Like every New Year, 2016 brought many sales tax changes. Rates decreasing or increasing, new product taxability rules, exemptions expiring or taking effect, and reporting changes too. The only thing certain when it comes to sales tax is that change happens. And it often happens without much warning.
Resolve to streamline your company’s sales tax compliance process in 2016.
Rates. Nearly a dozen states, including Illinois and Maine and Minnesota, announced local sales tax rate changes for 2016. In addition, there is talk of increasing the state sales tax rate in both Oklahoma and Florida. State departments of revenue often — but don’t always — announce rate changes in time for businesses to account for them. However, in tricky home rule states like Colorado and Louisiana, local governments may not notify state revenue departments of such changes in a timely manner, or at all.
Resolution: Be sure you have a reliable system in place to manage sales tax rate changes.
Product taxability. Businesses also need to account for changes in product taxability. Sales tax can be expanded to services or slapped onto previously exempt tangible personal property. States generally announce changes in time for sellers to account for them; yet unfortunately, that’s not always the case. For example, on June 30, 2015, Governor Jay Inslee of Washington signed legislation reforming the regulation and taxation of the marijuana market. It took effect the following day.
Product taxability changes in 2016 include the following:
Resolution: Successfully process changes in product taxability and do it quickly.
Exemptions. Changing sales tax exemptions are also a bear, whether at the state or local level. While many, like the exemption for gun safety devices recently approved by the Michigan Senate, make headlines, many others slip into law virtually unnoticed.
Some exemption changes under consideration or set to take effect in 2016 include the following:
Resolution: Have a fail-safe solution to managing sales tax exemptions and exemption and reseller certificates.
Reporting. Last to be considered here (but certainly not the last issue sellers will confront) are changes to the way sales tax is reported. Some of the changes for 2016 include:
Resolution: Get reporting and filing right.
Be ready
Sales tax changes are here, with likely more to come. There will be new rates, product taxability rules, exemptions and filing requirements, and the onus is on you — the seller — to comply with those changes. Failure to do so can lead to negative audit findings, penalties, interest, and a whole lot of hassle. So what’s your plan?
Resolution: Make sales tax less taxing with automation.
Automate
With a detailed process in place, an auditor is more likely to give your company a clean bill of health. More and more businesses are turning to sales tax automation to help them manage these processes. For example, Avalara’s cloud-based sales tax software, AvaTax, reduces audit risk with sales tax services that calculate rates, manage exemption certificates, file forms and remit payments.