Resolution: Make state and local tax a priority in 2020
February 6, 2020
By Scott Brawdy, CPA
We've entered a new year and a new decade, and it's often a time when business owners will consider ways in which to improve their processes, procedures and plans for better outcomes.
Like resolutions for better physical health, business health comes into focus this time of year. The past few years of federal and state tax changes have caused a bit of an upheaval in many tax plans, forcing business owners to reprioritize areas that might have been neglected until recently.
State and local tax has hit the spotlight in the wake of the South Dakota v. Wayfair Supreme Court case, prompting tax professionals and business owners to rethink their business's health when it comes to SALT. Like your blood pressure, your SALT obligations can get out of control before you realize it's even happening.
If your goal in 2020 is to get your business's health in check so you can focus on ways to grow, then SALT is a good place to start.
Do a quick SALT health check on your business and see if you can identify with any of these four challenges:
The challenge: You're facing a sales tax audit from the state and wondering if you can resolve the issue yourself through the documentation you have. However, if you don't know how to deal with an auditor and properly answer the questions, you could be in for a bigger challenge than what you started with.
The solution: Don't try to handle your sales and use tax audit on your own. Avoid the landmines and unintentionally stepping into a bad situation by employing the right defense to handle your situation. Tax professionals know how to communicate with state auditors and resolve the situation at hand or at least mitigate the audit's impact.
The challenge: Your enterprise is growing but your internal team lacks the experience to deal with your increasingly complex state sales and use tax issues.
The solution: Sales and use tax isn't necessarily a central focus of any core curriculum at universities. It's often learned on the job and takes time to accumulate the knowledge and skills necessary to handle these issues proficiently. You can save yourself time and energy by investing in training for you or your staff on sales and use tax. Getting up to speed will make a world of difference in tracking your organization's obligations.
The challenge: Your business is operating across different states and hasn't conformed to the new economic nexus laws put in place since the passage of South Dakota v. Wayfair. Since this landmark legislation, states have become more aware of collecting revenue, both sales and income tax, from foreign entities, and they're starting to enforce penalties for noncompliance.
The solution: Nearly every state with a sales tax has adopted a new standard. If you're unsure where your compliance lies, it's time for a nexus study. Nexus studies can help determine where the company has an unaddressed filing requirement and what your potential tax exposure is.
The challenge: You're spinning your wheels trying to stay on top of your sales and use tax compliance in your state and not sure if you're even meeting obligations. You'd rather be working on the business and spending less time with compliance.
The solution: A sales and use tax compliance review will look at your procedures and educate you and your team on best practices for properly staying on top of your obligations. Sales and use tax is manageable with the proper foundations in place.
Although complex, sales tax is an area where you can, with knowledge and training, minimize your exposure if you stay on top of the rules and obligations. It's your customer's tax to pay, but it becomes your problem when it gets out of control. Like your physical health, improving your business's health starts with small steps - make SALT the first one in 2020.
This article was previously published in the Tri-State bizTimes.