Staying in state tax compliance with sales is not a simple feat and small errors will turn into costly mistakes. With plenty of rules and regulations in place— and changes to them —this will be tough to know various tasks to focus on and best practices to tackle them. Only companies like TaxConnex with experienced tax advisors can help reduce the stress of sales tax compliance by a suite of services made to streamline tax return procedures. Or you need to have your own advisor who can take of these things. In this article, let’s see what sales tax compliance is and how you can comply with it.
Adhering to the basic tax compliance principles and breaking them down in the checklist of normal practices will help to make the sales tax compliance manageable. But, the process of maintaining tax compliance with changing laws will be quite challenging, mainly when it is about international organizations doing business with partners across the world. Even complexities that are involved in filing tax returns have increased and causing many people to look for tax professionals for assistance.
Noncompliance with income tax returns, reporting, and international tax laws can result in huge fines from Internal Revenue Service, with other results. For such reasons, it is good for the businesses & consumers to trust the tax accountants or other extra to support the tax compliance.
How do Tax Administration & Tax Rates help?
To make sure tax compliance, professionals should follow the right procedure of the tax administration that includes calculating an amount client owes as per the current tax rates. If it is corporate tax, businesses should adhere to state & federal tax rates. The federal corporate rate, as explained, is the flat rate all businesses should pay as a part of taxes. State tax rate differs ― as some states don’t have any state corporate tax rates and some states have the flat tax rate, which spans from over 1% to 9.99%.
Organizations doing business outside their home country borders should observe the international tax rates, especially for those areas. It is very important that different tax rates apply to the company’s operations will be observed, rightly calculated, as well as paid according to tax administration deadline.
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Keep proper records
Today doing business needs well-organized record-keeping & retention to avoid any fines and penalties in an event of the audit. Strive to easily and quickly produce records that include exemption certificates, receipts, invoices, permits, and more.
The exemption certificates are the special note and without the right proof that the transaction was exempt from tax with a valid (up-to-date and accurate) exemption certificate, a business must pay an uncollected tax. With keeping organized records, ensure you respond to tax notices in a timely way. Ignoring it and pleading ignorance generally gets you nowhere if taxes are involved, particularly if the tax department reached you.
Quantify state tax exposure
There are some states where tax and nexus exposure exists for certain periods, hence companies must quantify historical sales & use tax exposures using the historical sales, income data & totals by product and state. For a few companies, the amount of state tax exposure will have to get recorded as the liability for the financial reporting reason.
Populate tax return
When you have gathered important data required, you have to input the right information in the tax forms. The review of tax returns is essential to know what is needed or how it needs to get presented. It is important to note that the return preparation differs from one state to another. Sales data will be reported separately from the purchase date. But, in a few states, it can be on a separate return, whereas in others it can be the separate lines on the same return. Some differences can include sales and seller’s use, lease or rental, telecommunications, as well as other tax types.
Get assistance from the tax professional
The startups who are trying to rightly file, collect, as well as report sales or use taxes, face a certain uphill battle. Thus, ignoring the sales tax obligations and guessing at the right path can lead to long-term troubles. Work with the accountants, take advice from the management team at the incubator and work through the right steps.
Tax compliance is a continuous process. When you have established the given steps, it is a matter of repeating & making tweaks when important. Companies enjoy fast ROI from the technology solutions because of improved compliance & redeploying staff time for various revenue-generating actions.