Updated: July 22, 2024 Here are the five common pitfalls that online sellers make when it comes to sales and use tax compliance.
Key Takeaways:
Ignoring sales & use tax compliance:
It is important that business owners and their service providers know when sales tax should be charged on sales, what the appropriate tax rates are, when sales and use tax should be paid on taxable purchases, etc.
Not paying attention to nexus thresholds: Businesses need to be aware of when they are required to register to collect a jurisdiction’s taxes. Economic nexus thresholds must be monitored as well as requirements due to physical nexus.
Being too aggressive with exemptions: Companies can get very aggressive when it comes to sales tax exemptions. A rule of thumb is that exemptions are very narrow. Guard against being too aggressive.
Not confirming sales tax is being charged correctly: Periodically verify that your software is charging sales and use tax correctly. If a business is audited, that is one of the first things that the taxing authority will do.
Monitor sales and use tax law changes: Sales and use tax laws, tax rate, policy, etc. can change. It is important to be abreast of the changes that affect your or your clients’ business.
Sales and use tax compliance is important. Make sure to have a practical plan in place to address it.
Our mission to provide a resource so business owners, accountants and bookkeepers can understand sales & use tax compliance. We know that sales and use tax laws are not the easiest to understand. Our focus is on empowering you with a framework and general understanding, so you know what questions to ask and where to go to get the information you need to stay on the right side of sales and use tax compliance.
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