Sales tax is indeed one of the most important things in the action list of every active business person in the market. But, the changes in the rate and related statutory rules are surely an excess burden on the business plan. Although sales tax isn’t always the top priority for all fast-growing businesses, the compliance challenges from it can often lead to serious and expensive consequences.
The lack of proper financial management in small companies in this case can lead to even adverse results, sometimes leading to bankruptcy as well. Thus, it is crucial to monitor the statutory rules that keep on changing frequently and also understand how to implement safeguards and systems these days.
On top of this, it is quite essential to look out for efficient and reliable ways to collect and remit the right sales taxes at the right time. Looking for sales tax help? Check out TaxConnex.com.
All those things can surely baffle the mind of any business person who is concerned with the growth and visibility of the brand. Well, not anymore.
Effective tips to help you develop a reliable Sales Tax Strategy
1) Sales Tax can turn complex sometimes (Never underestimate)
One of the most common mistakes that most businesses out there do is an improper prediction of sales tax assuming the sales. Just because the sales tax process has worked before doesn’t mean that it will work again and again. Thus, most of them end up paying penalties and fines.
Nevertheless, it is a mere fact that the sales tax obligations keep growing with the growing business as well. So, the need for effective management also keeps on increasing from time to time.
Several factors can lead to sales tax complexity with unpredictable outcomes. But, some of the common factors that any businessman shouldn’t miss include
- Including multiple products or services in your showcase
- Stepping into online and web selling
- Expanding your business and entering into new states
- Deploying new POS or ERP software
- Lagging to adapt to the frequently changing rules and regulations
To overcome sales tax complexities as a business, you need to assess whether your current systems are functioning properly. If you find any negative results in the audit or pay any fines, you need to go through the complete systems to check where the fault was.
Well, the best way to make sure your system is perfect for your business progress is to follow the practices used by companies of similar niches. Improvising the competitor’s method can save you from penalties to a great extent.
2) Look out for the change in nexus rules
Every time a business expands by adding a new product or service into their showcase online or in a new market location, the remote seller nexus may come into play. These rules and the frequent changes in them are quite unpredictable.
On top of this, most of the state and federal courts have already taken steps to broaden the nexus definitions by collecting sales tax from out-of-state sellers.
3) Reassure what services are taxable
Every state has its own way of taxability and being a businessman, you need to pay attention to what services they are focusing on. Even if your service comes under taxability, you need to ensure whether any other factors are influencing it or not.
Some of these factors include customer’s location, service location, and whether your service fits into the categories prefixed by a particular state. Common taxable services that most states take into their category include fabrication, repair and installation services, etc.
4) Keep tracking your product taxability
Sometimes, even the same product can affect the changes in the sales tax rules and regulations. This variability is most likely to continue among states especially when it is about emerging technologies.
There are few states where the taxability of a product and the sales tax rate differs based on the product types, sometimes the ingredients and composition in it. Similarly, the selling date and the way the product should be used and the location where it will be used can decide the sales tax rate.
Furthermore, some states are widening the taxable product definitions due to the rise of digital downloads which come into virtual products.
5) Keep an eye on the exempted transactions
Other than just focusing on taxability, it is also crucial to keep an eye on the sales tax exemption certificates. As the name suggests, these certificates allow the purchaser to buy a product or service at a tax-free price.
For instance, suppliers can opt for resale certificates which are meant to substantiate that the purchased items are for resale purposes only. Thus, these products or services are exempted from sales tax.