Please note, this post is sponsored by Diamond Bloggers. All opinions expressed are my own. Thank you.
With the hustle and bustle of holiday shopping just around the corner ongoing debates over online sales tax, and related statutory rules and rate changes, remain more divided than ever. With annual vaulted sales projecting higher than normal turnarounds for small businesses this fall, and constant debate circling the Wayfair Act passage of 2018, making being versed in proper tax compliance important to nearly every savvy businessperson’s action list all sales tax holidays long. But sometimes understanding how to implement safeguards and systems, monitor ever-changing statutory laws, and finding easy and efficient ways to remit the right taxes can be tricky for even the most compliance-minded business person.
Making having an easy-to-follow starting point key for addressing sales and use tax compliance. With this in mind, here are five tips to identify steps your business can take to address your particular challenges this season with your small businesses at home:
Determine taxes by analyzing changes to nexus rules
Nexus means connection. The term nexus when used in tax law to describe a situation in which a business has a tax presence in a particular state or states. A connection between a taxing jurisdiction, like a state, and an entity like a business that must collect or pay the tax.
While most businesses have some concept of nexus—what connects businesses, both online and in brick-and-mortar retail, per each individual taxing jurisdiction, as to what is required for sales tax collection and remittance, this complex system can leave many unaware of dramatic changes to nexus proposals happening this season. As there are numerous developments on the federal level, focusing on current state proposals that that are currently underway is key. These rules change significantly over time and have the most direct impact on online retailers and at-home small businesses.
To stay compliant, review where you currently have nexus and identify applicable rule changes. Most important in light of recent Wayfair sales tax case changes. Which can be found from looking online on your state’s tax office page. As well as making sure your business is registered in states where it’s required and determining whether your business might have unknowingly created nexus in a jurisdiction. Particularly is you employ or utilize traveling salespeople, contract labor, leasing real or personal property in a state, participate in trade shows, or other nexus-creating activities. Making sure to avoid practices that put you at risk for audit including having out-of-date rates and rules and failing to recognize new tax laws and rates.
Never ignore consumer tax
Consumer tax is defined as a tax on the use of a tangible personal property (TPP) not otherwise subject to sales tax. Generally speaking, a purchaser owes consumer tax and sales tax compliance on items purchased on which they paid no sales tax or less tax than the applicable sales tax rate. Unlike sales tax, the remittance responsibility lies with the buyer, by way of either the business or individual. In some cases, as in most small businesses and online businesses, the purchaser would be a business, such as a developer or a distributor, who regularly buys goods, mostly online, to use, or consume as TPP. Including remitted taxes for businesses as they withdraw goods from inventory for its own use, particularly if the sales taxes were not originally paid at the time of purchase. It is the responsibility of all properly run business to self-assess their owned TTP, and if and when necessary, including changes to Wayfair tax policy, when you remit to your state what has been accrued on your next tax return.
This can be done by maintaining a written use tax policy leger spreadsheets, filing exemption certificates, when needed, for more complicated multip-purchase and shipped orders, creating an audit trail for certificates of ongoing purchases spanning multiple seasons, keeping accurate records of service exemption rules in each jurisdiction in which you do business, and creating quick-to-be-accessed, printable, nonexpired exemption certificate summary reports.
Know how to remit sales on tax returns
Even companies that ensure every possible step to diligently track and update changes in sales and use tax rules, sometimes inadvertently fail to remit their accused taxes correctly. Which is why knowing which form to use, where to file, and what to include in your returns, paramount each tax season at home.
This can be most easily done by review whether your filing schedule has changed as relates to your business revenue, at least ninety days prior to remitting for your annual or quarterly taxes each year. This can help you determine if new ore implemented e-filing laws will affect your business in each current season. This also will help businesses to avoid filing errors that increase your risk of audit. Including failure to prepay or establish payment plans, remit late payments, or payment to incorrect jurisdictions or states.
Affiliate Sales
Some online retailers sell directly through affiliates. This style of marketing involves the selling company to advertise and sell goods provided by another company. Some states have adopted laws that require online marketers to collect and remit sales tax on products purchased from affiliates based in states where the law is in force, regardless of where the selling company exists or where the products are sold. Similar legislation in other states may follow, so always be sure to keep abreast of sales tax laws for online concerns in your state.
Get help when needed
No matter how versed you are with sales tax law, even the savviest of businesses might need help. Including Wayfair nexus. A site designed to help businesses better understand sales tax nexus and sales tax laws. As well as enabling small business owners better understand other tax-centric topics including, various sales tax software, sales tax filing, sales tax regulations, sales tax act, in a post-Wayfair Act world.
Resources to help you understand the ins and outs of sales tax nexus and sales tax laws. Including other tax-centric topics including, various sales tax software, sales tax filing, sales tax regulations, sales tax act, and specific Wayfair act procedures for overall Wayfair sales tax nexus laws compliance. Helping thousands of business owners stay focused on their core businesses by providing automated end-to-end compliance service information best related to your current business needs.
Staying sales tax savvy is paramount for your small business at home this season. Are you ready to take on sales tax compliance this holiday season at home? Leave your thoughts below.