Keeping track of sales tax across multiple states and reporting it accurately can be tough for the average business owner. It can be especially challenging at the start of a new calendar year when states update their sales tax requirements.
Sales tax automation, such as the service provided by our partner Avalara, can be a tremendous help when you’re juggling 50 states and countless counties and their individual rules, requirements, and tax bases. Integrating sales tax automation with your ERP and accounting systems is another way in which you can make it easier and faster to track and report taxes accurately across multiple tax jurisdictions.
Sales Tax Jurisdictions
Sales tax is usually charged and collected based on whether the customer who orders the goods lives in the area in which your company has a presence. A “presence” to the IRS means an office, a warehouse, or another location that regularly conducts business. It can also include workers who perform full-time duties from home offices in different states. Keep this in mind when you talk to your accountant about the areas in which you are legally bound to collect, report, and pay sales tax.
Changes to Sales Tax: The Highlights
There are dozens of changes to the sales tax rules nationwide. Avalara provides a good report on them for 2017 on their website, but the highlights include:
- Changes to local sales tax rates in many states. These include:
- Alabama
- Arizona
- Arkansas
- California
- Colorado
- Florida
- Illinois
- Kansas
- Minnesota
- Mississippi
- Nebraska (also boundary changes, which can impact rates)
- Oklahoma
- South Dakota
- Texas
- Utah
- Washington (and Washington lodging tax rate changes)
- Wisconsin
- Repealed sales tax exemptions in numerous states including:
- Repeal of exemptions for tangible or personal property used for renovating aquariums in Georgia.
- Retail sales of tangible personal property, digital property, and taxable services by nonprofits will no longer be exempt from sales and use taxes in North Carolina.
- North Carolina will no longer exempt purchases by a manufacturer of fuel or piped natural gas used solely for comfort heating either.
- Wyoming is considering eliminating sales tax exemptions triggered by economic development incentives. This hasn’t passed yet but is under examination by Wyoming’s Joint Revenue Committee.
Amazon Changes
Amazon, the world’s biggest seller of pretty much everything, is voluntarily starting to collect taxes in Utah, Iowa, and Louisiana even though they do not have a physical presence in those states. They’ve reached an agreement with the government of Utah, for example, and have proactively agreed to collect sales and use tax. If you sell via Amazon services, you may want to watch the changes in this area and see if it impacts your business.
Tracking Exemptions and Repeals
Each year the list of exemptions and repeal of exemptions grows. Many exemptions are based on state needs and priorities such as economic development, exemptions for military veterans and nonprofits, and other specific examples.
The best way to track exemptions and related exemption repeals is to focus on the states and counties in which you do business. Most companies have a finite number of locations in which they conduct business and that makes it easier to work out sales tax rules and deadlines.
Software Efficiencies
As we mentioned earlier, tracking sales and use tax in multiple jurisdictions can be tedious as well as difficult to do manually. Software such as Avalara’s automated tax software can help you keep track of these important details.
Additionally, moving your accounting to Sage 100 can help streamline your business in many ways. Small to medium-sized businesses can improve efficiencies in their accounting, finance, sales management, inventory, and warehouse processes, and much more by using a robust tool such as Sage 100.
Accounting Systems Incorporated (ASI) provides accounting software and systems to help your company grow. We focus on helping small to mid-sized companies improve operational efficiencies through the power of software and technology. For more information, visit our website or call us at 803-252-6154.