The term ‘tax compliance’ is a procurement concept to submit the return tax within prescribed periods. And the procurement status presents the options to estimate the income statements, deductions and assessed taxes payment on the due date.
Sales tax compliance ensures the penalty and interest-free taxation practices, which helps the overall development of a business. The feature-driven solutions provide the company’s effective ROI from the sales tax compliance department. And the improvised deployment of sales tax calculation empowers the revenue-generating agendas, as well as ensures the success of sales tax compliance.
Manual sales tax compliance cost is always higher than automated compliance cost. In automated reports, the improvised use of tax management aptitudes and effective sales rules boost the productivity level along with the reduction of errors.
But, what will you do if specific jurisdiction or state laws change? Also, what to do if you do not need to registered or cancel your registration? Check out Taxconnex.com to know if you should cancel Sales Tax registration or not.
Roadmap Recommendations for Sales Tax Compliance
Monitor the expansive criteria of Nexus
Whenever your business firm launches a new product or service in a state at any location or online, sales tax nexus will be applicable. These protocols are connected with evolving factors of sales tax compliance. For the idleness between state and federal court, states have defined some persuasive authority to expand the nexus resources.
There are few crucial factors, which makes sales tax collection a little critical for out-of-the-state sellers.
Affiliate relationships between the online sellers can not establish the taxable protocols. Shipping is another critical affiliate relationship as per the definitions of nexus. Shipping between manufacturer and customer or shipping between distributor and customer is always a critical element for the online sales tax management authority. Therefore in few cases, the involvement of third-party integrations for the distribution functionalities plays a vital role to achieve the status of taxable nexus.
Tracking the Exposure of Taxable Products
There are some typical rules for taxable products, which can vary state by state. In terms of trending technologies, every state has their lookouts. In a few states, the type or nature of the products defines their taxability and the rate of sales tax. Alongside, sometimes the particular date of selling and product’s raw materials are considered to define the sales tax rate. Besides, the usage purpose and purchase location also matter to define the taxability and sales tax amount.
The emerging technologies increase the possibilities of digital downloads such as movies, music etc. Some states have considerable plans to expand the definitions of product taxability with the scope of virtual products addition.
Check the Type of Taxable Services In Different States
States consider different pathways to approach service taxability. The taxability of any service depends on multiple factors such as the consumer’s location, the service provider’s location. Your service is fitting or not into the expandable service categories. In a particular state, the extensive service categories are used or not. Generally, the products or services category including personal, repair, fabrication, installation can come under the considerations of taxable range.
For example, while consumers buy computer software and prefer to hire valuable services from multinational service providers, the products and services would come under the taxable array of products and services in Florida.
The services offered or received by the “professional service category” are quite confusing about taxable status because services are delivered online. Therefore, ever-evolving cloud services, as well as remote IT support services also come under the taxable array.
Maintaining Records of Released Transactions
As a buyer, if anyone has exemption certificates after paying sales tax, he/she can purchase anything without tax. The suppliers get resale certificates to justify if the purchased products are ready for reselling only and is there any chance of sales tax exemption. There are so many reasons behind the exemption of sales tax including:
The pattern of usage – where or how the products or goods will be used by the buyer – as few states do not charge sales tax on labour or services, but others do. The intention of buyers – few states do not charge sales tax from the non-profitable organizations and government agencies, others do.
Therefore, the collection of these certificates and files may be a lot of hassles for the administration. Specifically, the conflicting demands of the individual states. This can be one of the mistake-prone segments for the sales tax management procedures. And any crucial error can drive a company to the vulnerable risk factors of audit for any invalid or expired certificates.
Execute an Action Plan
Any effective action plan for sales tax compliance should have accurate, efficient and cost-effective options to face the challenges of the sales tax systems. Companies appoint executives to collect accurate files, sales reports to resolve the rising risk factors of sales tax.
Ever-evolving technologies offer a wide array of privileges to estimate sales tax using automation aptitude. So, technology can ease the management of sales tax compliance using the automated aptitude of remitting, reporting, calculation etc. The new technological advancements make human roles minimized and it reduces the risks of an audit. Many financial companies do not consider the theory of sales tax compliance. As their limited transparency of sales tax transactions does not require high-end integrations and justified procurement processes.