Simplifying Sales Tax
- Written by T. Steel Rose, CPA
Even Amazon and other major online companies are beginning to appreciate the inevitability of sales tax being charged on online purchases. Despite Walmart and other main street retailers claiming it provides unfair competition, there has been resistance to charging taxes between states partly due to a favorable attitude toward fostering growth of Web commerce. Gradually however states like California have found ways to determine nexus when companies have a presence in their state like a sales office or onsite sales calls. The Marketplace Fairness Act passed the Senate on May 6, 2013 but still must go through the House. With states taking a much more aggressive stance on sales tax compliance, businesses of all sizes are quickly realizing that it will simply cost more in the long run to ignore this issue.
As the tax on Internet purchases debate continues, most states realize the complication of assessing and collecting the sales tax. It should be fascinating to watch, as most states have a different theory on what is taxable and what is not. Imagine, buying your food from a neighboring state like Texas that does not charge sales tax on groceries, but does tax prepared food; or buying clothes from New Jersey that doesn’t assess its 7% sales tax on unprepared food, medicine or clothing. A total of 24 states joined together to form the Streamlined Sales Tax Governing Board to simplify the process if it is permitted by Congress.
One thing is fairly certain; business clients will look to you for answers. This is why sales tax consulting is expected to be a growth area for expanding your practice. Sylvia Dion, CPA at Dion Consulting emphasizes sales tax consulting in her practice. Dion publishes an informative blog at www.thestateandlocaltaxbuzz.com that covers new sales tax topics across the country.
The effort that became the Streamlined Sales Tax Governing Board was established in March 2000. The goal of this effort is to find solutions for the complexity in state sales tax systems. This resulted in the U.S. Supreme Court holding (National Bellas Hess v. Department of Revenue of the State of Illinois in 1967 and Quill Corp. v. North Dakota in 1992) that a state may not require a seller that does not have a physical presence in the state to collect tax on sales into the state. The Court ruled that the existing system was too complicated to impose on a business that did not have a physical presence in the state. The Court said Congress has the authority to allow states to require remote sellers to collect tax.
The result of this work is the Streamlined Sales and Use Tax Agreement. The purpose of the agreement is to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance. The vast array of testing determines the proper handling of goods or services based on special taxability, sales tax holidays, and entity exemptions. All must have tax rules in place that correspond with State Taxability Matrices. A snapshot of these six companies follows.
Avalara is a fully-automated sales tax management solution that performs real-time, automated sales tax calculations, integrates seamlessly with financial or e-commerce systems, and provides automatic return preparation and filing, while enabling treasury management and audit defense with sophisticated, web-based compliance management and reporting tools. Businesses of all sizes are able to affordably outsource the most tedious, repetitious and time-consuming aspects of sales tax compliance - researching, calculating, posting, reporting and remitting sales taxes - while simultaneously acquiring the ability to better manage their business via online access to sales tax data.
Its web-based offering provides a complete set of transactional tax compliance services, including tax calculation, exemption certificate management and returns processing. It also offers 1099 filing and reporting. Avalara simplifies the complexity associated with sales and use tax by partnering with 150 accounting and commercial software publishers. These partner applications include enterprise resource planning, point of sale, ecommerce, mcommerce, compliance, and customer relationship management systems.
CCH combines the practical advantages of web-based technology with CPA-designed functionality. The strengths of the CCH Sales Tax SaaS application include: web services and coding economies for real-time accuracy in sales tax determinations, a Sales Tax SaaS Console online administration and service center and a Sales Tax SaaS Service Engine to ensure efficient handling of rule additions and changes.
Exactor enables sales tax compliance by providing an automated solution for secure, reliable sales tax record keeping and processing. Exactor bridges between all elements of a transaction, starting from the point of transaction, such as the shopping cart, through the final e-filing and remittance of taxes owed.
Taxware solutions are used by various businesses including remote sellers, brick and mortar stores, and manufacturers. Taxware products integrate with a business’ ERP, CRM, POS, shopping cart and home-grown applications. Its products can be accessed remotely through the Taxware hosting center or can be deployed onsite within a business’ firewall. Taxware processed the first certified tax transaction in 2001during the pilot run by the Streamlined Sales Tax Project.
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AccurateTax TaxTools are integrated into online stores, with plug-in solutions for a variety of software platforms, as well as a custom API. The TaxTools suite brings SSTP-certified rules and transactions to the online point of sale for retailers to ensure they are calculating, collecting, reporting and remitting the accurate tax information.
FedTax offers businesses a free way to calculate and collect sales tax. Over 2,500 retailers use TaxCloud to manage sales tax. It claims to handle every aspect of sales tax from calculation to collection to filing. TaxCloud can be integrated into most accounting, order management, and shopping cart systems. It calculates sales tax in real-time for any location in the country and files sales tax returns for 24 states. It prepares monthly state-by-state reports on sales tax collected and monitors changes to tax rates and tax holidays
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