What do Sprint-Nextel, Bards & Noble, and Amazon all have in common? They've all unknowingly (or knowingly) performed actions that exposed them to risk in the area of sales tax compliance.
Even in a down economy, there was a 5.4% increase on sales tax revenue in 2011. States are getting creative in finding new ways to collect. They're hiring more auditors and keeping a watchful eye on out of state businesses to see where they can find opportunities to collect.
With over 10,000 tax jurisdictions in the U.S., all with different rates and rules about what is taxable, it's hard for even the largest companies to keep up. That's why much like payroll tax before it, sales tax is an area where small and mid-sized businesses are increasingly turning to automation to lower costs and mitigate risk.
Here are some questions to ask yourself to determine if your practices are bulletproof in the event of a sales tax audit:
1. How do you determine the tax jurisdiction and taxability for each customer/ship-to address every time you process an order? How do you keep that information up-to-date?
2. For tax exempt sales, what processes do you have in place to collect and maintain exemption certificates? Could you produce proof of exemption for historical orders in the case of an audit?
3. Are you doing business activities in any states where you're not collecting sales tax?
Through our partnership with the sales tax experts at Avalara, SBS Global is offering our clients a complimentary sales tax risk assessment. Contact us today to schedule your checkup and determine what steps you should take to protect yourself in the case of an audit.