Are You on the Auditor's Naughty List?

Are You on the Auditor's Naughty List?

December Blog Series: Spreading the Joy

Insights from: Avalara​

​Edgewater Fullscope is pleased to announce the first blog post in our monthly partner blog series. This week's post is a special addition featuring Fullscope's partner Avalara, which offers end-to-end sales tax compliance software, all in the cloud. Avalara helps provide fast, easy, accurate, affordable and reliable rate calculation & filing.

 We're right in the middle of the holiday season which brings in some of the biggest revenue of the year for many businesses. Unfortunately, the holidays also means a lot of  tax confusion and a potential domino effect of audit penalties if even one rate is wrong.

Tax compliance is hard. Really hard. If you're managing it manually you're probably fighting an uphill and frustrating battle to keep your risk down. Sales tax impacts just about everything: wrapping paper, gift certificates, that puppy your granddaughter wants on Christmas morning. It's collected most everywhere in the country–except for that handful of outlier tax-free states. And it's surprising. Just when you thought you knew what your state was up to, it up and changes its tax laws. Add in holiday shopping complexities like online sales and drop shipping and your business has a recipe for a compliance disaster.

Not worried about sales tax? Have it handled? Good for you and fingers crossed that your strategies are sound. For everyone else, read on.

Sales tax provides critical revenue for states. Other than property and income tax, sales tax is the largest source of tax revenue in the majority of the 46 states that collect it. From a government operations perspective, making sure each and every sales tax dollar is collected, through audits, fines, penalties and well-developed rates and rules, is simply good business. Take a look at the following. As you can see, general sales tax constituted 30.5% of total state government tax collections. When combined with selective sales tax as applied to fuel, liquor, etc., that percentage rises to 47.1 percent. It's easy to see why sales tax is both a major source of funding and uncollected sales tax is on the radar of budget-strapped states. After all, wouldn't you rather be the politician who recovers uncollected funds from existing tax streams, rather than raise taxes?

No one likes dealing with the mundane, complicated, and time-consuming tasks associated with sales tax compliance. Whether it's calculating, collecting, remitting, filing - or performing related tasks like tracking exemption certificates, sales tax holidays, or product taxability - none of it adds to your bottom line.

It's easy to be lured into a false sense of safety when it comes to sales tax. No one likes calculating, collecting, remitting, or filing taxes, nor do they enjoy tracking exemption certificates, sales tax holidays, or product taxability. Because of this, many companies relegate these tasks to the back office, assuming all is well. In fact, this assumption is the very thing that can put your company on the auditor's naughty list.

Don't get stuck with a lump of coal where your revenue should have been. By developing tactics to address tax complexities, you can proactively safeguard and prepare your company for an audit.

Sales Tax, tax compliance, Partner Blog, partner blog