TMCnet Feature
August 05, 2020

5 Reasons It's Important To Have A Sales Tax Consultant

Keeping track of your company’s sales tax obligations can be a full-time job in itself. Having a sales tax consultant can greatly reduce the hassle of keeping up with monthly returns and frequent payments. When your company has a sales tax consultant, it is far more likely that your financial obligations will be met in each state where you do business. This can save you from procedural and in some cases legal trouble.

Sales tax filing is a continuous business. Returns must be filed each month in each state where your company is obligated to pay taxes. Simply keeping up with the volume of returns and the amount of data you will need to complete these tasks is daunting.

Here are five reasons why it is important to have a sales tax consultant on your side.

Sales Taxes are Complicated

Each state has vastly different sales tax laws. For example, in some states like Massachusetts, food and clothing are exempt, while in other states like Illinois and Alabama, they are taxed. Having complex provisions built into your POS system will help you collect the proper amount of taxes. It is necessary for your sales tax consultant to keep a close eye on your POS and payment processing systems and make sure that they are kept up-to-date.

Monthly Returns

Businesses may start out optimistic that they can handle sales tax filing on their own, but the reality of the situation will soon become clear. Companies need to monitor the sales tax systems of every state in which they do business. They need to file monthly returns with each state and make sure that they are properly accepted. Some businesses try to use stand-alone software solutions to meet their filing requirements, but they may find that these solutions are not all-encompassing and can be subject to errors.

Sales Tax Nexus

Sales tax nexus further complicates the process of filing returns. In the past, most states did not require online or interstate businesses to pay sales taxes. As the years went by and internet sales became more popular, states realized that they were missing out on a huge amount of revenue.

A recent Supreme Court decision (South Dakota v. Wayfair, 2018) found that states were legally allowed to collect sales tax from companies doing business within their jurisdiction as long as certain requirements were met. Sellers delivering goods or services in at least 200 separate transactions, as well as sellers that deliver more than $100,000 to the locality, would be considered to have sales tax nexus.

Each state has its own sales tax nexus laws, and these laws must be taken into consideration along with the other principles of sales tax filing. States scrutinize monthly returns to make sure that businesses are not skirting the requirements.

Changing Rates and Exemptions

Commonly, many states such as Massachusetts hold “sales tax holidays,” a period usually happening in August or September and intended for back-to-school purchases. Sales tax filers need to be aware of these holidays to make sure that they do not overpay their sales taxes.

Exemptions from sales taxes are also subject to frequent change. Filers need to make sure that they understand the time limitations of exemptions so that they can start paying when the exemptions expire.

Save Time for Other Tasks

If a single employee of a corporation is tasked with sales tax compliance, it is likely that this employee will quickly become overwhelmed. Sales tax compliance cannot easily be absorbed by an accounting department that is already busy with other activities. If an employee or a manager is constantly dealing with sales tax issues, they may miss out on important core tax and accounting functions.

Sales Tax Consultants Make Sense

Having a qualified consultant can take much of the time, trouble, and worry out of paying state and local sales taxes. A consulting firm will be able to devote more time to sales taxes than a single member of an accounting department.

Sales taxes are complex, and it is vital to understand how they work. Hiring a sales tax consultant can help your company stay on the right side of the law and avoid costly citations and fees. When your company is fully compliant, your business will be safer and your revenues will be protected.

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