Businesses may feel out of their depth as states look to test the waters on tax compliance in the coming year.
Sales and use tax compliance can be a complex problem for many businesses. It almost feels like you need a bowie knife to cut through the regulatory red tape, although knowledge may be a better weapon in this case. So stay sharp with Avalara’s 2017 Sales Tax Survival Guide.
Published every year to help businesses better understand the challenges they are up against when it comes to complying with sales and use tax regulations in the U.S., Avalara’s latest Survival Guide is refreshed for 2017 with insight into what’s new and what’s changed at the state and federal level, common challenges around sales tax compliance, and tips for staying on top of your tax obligations.
States are testing the waters in 2017
States are facing budget deficits and they need revenue from taxes. Sales and use tax is one of the largest generators of this revenue, but collecting it has become more difficult as how Americans buy, sell, and consume goods and services has evolved beyond what’s defined by state tax laws. For example, Congress has yet to act on outdated federal internet sales legislation; services now outpace goods in consumer spending but aren’t taxed with the same consistency; and digital delivery of software, books, and other media and streaming services have states perplexed when it comes to setting standards for taxability.
This has led many states to get aggressive—hiring more auditors, expanding nexus definitions (a connection with a state that triggers an obligation to collect and remit sales tax to that state) to target out of state sellers, implementing use tax reporting policies, increasing state and local sales tax rates, and extending sales tax to more products and services.
Survival of the fittest
While not every aspect of managing transactional tax causes pain for every business, it’s pretty certain that at least some areas will pose a challenge given how quickly the rules changes.
The 2017 Sales Tax Survival Guide walks you through 10 critical compliance challenges, from determining nexus to managing exempt sales to understanding the implications of drop shipping on your business and dealing with audits and lawsuits. Each section is also buoyed with best practices for overcoming these challenges, and links to additional information should you need to go more in depth on a topic.
Shore up compliance
As helpful as it is, no guide is a replacement for good practices. The most valuable takeaway from the Survival Guide is a greater awareness of just how burdensome tax compliance can be on a business—large or small. Trying to keep up with ever-changing state tax rates and rules puts a strain on accounting and finance teams in terms of the research and due diligence required.
You can remove that burden with tax automation software like Avalara AvaTax. Much of the work that goes into proving sales and use tax compliance—calculating tax rates, verifying customer information, updating taxability rules, applying exemptions, remitting sales tax and even filing tax returns—can be handled easily and efficiently in your accounting system with little to no manual work required. It’s easy to set up and use, guaranteed accurate, and budget friendly. Avalara is a preferred provider of tax software for more than 500 ecommerce, shopping cart, ERP, and accounting systems and used by more than 20,000 companies worldwide. Talk to your system or application provider about using AvaTax to manage transactional tax.
Permission to reprint or repost given by Avalara. Content previously published at www.avalara.com/blog.