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INDUSTRYNEWS

by Susan McLain marked decrease in sales and use tax income over the past few years, compounded by overall budget shortfalls, has caused states to focus on ways to collect additional revenue. To this end, states are changing sales tax laws and regulations to broaden the definition of nexus, increasing the number of audits and decreasing exemption qualifications.

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This environment requires businesses to be even more diligent in keeping accurate sales tax records including: • Tracking and applying correct rates according to product taxability, jurisdiction and sourcing rules for each state where there is liability.

• Increased audit activity in the states; • Lack of skilled staff with tax domain expertise; • High cost of negative audit results; • Mandates to improve organizational productivity.

• Easy access to exemption certificates and proper association with non-taxed transactions.

In order to achieve Best-in-Class performance and the benefits associated with sales tax compliance, three steps were cited as “mustdo:”

• Ensuring timely filing and remittance along with appropriate registration for sales tax liability.

• Automate workflow from tax preparation to remittance.

Keeping diligent in these areas can help reduce your risk of exposure to sales tax audits and enable you to respond rapidly to any inquiries from state authorities. It’s been estimated that for every $1 of sales tax error, the cost to fix the error exceeds $50 when using manual processes. This estimate is very modest and does not take into account the cost of lost staff productivity and customer dissatisfaction when overcharged.

BEST PRACTICES In a 2010 Aberdeen Group survey, responses showed companies that implemented Bestin-Class sales tax compliance practices experienced a decrease in audit penalties and fines as well as in the time spent addressing tax errors. Driving factors for companies to adopt effective sales and use tax management were identified as:

• Enable centralized management of tax information. • Establish standardized procedures for managing government audits. Automation using a cloudbased tax management service reduces costs by providing a solution that is scalable to the needs of the business. A fulllifecycle automated solution will include tax calculation, exemption certificate management and filing and remittance services.

• Thorough tax analysis of state rules and regulations • Accurate calculations based on sourcing rules, jurisdiction and product taxability • Exemption certificate management for non-taxed transactions that includes: • Digital collection of certificates

Learn more about best practices and automation of the sales tax compliance process at www.avalara.com.

• The need to comply with regional and jurisdictional regulations;

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When seeking an automated solution that supports best practices, companies should look for a product that provides:

Bellwether Magazine | Third Quarter 2011

• Easy accessibility • Certificate to customer and transaction association • Reporting capabilities • Full sales tax cycle support with filing and remittance of returns • Easy integration with ERP solutions

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