The five steps for managing sales tax

Step 4: Track and manage exempt sales

Overview

Depending on the nature of the business or the intended use of the item for sale, a business may be exempt from paying sales tax on a transaction. For example, many states don’t require nonprofits and government agencies to pay sales tax. In addition, products or items intended for resale may be exempt from sales tax in some states. When dealing with exempt sales,  the seller must collect and manage an exemption certificate to validate and confirm why sales tax wasn’t collected. Failure to produce up-to-date documentation during an audit may leave you open to penalties and fines.

What to do:

Make sure you have a process in place to collect, track, and validate exemption certificates from your buyers. Neglecting to collect tax coupled with missing or expired exemption certificates is one of the top reasons businesses are assessed penalties during an audit.

Common errors with tax-exempt sales

Learn more about three common ways businesses make errors with tax-exempt sales.

When do you need to collect a sales tax exemption certificate?

Ensure you understand when it’s necessary to collect an exemption certificate from your customers.

Let Avalara help:

Avalara CertCapture eases the burden of handling exemption certificates with an automated solution that collects, stores, and manages exemption certificates. After you get a handle on your exempt sales, it’s time to remit sales tax to the appropriate tax authority in Step 5.

Next steps

The five steps for managing sales tax
REMEMBER THE FIVE STEPS

Keep this checklist handy to remember these critical steps