Sales tax may seem like a minor inconvenience for business owners to track. However, failure to properly keep tabs on a few cents per product over the years can add up and result in devastating circumstances for your business.
Unfortunately, sales tax errors are common and several entrepreneurs find themselves in the federal hot seat while an audit looms overhead. Keep your business on the right side of tax collectors by following these five steps that can help avoid some of the most common sales tax mistakes businesses make.
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Understand What Use Tax Is
Consumer use tax used to fall on the shoulders of consumers to pay back to the government. However, states are now starting to look towards sellers to lay blame when use tax isn’t paid.
Use tax is typically seen when a seller from a state with no sales tax sells tangible personal property to a consumer in a state with sales tax. Use tax is extremely important and must always be calculated correctly.
Unfortunately, it’s one of the biggest red stains on most commercial audits and can land a business owner in hot water. Avoid use tax issues with the help of a local tax consultant. We can help you create a use tax policy for your business, understand the differences between sales and use taxes, as well as help you review your inventory and determine what products are applicable for the tax.
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Create a Paper Trail for Resale Certificates
If you sell bulk products that are meant for resale, they can be sold without sales tax as long as a valid resale certificate is given to your business. Without a process to effectively track and manage resale certificates, it’s easy for these types of sales to become a huge tax problem for a business.
An invalid or missing resale certificate on products that should have otherwise been taxed, leaves your business on the hook for paying the sales tax. In order to avoid any issues or potential audits, make sure to:
- Have the capabilities to generate an accurate summary of your resale certificates
- Know the tax exemptions of the states where your business has jurisdiction
- Create a general trail that can easily source each certification in the case of an audit
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Keep Up with Jurisdictional Sales Tax Changes
There isn’t a general sales tax in the United States. In fact, there are over 11,000 US jurisdictions that implement their own sales tax amounts. Aside from different rates in different jurisdictions, changes in rates are a common occurrence.
Don’t come up short during tax season and take some simple steps towards keeping up with any taxes that apply in the jurisdictions where you physically sell products:
- Register with Avalara AvaTax to help with quick, location-based tax calculations
- Register your business in states where you do business
- Pay taxes directly to the states they apply to
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Remit Your Sales Tax
We shouldn’t have to say this but would be remiss not to. If your business collects sales tax, it must remit the sales tax to the state where it’s owed. Failure to remit any tax you collect is criminal and could leave you in more legal trouble than just an audit.
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Ask a Tax Consultant About Local Filing Schedules
If you operate in multiple states, it can be complicated to keep track of essential filing schedules and forms. However, even innocent mistakes can leave a company as the target of an audit.
So, if you’re unaware of potential changes in filing deadlines, tax rates, or even forms you need to file for your taxes, it’s always good to reach out to a tax professional. We can quickly find the answers you need and help you ensure that your business stays on top of paying its taxes on time.
What if You Get Audited?
Sometimes a business’ realization that they’ve made a mistake in their sales tax practices comes in the form of an unexpected audit. If this is the case for your company, it’s highly suggested that you seek help from a tax consultant that specializes in sales tax audit representation.
An audit can be an uncertain time for any taxpayer, but trust the consultants of The Hegwood Group to stay by your side through all stages of a tax audit.
We work side-by-side with auditors and taxpayers to:
- Reduce taxpayer liability after an audit begins
- Ensure that an audit is accurately conducted
Receive Superior Sales Tax Support From The Hegwood Group
If you have any questions about sales tax or need help sorting out your commercial property taxes for the season, reach out to our property tax consults for assistance.
We are a full service property tax consulting group that offers a flexible fee structure for each of the tax services we provide. Don’t let sales tax issues bring your business down.
Contact The Hegwood Group today to schedule a free consultation.
