Sales Tax Compliance Gets the Unprepared Every Time
It’s the cost of success. As more North American industries expand their corporate reach into new and previously untapped jurisdictions, the tax man’s long arm just gets longer.
One of the trickiest areas to grasp is sales tax where the tax jurisdictions can be so roof-top based that it’s possible for companies situated across the street from one another to be paying different taxes.
Equally true is that feigning ignorance doesn’t help. The statute of limitations for audits can be as much as five years, and once interest is added on, the costs to a company found to be non-compliant can be well into the millions of dollars.
The Sales Tax Tangle
The tangle starts right from where you live, and continues through to where you sell. Knowing what is taxable, the appropriate jurisdiction, and exemptions, make this area of compliance very complex. In the oil and gas industry, there are other complexities. You need to collect onshore taxes, but you may also need to collect off-shore taxes in state-owned waters.
Determining nexus and the threshold of taxable sales to require sales tax reporting and the reporting frequency are other issues to be considered when dealing with sales tax compliance. Many billing and accounting systems do not measure up when it comes to compliance.
So whether you’re selling pipe in Texas to be used in North Dakota, or manufacturing cabinetry for a high end market in New York and distributing from a warehouse in Illinois, location nexus has to be considered in the equation.
Get Your Sales Taxes Back Under Control
There are currently 11,000 taxing jurisdictions in the U.S., according to a report on compliance conducted by Wakefield in 2013.
Wakefield interviewed 400 professionals, including those in manufacturing, and the results were revealing. As many as 50 per cent feared an auditor would find something wrong. Even accountants consider sales tax to be one of the most complex areas of their profession.
An efficient ERP system can take care of the heavy lifting, and provide you with the confidence to expand and grow your business, knowing your company is handling tax change as it happens.
Turning a blind eye never helps. The order of business is to evaluate where you stand today:
- What, if any, of your sales are taxable?
- Have you identified the location(s) of your sales (and yes, out-of-state taxes apply for sales conducted online)?
- Do you have a mechanism in place to track your sales?
You may have an existing ERP system, but if it can’t help with the demands of today, it’s time to reconsider your options.
A strong ERP system will ensure appropriate compliance with these regulations from sales tax issues, to nexus, taxability and sales tax compliance.
Rand Group, with its depth of accounting expertise and long-standing relationships with experts in the software sales tax field, can help make sure the taxman gets what he needs, leaving you to explore business opportunities with ease. Avoid costly audits by having sales tax automation software integrated with Microsoft Dynamics AX, Microsoft Dynamics NAV, or Microsoft Dynamics GP.