So you have determined that you have nexus in several
states. What do you need to do to remain in compliance?
The first thing that you need to do is to register in that
state for a sellers permit. Some states have a special permit for out of state
companies.
Secondly, you need to have your programs set up to calculate
the correct tax rate on the sale. Sales tax is a destination tax. It gets
charged based on the destination that the product is shipped to, not on the billing
address of the customer. A business, then, needs to set up their ecommerce
website and their accounting system to correctly charge and account for the
destination sales tax. Sales tax needs to be charged on product or taxable
services going to any state where your company has sales tax nexus. The more
advanced programs use geolocation technology which determines exactly where the
business is located instead of just zip codes to determine the correct tax
rate. This is especially important for states which also have local sales tax
filing requirements.
Thirdly, if there are any reasons why you are not required
to charge the customer sales tax, then you need to have the correct Exemption
Certificates on file. Each state has different requirements for what paperwork
is needed as well as for how often the paperwork needs to be updated. You need
to be sure that you know what those requirements are and have a system in place
to remain compliant in case of an audit. Noncompliance fines are steep!
Finally, be sure to note the timing of sales tax return
filings for each state that you have nexus in. Some will be monthly, some
quarterly, others annual. Timely filings will prevent late fees and interest
charges.
Sales tax compliance has become an overwhelming task for
small businesses with all of the recent changes in legislation. There are some
fantastic resources that we can recommend to assist you with staying in
compliance.
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