Technology
December SALT Checklist: 8 Best Practices for SALT Clients for Year-End and Beyond
What should you be doing in your state and local tax practice this month? Here's your SALT checklist for December.
Dec. 01, 2014
8 Best Practices for SALT Clients for Year-End and Beyond
As most SALT practice leaders know, sales tax compliance is a critical but often overlooked aspect of running a business. Don’t let your clients close out the year without looking ahead to 2015.
Here are eight smart business practices to help your clients stay on top of transactional tax compliance:
1. KNOW NEXUS
Nexus means that a business must collect state sales tax if it has a substantial physical presence in a state. Recently, nexus laws have expanded to include distribution, independent agents, remote employees and affiliate networks. Be sure clients understand where they are required to collect tax and keep up to date on nexus changes to protect against non-compliance penalties.
2. TRACK PRODUCT TAXABILITY RULE CHANGES
Most sales of Tangible Personal Property (TPP) are subject to tax. This has begun to shift to include intangibles, with many states now routinely apply sales taxes to certain services. Keep apprised of product and service taxability as rules evolve and help clients adjust accounting systems and taxing practices accordingly.
3. USE THE RIGHT TOOL FOR THE RIGHT RATES
It’s common for businesses to shortcut researching sales tax rates by using ZIP code tools. Unfortunately, taxing jurisdictions don’t always follow ZIP codes. Tax rates can vary even within an individual ZIP code and counties and municipalities can levy sales taxes in addition to state rates. Geospatial mapping (the same technology as Google Maps) is more accurate and can calculate sales tax down to the rooftop. Help clients find geolocation tools online, such as salestax.avalara.com.
4. ENSURE ACCURATE EXEMPTIONS
Not all customers are required to pay sales tax. Depending on the rules in a taxing jurisdiction certain businesses and individuals may be exempt. It is incumbent on the seller to collect valid exemption certificates, keep them on file and track expiration and renewal dates.
5. REMIT AND REPORT CORRECTLY
When it comes to remitting sales tax, businesses must using correct forms and formats for each jurisdiction and meet filing deadlines. This can get complicated with multiple locations and nexus, exponentially upping the odds of missing a file date, rate change or certificate renewal date and increasing non-compliance and audit risk.
6. BE AUDIT READY
The most critical action your clients can take to pass an audit is to collect sales tax properly over time and ensure they’ve properly documented each transaction. Sales tax audits are much less painful when transaction history, exemption certificates and other relevant information is readily available. If practices, calculations and records are in good shape, your client should be too.
7. STREAMLINE THE PROCESS
The more time spent calculating, collecting, and remitting sales tax, the less time will be spent on revenue-generating activities. Advise your clients to find ways to streamline sales tax calculations and related activities by outsourcing and automating the process.
8. OUTSOURCE AND AUTOMATE
Outsourcing and automation are efficient, cost-effective alternatives to manual processes. Advise clients to look for a cloud provider that integrates accounting, point-of-sale, ERP or ecommerce system and offers a full suite of transactional tax services— calculation, filing and handling of exemption certificates.
What better way to help clients wrap up 2014 and prepare for 2015 than to help them understand and plan an effective sales tax strategy.
Source: Avalara, Inc.