3 steps to readying your business for economic nexus
It took 26 years for the Commerce
Clause to catch up with ecommerce. On June 21, 2018, the Supreme Court ruled in the case of South Dakota v. Wayfair, giving way for states to impose sales
tax on remote sellers: https://www.avalara.com/us/en/learn/sales-tax/South-
Dakota-Wayfair/get-prepared.html based on economic nexus (the volume or dollar value
of sales into
a state) and
not just physical presence.
Settling the debate
took years, but requiring companies to comply will likely come much faster. And it’s not just Internet retailers that need to pay heed to tax rule changes. Any business in any industry that sells to or services out-of-state customers, online or offline, could be on the hook for sales tax under economic nexus.
Here
are three actions every tax manager, finance leader, and business owner should
take to prepare:
1. Reassess Nexus: Where are your current (and future) customers?
Why it’s time: Now that the Supreme Court
has given the green light
to one state to collect
sales tax on remote
sales, others are undoubtedly following suit. Already, more than 20 states have economic
nexus laws in place or pending (see map). What that means is
that, in addition
to states where
you have physical
presence nexus,
you could be required
to collect and remit sales
tax on sales into states where you
meet the minimum
thresholds for
economic nexus: https://www.avalara.com/us/en/learn/sales-tax/South-Dakota-Wayfair.html either based
on volume of sales or total revenue from those sales.
The Bottom
Line: If you are uncertain of your nexus
obligations or want to be extra sure your business
is compliant under
the new economic nexus regulations,
consider a nexus analysis
study: https://www.avalara.com/us/en/products/professional-services/ NexusAnalysisStudy.html.
2. Revisit
Registration: Will you now need to collect and remit sales tax in more states?
Why it’s time: If your sales
activities give you nexus in more states,
you’ll need to register
to collect sales
tax, remit tax, and file sales
tax returns in those states.
How and when you
need to file
returns and remit sales
tax can be drastically different from state-to-state. Keeping on
top of your obligations with the additional burden of economic nexus
could become a challenge to manage manually
or with in-house staff.
The Bottom
Line: Consider the benefits
of having a third-party handle
registration and returns for you. Avalara
has a full suite of technology solutions
that address every stage of tax compliance from accurate
rate calculation to on-time returns
filing to business license and tax registration services: https://www.avalara.com/us/en/products/professional-services.html.
3.
Rethink
Compliance: Is there a better way?
Why it’s time: How you manage
sales tax and
use tax today
may not be enough to keep you compliant once states start expanding and enforcing economic nexus. If the company is growing or planning to grow, its tax obligations will likely grow too. If your financial systems aren’t optimized for tax changes
of this magnitude or you are too
reliant on staff
to keep you compliant, the company could
be at greater risk for errors or audits.
The Bottom Line:
Having a robust and reliable sales
tax solution in place today
prepares you to deal with any and all tax obligations that impact your business now or in the future.
Check out Avalara’s cloud software solutions: https://www.avalara.com/us/en/products/sales- and-use-tax.html, which offer unparalleled accuracy
and reliability and turn-key set up in your current
ERP, ecommerce or accounting system.
Rest Easy. Sales tax is complicated. And it’s not likely to get easier
anytime soon. But that doesn’t
mean it has to eat up resources and be a burden
on the business. Explore the benefits of tax automation. Ask your platform
provider about Avalara or talk to one of our tax automation specialists. There’s peace of mind in knowing you’re doing
sales tax right…no
matter which way the gavel
falls.
About Avalara
Avalara helps businesses of all sizes achieve compliance with transaction taxes, including sales and use, VAT, excise, communications, and other tax types. The company
delivers comprehensive, automated, cloud-based solutions designed
to be fast, accurate, and easy to use. The Avalara Compliance Cloud® platform helps
customers manage complicated and
burdensome tax compliance obligations imposed by state, local,
and other taxing
authorities throughout the
world.
Avalara offers
more than 600 pre-built connectors into leading accounting, ERP, ecommerce and other business
applications, making the integration of tax and compliance
solutions easy for customers. Each year, the company
processes billions of indirect tax transactions for customers and users, files
more than a million tax returns, and manages millions of tax exemption
certificates and other compliance documents.
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