State sales tax returns are anything but easy. States and local jurisdictions set their own rules for sales tax collection and how that tax is remitted. What that means for you is keeping track of hundreds of rules for forms, dates, frequencies and processes. And if you have nexus in multiple states, you may have to file dozens of tax returns monthly, if not more. It’s a lot to keep track of, especially when you own a business or you have other job responsibilities.
To stay on top of it all, you not only rely on your own internal financial and accounting department but also might have acquired an outside service to help – think either an automated solution like automatic sales tax return filing software or service, or an external CPA or accounting firm.
Even with these solutions, though, do you have full peace of mind? For many businesses, when it comes to the state sales tax return process (or even your state sales tax situation as a whole), the answer is no.
Don’t get us wrong here. Automated solutions, CPAs and internal teams are helpful for any business. But when it comes to state sales tax returns, it’s important for you to know their limitations – and what you can do to supplement those shortcomings.
Automated solutions are a great way to handle a lot of the time-consuming front-end work.
They can manage a lot of data and quickly apply accurate sales tax rates and taxability to all your products and services on every transaction. Then, it stores that data and even links it to your backend eCommerce solution, making it easy for you to access in the event of an audit. All these functions are extremely useful and would take way too much time for a human.
But the key here is how they apply the tax to your products. Are they doing that correctly?
If there’s a hiccup in the sales tax return process, then your automated solution might file inaccurate returns in your name. On top of that, you may not even be aware of the problem until the notices start rolling in from states. By then it’s a little too late to fully correct those mistakes, and you’ll have to start dealing with the audits and potential penalties.
Or the opposite can happen, and you could end up remitting a higher amount than you actually collected. This is more common than you might think, or you have already dealt with this, or you are dealing with this. This could mean tens of thousands of dollars directly out of your own pocket every month.
With an automated solution, you need to make sure you’re checking the work. Unfortunately, it’s not a “set it and forget solution”, and sometimes this is not learned until after you’ve been implemented on the platform. If you feel you are settling for known shortfalls in your solution, we’re here to let you know there is a better way, with a hands-on, consultative approach.
Using your own internal department or hiring a CPA is also a great way to make sure that your books are in order but adding a state sales tax return process to their plate might be asking too much.
Ever since the Wayfair vs. South Dakota Supreme Court decision made economic nexus the law of the land, it’s become more challenging than ever to stay on top of all the complexities of state and local taxes.
Keeping track of state sales tax is a job in and of itself. So, when someone who isn’t dedicated to state sales tax full-time manages the filing of your returns, the process is more prone to mistakes, and likely more expensive.
If you have a CPA or your accounting team working through these returns, you might want to consider hiring outside professionals to help supplement their knowledge. Talking with a state sales tax expert can truly give you and your team some peace of mind when it comes to filing state sales tax returns. And it ensures that they’re armed with the precise knowledge they need to file your returns correctly.
One of the most common issues we see is people will try to address an issue with their state sales tax process, and after the first step, they run into a wall.
We get questions like this all the time:
“What do you do when you get an expensive state sales tax risk assessment done that tells you to enter 20 different voluntary disclosure agreements?”
Assessments like these can give you valuable knowledge on your current situation. The problem is they don’t do enough to answer the questions that come afterwards. And when you reach out to the company that provided the results, you might not get all the answers you need.
In the case of the VDA example above, you need a professional to go through each of those recommended VDAs to find out which ones would be beneficial for you.
That’s why we have our “What’s Next” calls. If you’ve received an assessment that paints a grim picture or if you’re struggling with your state sales tax return process, there are answers out there for you. Get on the phone with us, and we can talk through what those notices mean for you and what you should do about any risk assessment.