10 Tips for Complying with Sales Tax Regulations

Consulting an expert is the best way to find the answers you need. When it comes to learning about sales tax regulations for manufacturers, Avalara is just the expert we turn to.

Since taxes falls in the “death and taxes” category, we all have to deal with taxes. However, wholesale manufacturers may not need to pay the same taxes a retailer or other business may. The catch is that manufacturers may have to report what taxes they aren’t paying.

It depends on numerous variables. But what are those variables? That’s where a solution like Sage Sales Tax comes in. Avalara knows all the ins and outs of sales tax compliance, and stays up-to-date on the ever-changing world of tax laws.

Our friends at Avalara have provided us with 10 tips for Complying with Sales Tax Regulations.* Even if you think you know your sales tax regulations, it’s always good to follow the latest advice in case regulations have changed since the last time you looked them up.

Here are 10 Tips for Complying with Sales Tax Regulations:

  1. Confirm your customers’ tax-exempt status. Exemption certificates need to be accurate, up to date, and readily accessible.
  2. Don’t ignore tax notices. Nothing good ever comes from letting a tax notice molder at the bottom of your to-do stack, even if you’re sure you’re blameless.
  3. eFile when you can (and when you must). Some states require electronic filing for all
    tax regulations

    Keeping great records will help if an auditor comes around. This is one of the best defenses against tax regulations.

    businesses, while others prefer it. For more information about a particular state’s requirements, check out the Avalara TaxRates state guides.

  4. Find out if you’re required to make prepayments. If you are, your filing requirements may differ from the standard filing requirements. For example, in North Carolina, returns for some prepayments must be filed online, while others must be filed on paper.
  5. Get to know state nexus rules. If you have sales tax nexus with a state, you’re required to register with the tax department and collect and remit sales tax. Nexus rules have been changing at a rapid rate since the Supreme Court of the United States removed the physical presence rule in June 2018; it’s now easier than ever for a state to impose a sales tax collection obligation on remote sellers. See this state-by-state guide to sales tax nexus for up-to-date information.
  6. Identify taxability rules in states where you collect. Taxability rules for products and services differ from state to state (even from city to city in some states). Be sure you’re collecting what you should wherever you have nexus.
  7. Keep excellent records. You’ll need them if you’re ever audited. Auditors need to be able to track and verify each transaction from start to finish.
  8. Update filing frequencies on your tax calendars. A change in your business can lead to a change in filing status. It’s up to you to know how frequently you’re required to file.
  9. Reconcile! Reconcile! Reconcile! Start with the account balance at the beginning of the accounting period, then add the amount billed to customers and subtract the sales and use tax paid. The end result should match the current balance of your sales tax payable account.
  10. Use geolocation to determine sales tax rates. Relying on ZIP codes can lead to inaccurate sales tax rates. Geolocation provides more accurate rates, down to the rooftop.

The folks at Avalara also provided us with a bonus tip: Automate your sales tax compliance. This is something we recommend for almost all business processes. Any time you you automate a process, you exponentially decrease the possibility of entering mistakes into your operation. And less mistakes when doing business taxes can stop a lot of headaches and financial burdens down the line.

If you’re interested in learning more, click here to download the eBook Sales & Use Tax Compliance for Dummies by Avalara.

* — This list was originally published in a blog post from Gail Cole from Avalara.

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