Automation in Finance Benchmark Report
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Often, simply gathering the internal data that is needed to calculate sales and use taxes represents a significant time investment. Systems including the point-of-sale (POS), general sales ledger, billing and ERP, as well as ecommerce all need to be tapped and the IT department is generally required. If the retailer keeps its brick-and-mortar and ecommerce sales separate, these sales must be aggregated if the business is registered as a single filing entity. However, sometimes sales tax needs to be reported by location. In addition, for retailers that sell through third-party marketplaces, these need to be integrated with sales from other channels. SMB retailers can simplify both the data gathering and calculation parts of their processes with a centralized tax management system.
This type of solution can handle data from multiple sources and in various formats, calculating the taxes owed and generating the appropriate returns for individual jurisdictions and due dates. A centralized sales and use tax management solution also simplifies record-keeping, including key paperwork such as exemption certificates for non-taxable items or exempt customers and previously filed sales and use tax returns. The need for comprehensive record-keeping in case of an audit is more pressing than ever, given states’ pursuit of sales and use tax revenue.
“The desire for revenue has led states to more aggressively assert nexus over out-of-state corporations in both the income tax and the sales and use tax arenas,” according to Bloomberg BNA’s 16th Annual Survey of State Tax Departments, as stated in a May 2016 Accounting Today article. The article also noted a range of states’ recent challenges to the Quill decision that governs most nexus determinations, including Ohio’s assertion of a theory of Internet nexus that would create taxable presence every time a retailer’s web site is accessed by a customer in the state.
Not keeping up with tax rate rules and changes could lead to expensive fines and time-consuming audits. Businesses are often selected for audits for various reasons such as:
When your business is contacted for an audit, here are some general guidelines to follow:
If you are selected for an audit by a taxing authority the process will generally be something like this:
When the audit commences a variety of required records and reports will be examined so as to:
At the completion of the audit, the auditor will discuss all preliminary findings and explain the following:
For more information read 5 Steps to Simplify Sales and Use Tax for Retailers.
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