3 reasons you’ll learn to love sales tax compliance
June 19, 2017 | Sales Tax
By Laura McCamy
You’ve got a lot to do to run your business. You manage production, maintain inventory levels, make sure your products are displaying properly on the web and shipping correctly to your customers. You even answer the irate call from Mindy in Manasquan, who thinks that the pink poodle skirt she received is a different shade of pink from the one on your website. Sales tax compliance is probably number 42 on your to-do list.
But spending a little time keeping up with your sales tax compliance today can save you a lot in the long run. Here are three reasons to tackle your sales tax obligations head on.
1. Sales tax compliance avoids late fees and penalties
Filing your sales tax returns on time can be a hassle, especially if you have nexus in multiple states with different rules and different sales tax return due dates. Staying on top of your sales tax compliance may seem overwhelming.
You may think it’s no big deal to file late, especially if you don’t owe any sales tax in a state or you owe very little. You might be right — or you might be very wrong. Penalties for late filing vary widely from state to state.
In California, for example, the penalty for filing late is 10 percent of the tax you owe. If you owe nothing, you won’t be dinged for filing a late sales tax return. If the amount due is small, the penalty and interest won’t add up to much either.
In New York, on the other hand, your late return will earn you a penalty of at least $50, even if you don’t owe the state a dime. If you’re more than 60 days late, the penalty can go up to $100 or 100 percent of the sales tax you owe.
Fortunately, sales tax compliance software can take the hassle out of filing on time.
2. Sales tax compliance ensures that your customers pay the correct sales taxes
If you don’t add sales tax to your shopping cart for the customers who live in states where you have nexus, the tax amount will come out of your profit margin. That’s why it’s a good idea to understand where you have nexus and which of your ecommerce orders need sales tax added.
Nexus is a physical presence in a state that creates a requirement for you to collect and remit sales taxes on your sales within that state. For example, if you operate your business out of Fort Worth, you owe Texas sales taxes on your sales to Texas residents. If you use a fulfillment warehouse in Memphis, you need to charge Tennessee sales tax when you ship an order to that state.
3. Sales tax compliance is the way of the future
The more sales have moved online, the more sales tax revenue states and localities have lost. Someday soon, the states will find a way to collect sales tax on every internet purchase. Put your sales tax compliance plan in place now and you’ll be ahead of the curve.
What are your thoughts on this topic? Share with us in the comments below.