Originally published on July 3, 2018, updated May 9, 2019
In this guest post, Jennifer Dunn from TaxJar discusses five strategies you can use to troubleshoot sales tax issues.
Dealing with your sales tax filings is probably not why you got into business in the first place. You dreamed of products and profits, not filings and fines. But ignoring your problems isn’t the answer. The best way to keep small tax problems from turning into big tax problems is to face them head on. Although collecting and filing sales tax may seem complicated, troubleshooting your problems is a pretty straightforward process.
States use sales tax as a way to fund all sorts of public expenses, including roads we drive on and the schools we send our children to. Chasing after scofflaws requires resources--time, money, and manpower--that could be better spent elsewhere. So, it’s in the state’s best interest to provide resources that help retailers understand their sales tax responsibilities and helps them fulfill them. And it’s in your best interest to use them. Use this state by state list of tax agencies to find the website you need.
At the bare minimum, the state website will have a basic explanation of what the sales tax laws are and the answers to the most frequently asked questions. If you’ve got a quick question about your problem or need a basic point of clarification, this is probably where you’ll find it.
Now, if your problem requires a little more detailed answers, you’ll probably need to speak to someone in the state tax agency’s office. The website is where you’ll find contact information that can help you do that. If it’s convenient, consider going in-person to the office. However, it’s probably more efficient to call the help hotline. Just remember that if it’s really important, you’re always better off getting it in writing because it’s usually impossible to prove that someone on the hotline told you something incorrect.
No matter how big or small your sales tax problem might be, you can be sure that you’re not the first or the last retailer to experience it. Other retailers can often be great sources of information and inspiration. Someone who has had a similar problem can tell you how they solved it. In most cases, the information you’ll get from a fellow business owner will be a little more candid than what you might get from the state. And best of, they’ve got the real life experience to tell you how to avoid where they went wrong themselves.
There are a number of places you can find other retailers sharing information and experiences. Local business organizations, like the Chamber of Commerce, bring retailers together to network and share information. You can also find a number of groups online that use virtual spaces to share information. Facebook, Reddit and online message boards are all possible sources. Check out this sales tax Facebook group for eCommerce sellers that brings together like-minded retailers who often share advice about problems.
If you’ve got a particularly complicated sale tax problem, you might need a SALT (sales and local tax) expert. These accountants specialize in sales tax and generally work in multiple states. If you’ve found yourself with a big past due tax bill or need help surviving an audit, these are the guys you need on your side. For example, if you ever need to negotiate a voluntary disclosure agreement (VDA) to reduce the back taxes you owe, a SALT is recommended.
Using the state provided resources and advice from your community are both free but hiring a SALT will not be. In fact, you can expect them not to be cheap at all. You’ll be paying for their knowledge of various state tax laws and personal experience resolving all sorts of sales tax problems. Remember, you get what you pay for. Just be sure to research your SALT thoroughly. And check out this list of vetted experts to get you started.
When you received your sales tax license from the state, you also were assigned a filing frequency. Whether it was monthly, quarterly, or yearly, the state expects you to file a sales tax return that details your sales, the sales tax you collected, and--most importantly--a remittance of that sales tax.
There’s nothing like getting to your filing date and realizing that the amount of sales tax you should have collected doesn’t match the amount you actually collected. Avoid this problem by using TaxJar’s Expected Sales Tax Due report. TaxJar will use the information collected by your online shopping cart or marketplace compare your actual collected sales tax to your expected sales tax. You can use this information to avoid being blindsided when it comes time to file your returns.
Most sales tax problems can be avoided by simply filing an accurate return on time. That may be easier said than done, considering that many online retailers are working with multiple nexus states and sales platforms. If you want to avoid the most common issues, consider going automated with your filings.
This is where sales tax automation technology comes in. Use an eCommerce tool that imports your sales information directly from your online selling platform to create ready-to-file sales tax reports for every single one of your nexus states. You can even have it AutoFile for you so you never have to deal with a filing ever again.
For more about sales tax, check out our eCommerce Sellers Guide to Sales Tax. Do you have questions or something to say? Start the conversation in the comments!
TaxJar is a service that makes sales tax reporting and filing simple for more than 10,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!
Originally published on July 3, 2018, updated May 9, 2019
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.