Sales tax compliance could be made easier with standard nexus laws, audit preparedness, and the right sales tax automation solution, but only the last two of these concepts are reasonably doable with sales tax education and the right tools.  

By Stacey Roberts

Key Takeaways:

  • Navigating Nexus and Uniformity: The need for standardization and simplification in sales tax nexus laws remains paramount. 
  • Audit Preparedness and Compliance: As audits increase post-pandemic, it’s vital for businesses to stay informed about best practices in documentation and sales tax rules. 
  • Sales Tax Automation Solutions: Selecting the right tax software is crucial, and understanding the nuances can save businesses from costly mistakes. 

In the ever-evolving landscape of state and local taxes (SALT), the need for robust education and strategic guidance is more crucial than ever. This commitment to demystifying complex SALT issues was the focus of a recent discussion with Diane Yetter, Founder of the Sales Tax Institute, captured during an episode of the “SALTovation” podcast. The discussion spanned the breadth of sales tax education, the impact of landmark legal decisions like the Wayfair ruling, and the essential role of technology in maintaining sales tax compliance. 

Navigating Nexus and Uniformity 

Nexus remains an enduring hot topic in the realm of sales tax, continuously creating a web of complexity that businesses must untangle. Nexus laws, the rules determining the obligation to collect and remit taxes in different states, have become increasingly intricate post-Wayfair. The inconsistency across states has led to significant challenges for businesses striving for compliance. 

“We really need to reduce the burdens on business. Things like somebody going for a trade show, a one-day visit by a salesperson, or inventory in something like an Amazon warehouse,” Diane expressed, underscoring the need for uniformity. 

The conversation also highlighted the critical distinction between physical and economic nexus standards. The non-uniform thresholds complicate the landscape further, with a maze of different sales and transaction thresholds, inclusive or exclusive of marketplace sales, adding layers of confusion. 

“I really think we need to have some sort of consistency so that businesses know exactly what is going to create nexus. Eliminate physical nexus for non-permanent scenarios; let sellers focus on economic nexus,” Diane advised. 

Addressing these disparities can potentially alleviate undue burdens on businesses, ensuring they can navigate the nexus requirements proficiently. 

Audit Preparedness and Compliance 

The post-pandemic era has ushered in a renewed vigor among states to conduct audits, necessitating businesses to be ever diligent and prepared. The rising tide of audits post-pandemic necessitates that businesses adapt to evolving audit practices and maintain meticulous documentation. 

“Audits are definitely picking up. We’ve got several clients being audited by various states. It’s crucial to be prepared for exemption certificates, documentation, and ensuring tax mapping accuracy,” Diane noted. 

The transitional challenges during COVID-19 saw states struggling to conduct remote audits, predominantly affecting manufacturing audits requiring physical plant tours. However, as states acclimated to remote procedures, the onus has shifted back to businesses to be audit-ready. 

Understanding the nuances of sales tax regulations and proactively managing compliance can shield businesses from punitive repercussions. Balancing cost-effectiveness and comprehensive compliance remains a perennial challenge. 

“There’s so many solutions out there. Choosing the right one and ensuring it fits your needs is paramount,” Diane emphasized, reiterating the necessity of precise and thoughtful decision-making when it comes to compliance solutions. 

Investing in suitable training and leveraging specialized consulting services can streamline this aspect, making compliance a seamless part of operational efficiency. 

Sales Tax Automation Solutions 

With the proliferation of sales tax automation solutions, businesses face the conundrum of choosing the right fit amid a plethora of options. Each offers unique features tailored to different business needs, from simple calculation engines to comprehensive compliance management systems. 

“What part of your tax needs are you automating? Is it only sales tax, consumers use tax, compliance, or exemption certificate management?” Diane’s methodical approach to evaluating automation needs underscores the importance of specificity. 

Challenges and Considerations in Implementation 

Selecting and implementing a sales tax automation solution isn’t a one-size-fits-all scenario. It requires a deep understanding of your specific business needs, scalability considerations, and integration capabilities with existing systems. 

“Changing out a tax engine is not for the faint of heart. It’s a significant ordeal. Ensuring you understand what the solution provider takes responsibility for and what falls under your purview is crucial,” Diane cautioned. 

Ensuring a smooth implementation necessitates careful planning, often benefiting from consulting expertise to help align the software capabilities with business requirements, avoiding costly mistakes in the long run. 

Listen to the podcast In the Halls of Power and More: Hot Topics with Diane Yetter.

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