Should You Collect Sales Tax?By Tom WeissApril 5, 2021
The answer to the simple question whether to collect sales tax should be fast and straight forward. Unfortunately, it isn’t. It is common knowledge that certain retailers do collect sales taxes in some states but not in others. How do they arrive to that conclusion and determine their obligations across several states?
Regardless whether a business operates a large internet business, a brick and mortar store or a small family business, it is important to understand your tax obligations in every state you are doing business in. There is no standard rule across all states or business types and exceptions are complex and daunting to fully comprehend.
“There is no standard rule across all states or business types and exceptions are complex and daunting to fully comprehend.”
A first indication of your general obligations is to understand if your company has a “physical presence” – generally meaning it employees direct staff, affiliates, or any sort of agents in a state or owns property connected with your business transactions, then you will likely need to collect tax in a particular state. However, that is not the only driving factor and you are not quite done yet understanding the full impact regarding the particular determination of your tax obligations.
The level of scrutiny goes far beyond a simple yes/no answer.
Now, you have done your homework and made your way through the mayhem of due diligence as good as you can in an effort to avoid any issues and potential penalties in the future and you have determined that you might have nexus in certain states – does this mean that your company is actually required to collect taxes? The answer is a resounding “Maybe”. Your due diligence needs to consider your existing business, how and where you transact to, employment of personal, nexus plus any other strategic implications.
“ How significant is your competitive advantage if you are enabled to avoid taxes wherever legally possible.“
For example, how significant is your competitive advantage if you are enabled to avoid taxes wherever legally possible? Are you selling your goods and services to other resellers or can you apply any other tax exemption towards your sale? Many business owners underestimate or simply ignore the options of successfully offering sales tax exemptions to their clients. This neglect is often driven to avoid the added complexity that tax exemption processes might present to your business. However, the benefits of offering tax exemptions to your customers often times greatly outweigh any disadvantages in handling tax certificate if you outsource the complexity to the right service provider.
EXEMPTAX provides your business with a comprehensive exemption certificate management (ECM) platform, which enables your customers to fill out tax exemption certificates in an intuitive workflow. Your customers will be guided through a step by step process to ensure completely filled out tax form for the correct purpose. You will only receive valid and signed tax certificates, which eliminates the painful back and forth with your customers as well as any of the usual guesswork. We believe that sales tax exemption certificate management does not need lead to rocket science and EXEMPTAX will help you to demystify exemptions for you and your customers to create a win-win situation.
” You will only receive valid and signed tax certificates, which eliminates the painful back and forth with your customers…”
To get an idea of the simplicity and ease how to fill out a tax certificate, simply click on the link below to start a self-guided demo and generate some test certificates.
If you require further support in determining your overall obligations through a nexus study or have other questions, our network of tax advisors have extensive experience and are happy to help out.
Let EXEMPTAX enable your business to streamline handling of resale and sales tax exemption certificates, help you reduce your audit risk, and save your time and money. Schedule a Demo Today!