Sales Tax Compliance Issues | Sales Tax Automation

Sales Tax Compliance | Common Pitfalls and How to Avoid Them

Published on by Cheryl Ganim, Ryan Lauer, in State Local Tax, Tax Services, Video

Can’t watch the video? Get the transcript.

If you think sales tax compliance is only an issue for retailers, you might be in for an unpleasant (and expensive) surprise. In this Ask the Experts episode, Sales Tax Compliance Director and practice leader Cheryl Ganim and leading Sales Tax Compliance pro Ryan Lauer talk common sales tax compliance pitfalls, how to avoid them, and what industries should be concerned (it’s almost all of them). 

The 2018 Supreme Court decision on Wayfair vs. South Dakota changed the game across the entire country. Before this decision, businesses had to have a physical presence in a state for that state to subject the business to its sales tax regime and require it to charge, collect, and remit the state tax.

The decision in favor of the state of South Dakota set the precedent for other states to change their rules, saying if a company has an economic presence in the state, they’re benefiting from the state; and so require those out-of-state businesses to collect the state’s tax and remit it. It’s a game-changer because it thereby enables states to generate income from businesses that don’t have a physical presence within their borders.

A quick summary

Don’t have time to watch or read the transcript? Here’s a quick summary:This video covers sales tax implications for businesses, particularly focusing on changes following the Wayfair Supreme Court case. It explains that all businesses selling items at retail may need to consider sales tax, with the ruling expanding the scope to include economic presence rather than just physical presence in a state. Filing requirements vary by state and even at the local level, with differences in economic nexus thresholds and taxation rules.

Sales tax exemptions are also covered, emphasizing the importance of exemption certificates and proper documentation. Common pitfalls include not collecting exemption certificates, overlooking taxable items like software licenses, and errors in handling purchases. Best practices include regular review of exemption certificates, automation of sales tax compliance processes using software, and training staff to ensure proper handling of sales tax.

The benefits of automation include time savings for finance teams and reduced manual effort, although complexities in setup and mapping products correctly are acknowledged. The ideal size for using such services is suggested to be businesses operating in around 15 to 20 states, with potential time savings of days to weeks depending on the volume of returns filed. Overall, the video highlights the importance of staying compliant with sales tax regulations amidst evolving rules and leveraging automation for efficiency.

Get help with sales tax compliance.

Looking for more insights into sales tax compliance? See how outsourcing and automation can help you ensure compliance while freeing up your team’s resources. You might also be interested in how remote working might impact your business’s tax withholding.

If you’re concerned about how the rapidly changing landscape of sales tax compliance might impact – or already be impacting – your business, connect with us today for a free consultation with one of our top sales tax compliance pros. As always – we’re here to help.


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