What To Do When Sales Tax Rates Aren’t Updated

Someone in the IT department dropped the ball—your sales tax software wasn’t updated to the most current rates and you didn’t realize until transactions are already said and done. You might have caught the error quickly yourself or because a customer or sales rep reported a problem. Regardless of how you found out, there is a big problem that needs fixing. What do you do to make sure your sales tax is compliant with the new sales tax rate? This is a common problem that many retailers have encountered throughout the years. Because many sales tax engines require the IT department to install updates as sales tax changes are put into play, it’s easy for sales tax rate changes to fall through the cracks with conventional sales tax software.

Web-based options like SalesTaxDataLINK are easier to manage because you don’t have to worry about changes in rates—they update all on their own—but that’s not the case with many invoicing software programs that calculate the rate in the first place. While the best strategy is prevention, sometimes it’s too late. To get to the bottom of the mistake, it’s best to have automated help like our FileLINK or RecoveryLINK software that searches through transactions for mistakes. FileLINK catches errors before you file so you don’t need to send corrections to the state to recoup overpayments or make up for underpayments. RecoveryLINK can go through past transactions and returns to show you where errors are down to the transaction data and show you want liabilities you have from past returns.

If you don’t have this technology, it can be a hard battle to conquer bad rate information and time-consuming though it can be done. It’s not always the most cost-effective solution and many times businesses simply decide to risk getting caught than repair their errors—which is a terrible idea. Here are the steps you’ll need to go through to find sales tax rate errors: Look at your rate data of when changes were made in your rates. This might mean looking at a change log in the back end of your sales tax software, if available, or going through sample invoices to pinpoint the change. Isolate the invoices that have known sales tax rate errors. Depending on how many jurisdictions you deal with regularly, this can be quite the undertaking. Recalculate each invoice with an error in it and record the cumulative difference for all errors.

You’ll need to keep strong, organized records of your corrections in case of an audit. Prepare and send the appropriate forms to the jurisdiction and ask for a refund or pay the balance. If you asked for a refund, you need to track down each customer and refund the sales tax overage instead of pocketing the money. If that sounds like a lot of work, you’re right. Our RecoveryLINK software, on the other hand, automatically checks every invoice against historical and current rate data, finds and organizes the errors into one report, and gives you exactly what you need to file with the appropriate state entity. It’s as simple as a few clicks. Sign up for a web demo today to find out just how easy it is — and how much you’re leaving on the table right now.

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