Navigating sales tax compliance presents numerous challenges for small and medium-sized businesses due to the immense complexity involved with variances across jurisdiction rules and regulations. This maze of requirements has understandably instilled sales tax compliance fear among companies wary of the costs, administrative workload, and potential penalties associated with inadvertent mistakes or errors. Seeking to ease these concerns, many firms now outsource key tax functions to specialized providers. This blog post will explore how outsourcing can help attenuate the very real fears surrounding sales tax adherence by leveraging expert guidance and supported automation.
The Case of VIM & VIGR
Since the 2018 Supreme Court decision in the case of South Dakota vs. Wayfair, states and municipalities have had the power to require remote sellers to collect and remit sales tax in jurisdictions where they have no physical presence. The testimony of Michelle Huie, founder of VIM & VIGR Compression Legwear, at a recent Senate hearing on the subject gives insight into what this decision has meant for small and mid-sized businesses nationwide.
“I know many eCommerce business owners and I’m part of a forum of thousands of eCommerce sellers. We want to be compliant and pay our taxes accordingly,” Huie told the committee, “but the current conditions make it excessively complicated and add major costs and administrative burden as well as fear that we’re not doing something correctly.”
VIM & VIGR earned only 30% of its revenue through e-commerce, doing most of its business through retailers. Nonetheless, Huie discovers that she had nexus in 22 states. “I was triggering nexus for these states based on all my gross receipts even though eCommerce only accounted for a small percentage of that,” she explained.
Huie discovered where she had nexus by getting an analysis of her situation from a sales tax expert, She registered to pay sales tax in each of the 22 states in which she had nexus and collected, filed, and remitted sales tax returns on the varying required dates. She has spent $50,000 a year on compliance.
A case for outsourcing
Huie’s example is not unusual. As a manufacturer, she increased her online sales during the pandemic, but she meets thresholds for sales tax collection in many of the states only because they determine the threshold based on her gross sales, not her net sales to individuals. Selling her products in big box stores online and in brick-and-mortar stores brings her threshold up in many states where she may have relatively few sales.
VIM & VIGR is not trying to avoid paying sales tax. But even this highly successful business finds sales tax compliance confusing and frustrating. “I know of businesses that have had to close because the administrative complexities and costs were just too much for some business owners,” she told the Senate committee. “I am not here to challenge the payment of sales tax. It’s a major revenue stream for states and the shift to online commerce has changed the dynamics that don’t work for pre-existing regulations. I am here to ask to simplify the process for eCommerce businesses.”
Huie has had to be very hands-on with sales tax for her business, even though she started her company in a state without sales tax. For Huie, and for most business owners, it just doesn’t make sense to take on this job.
Outsourcing the process makes sense.
But who can you outsource this process to? Most CPAs are not sales tax experts. Errors are easy to make and hard to catch for anyone except a sales tax expert, and the software that automates sales tax compliance isn’t always refined enough to guarantee accuracy. Sales tax audits are on the rise, and states are taking the opportunity to increase revenues. Fear of doing something wrong is completely reasonable in the case of sales tax.
Outsource to us
At Sales Tax DataLINK, we are sales tax experts. You have your own business, and you are the expert in what you do. If what you do isn’t sales tax, there’s no reason for you to become an expert on sales tax.
Our patented software allows an unprecedented level of accuracy, and our experts know how to use the software to make sure that your company is compliant in every jurisdiction where you have a nexus.
Call us at 479-715-4275 and let us help make your sales tax compliance easier.
