Best Practices for Managing Sales Tax Notices - Will's Whiteboard
- Sales and Use Tax
- February 5, 2015 | Will Frei
So many people panic when their businesses receive letters from a state taxing agency. Yet not all sales tax notices are created equal. Watch this video to learn about the three types of tax notices, when you need to panic, and when you should keep calm and carry on.
Hi. Welcome to Will’s Whiteboard. I’m Will. If you’re in business, sooner or later you’re likely going to get a sales tax notice from a state. It’s just what happens. I’ve got one here. Let’s open it up and take a look at what’s inside. Oh my gosh. Oh my gosh. Spiders! Spiders, you guys! I hate spiders! Of course in a real sales tax notice there aren’t going to be any spiders but people’s heart rates go up when they see that logo from the State Department of Revenue, and they react like there are real spiders in the envelope. The thing is there’s really no reason to freak out. Let’s talk about why.
All right, when it comes to sales tax notices they generally fall into one of three categories. The first type is information. This is basically the state saying “Heads up, something has changed or you need to know about something and it might apply to you.” This could be, for example, a sales tax rate change and in that case if you’re handling notices on your own you need to decide if it applies to you or not, and update your systems accordingly. Second type of notice has to do with your filing schedule. Different states have different filing schedules and this can be determined by a business’s revenue, say. So if your filing schedule changed, again the state’s going to say “Heads up, your schedule has changed.” And you need to update your systems accordingly.
Now it’s really the third category that gets people’s blood pressure up. And this is the state saying “We think you did something wrong.” And notice I said think there. Because at this point nothing’s been proven. Hey, it could even be the state that’s made a mistake. So the key to these type of notices is to address them quickly. Because if you let them sit then you could go into delinquency, the state could send your accounts to collections and there could really be something to worry about. But if you address it quickly and either provide the state with what they need or work it out then you should be good to go.
Now, Avalara does notice management if we’re handling your filing or remittance for you. So in that case, if you’ve got Avalara, there’s really no need to freak out. And in fact, you can relax because we take care of all of this for you. You’ll still get the notices, it’s part of doing business, but all you do is send them to us and we’ll take care of them with the state on your behalf.
Thanks very much. I’ll see you next time.