Be adaptable and innovative
Tax professionals recognize the need for their companies to adapt and innovate. Indeed, this came in second on the list of “highly important,” and lowest on the “not at all important” list.
This could be due, in part at least, to COVID-19 tax relief: President Biden signed the sixth federal coronavirus relief bill nearly one year after former President Trump signed the first. Businesses were given three extra months to file income tax in 2020, and one more month to file in 2021 (though estimated payments were due April 15, 2021). On top of the federal assistance programs, states provided a wide variety of state-specific tax assistance. It was a lot for everyone to navigate, particularly accountants and bookkeepers.
2020 challenged tax professionals in other ways, too. Many were forced to work remotely during 2020, and some continue to do so. It took adaptability and innovation to learn how to best handle clients’ needs securely, while working from home (perhaps while caring for children or other family members). Out of necessity, firms long accustomed to pushing paper discovered how helpful cloud-based options could be.
In written comments, survey respondents advised their colleagues to “Stay client-focused,” “Be innovative,” and “Keep up with technology.” Sound advice.
Automate sales tax compliance
When asked about online sales tax compliance, 38.95% of respondents said “some” of their small business clients were complying with new collection and remittance requirements. However, 39.37% said small businesses were “mostly not in full compliance.” These are sobering statistics.
For the noninitiates, most states now require certain out-of-state sellers to register with tax authorities then collect and remit sales tax. This is because the Supreme Court of the United States overturned a long-standing physical presence rule with South Dakota v. Wayfair, Inc. (June 21, 2018). Prior to the Wayfair decision, states were largely limited to taxing sales by businesses with a physical presence in the states. Post Wayfair, a physical presence is no longer needed (though physical presence in a state still creates a tax obligation): Businesses can create a sales tax collection obligation solely through their economic activity in a state, or economic nexus.
On the eve of Wayfair’s third anniversary, all but two states with a general sales tax currently tax remote sales. Once Florida starts enforcing economic nexus on July 1, 2021, Missouri will be the last non-economic-nexus state standing — and a bill that would establish economic nexus in Missouri is sitting on Governor Mike Parson’s desk.
In other words, this isn’t some passing fad. States are serious about taxing remote sales in this age of ecommerce, and COVID-19 underscored that need. When consumers were reliant on online sellers, states that taxed those sales brought in more revenue than those that didn’t.
Accounting and tax professionals know this, and many are hoping that “technology will be able to provide tools to assist with compliance,” as one respondent wrote. Currently, only about 12% of the accountants surveyed say the handle “most” sales tax issues. It’s far more common for accounting professionals to handle “some” (36%) or “none” (24%).
