Get Help With Sales Tax Questions

Multi-State Activity Requires Multi-State Sales (&Use) Tax Considerations

Taxes are a challenge for any business. However, that challenge can become a nightmare when the issue is sales tax - and the business in question is active on a multi-state basis.

In order to understand why, you need to consider that a company's filing obligation is not limited to the 46 states that currently have a sales or a use tax. Local jurisdictions (including cities, parishes and even fire districts) can also levy such taxes - that means over 10,000 taxing authorities can be involved. Given that number, changing rates and forms are an obvious concern, but then consider that taxability decisions and product definitions can also vary by jurisdiction. And finally (assuming you haven't already decided to close shop) it's important to realize that sales and use taxes, like payroll taxes, are fiduciary in nature.

A company collects funds that in effect belong to the state, and it must remit those funds as soon as possible (typically on a monthly or quarterly basis). If a company starts to collect the tax - and then neglects to remit it on a timely basis 'company personnel are at personal risk of prosecution.

This is why its critical that you comply with sales tax law. Interestingly, many companies with multi-state activities still think their tax obligation is limited to the jurisdictions where they have nexus or physical presence - such as an employee or office. However, think again... Try a quick search for "Amazon tax" to see more about the issue of sales tax for online commerce...

Compliance Challenge Becomes Magnified in "Perfect Storm" Economy

It's clear then that sales (or use) tax compliance can be a challenge at the best of times, but in a bad economy, the situation worsens. When state budgets are shrinking, hungry states often look to sales and use tax to make up for revenue shortfalls. Put these circumstances together and you create a compliance challenge of "perfect storm" proportions - especially for firms active in multiple states.

States Want to Simplify Taxation for Businesses

The good news is that many states do want to reduce the burden of tax compliance. One such effort includes the Streamlined Sales Tax (SST) program which hopes to ease the compliance process and associated costs through tax law simplification, more efficient administrative procedures and the use of emerging technologies. So far 20 states have joined the program.

Some critics may say that state efforts to simplify and reduce costs are purely self-serving. The end result of a more simplified compliance process will still be greatly beneficial to businesses.

Changes in Tax Law Take Time - Businesses Must Comply in the Meantime

While interest in SST and its goal to simplify tax compliance is encouraging, the reality is that it won't happen overnight. So in the meantime, it is crucial for businesses to fully understand current tax law - and to meet current compliance obligations. There are many resources available to assist companies in that process, including free online resources.

Sales tax problems can ruin a business. Get informed and ask for help.

Copyright (c) 2010 Janet Blackwell

by: Janet Blackwell

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