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Home » Important Sales Tax Tips

Important Sales Tax Tips

December 12, 2012 by Publisher

image of tips and taxes Managing sales tax compliance can be a complicated matter, and it is a good idea to consult a qualified tax accountant. Meanwhile, web based sales tax solutions provider, Avalara, has compiled the following sales tax tips as a starting point for independent retailers.

First, determine if you created nexus in any new jurisdiction over the year. Nexus is a connection between the seller and state such that subjecting the vendor to the state’s laws is neither unfair to the vendor nor likely to harm interstate commerce. If you have indeed established nexus, check the state’s sales tax laws so that you can accurately calculate, file and remit your sales tax liability. Then, check whether or not you will be required to pay your returns electronically. Each state decides which payment options it will offer businesses. You should also determine whether you are required to prepay in any jurisdiction as well as reconcile your sales tax payable account by doing the following:

• Identify the balance of your account at the beginning of the accounting period.

• Add the total amount billed to customers.

• Subtract the total sales and use tax paid before timely filing discount.

• Reconcile this amount with the current balance of your sales tax payable account.

• Re-class any discount or rounding balances to the proper general ledger account.

It is also important to verify that all checks you have issued to the Department of Revenue have cleared the bank and update the filing frequencies on your tax calendars. Make sure you understand the taxability of new product offerings. Remember, product taxability laws are not consistent across states. In addition, be sure your customers’ tax-exempt status is updated and take care of any notices you received from a jurisdiction. Be sure to verify your jurisdiction using exact location, not ZIP Code. Lastly, ensure that your process for keeping sales records will help you in case of an audit by adhering to the following guidelines:

• Keep clear and complete information.

• Be sure documentation is easily accessible.

• Show the flow of each transaction.

Retailers can minimize their risk of audit and maximize efficiency by keeping close tabs on their sales tax requirements throughout the year. Sales tax collection and remittance is a significant obligation for independent retailers, and it is important for business owners to consult tax experts along the way.

Category: Product News Tags: December 2012 Issue, finance, small business, taxes

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