Sales tax was never exactly easy, but it was a lot simpler before the rise of ecommerce. For the most part, businesses back then just needed to collect sales tax (or an exemption certificate) based on the location, file and remit to the appropriate jurisdictions for those locations, and stay alert for the occasional rate or rule change.
Today, things are much different. A small business that 20 years ago might have sold exclusively to customers who visited its one physical store location can now easily sell in all 50 states — and even internationally — from that same store.
And while that can be great for business, it can be a giant headache when it comes to tax compliance, because the U.S. Supreme Court’s 2018 ruling in S. Dakota v. Wayfair opened the door for states to tax those online sales.
That means companies selling across the country and beyond are doing more than just expanding their business, they’re also expanding their tax liability — possibly by a lot. How much? Well, consider there are 12,000 sales and use tax jurisdictions in the U.S. alone, all of which have their own rates and rules for sales tax and wrinkles like exemption certificates.
Most businesses can’t handle that kind of complexity on their own. Trying to manage it all manually leads to increased risk of error (along with penalties or fines in the event of an audit). And it takes away resources from other tasks or initiatives that could be more impactful.
That’s why companies such as Tax CSA are so important in the wake of Wayfair. Businesses of all sizes trust the firm to provide expert advice and recommend solutions to meet ever-evolving tax compliance challenges.
The complexities can be so confusing that businesses don’t fully understand their obligations, according to Tax CSA Vice President of Sales and Partnerships Kristin Terdik. Sometimes, she noted, it’s only when they are seeking guidance on ecommerce platforms or tax technology that they finally get the full picture of complicated issues such as exemption certificate management.
Exempt sales in particular are a huge audit risk: Because sellers today must manage exemption certificates from a variety of states and jurisdictions (which, of course, have different rules), they are frequently mishandled by businesses that manage the task manually. That makes them an attractive target for auditors.
Fortunately, advances in technology have done more than simply enable businesses to sell in more places — they’ve also created opportunities to automate tasks and processes like sales tax compliance. Having earned status as an Avalara partner and Certified Implementer, Tax CSA leverages Avalara technology to help clients streamline their compliance efforts.
