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December 2014 • www.CPAPracticeAdvisor.com 25 HOLIDAYS Ever y year, a number of states set sales tax holidays (such as " back to school " or "summer" sales tax free days). K now the hol idays as they happen so you' l l avoid u nder- or over-collecting sales tax. SOU RCING W hether a transaction is sales ta x exempt also hinges on the location of t he buyer a nd t he sel ler. Most sales within a state are based on the location of the seller, whereas sales made bet ween states are t y pically based on the consumer's location. Some taxing jurisdictions determine ta xability based on the location of the seller. Tese "sourcing rules" are not consistently applied in each state and can cause an audit risk if incor- rectly exercised. TO DO: • Te Sales Tax Institute publishes a list of sales tax holidays by state. • Know whether to collect a resale or exemption certifcate and whether one form can be used for both. SURVIVAL TACTIC #4 Determine product and service-related exemptions Many states are addressing budget g aps b y i nc re a s i n g produc t a nd ser v ice ta xabilit y, but many prod- ucts and ser vices are still sales ta x free. As taxing jurisdictions change their rules about taxability of goods and services, your business needs to be aware of the changes and adjust its accounting systems accordingly. Te risk of under- or over-charging consumers sales tax can result in a higher risk of audit, as well as cus- tomer dissatisfaction. TO DO: Review taxability matrices available on many depar tments of revenue websites here. SURVIVAL TACTIC #5 Automate From a sa les ta x compl iance per - spective, manually managing ta x- exempt sales and associated paper- work not only increases risk of audit, it also costs more in manpower and other resources than outsourcing does. Most companies are turning to t he automat ion of e xempt ion cer t i f icate ma nagement, a nd t he integration of an exemption certif- cate solution into current systems to make managing exempt sales easier. Somet h i ng a s si mple a s auto - m at ic a l l y t y i ng eac h e xempt ion certifcate to each transaction can save hours of time and reduce risk of f ines and penalties. Other advan- tages of automation include: • Automates collection • Tracks the progress of collecting certifcates • Helps to ensure the completeness of certifcates • Eliminates lost certifcates • Tracks certifcate expirations • Improves the exempt customer experience Shane Ratigan, JD, LLM (Tax) is the Content Compliance Manager for Avalara. A Year in the Life of a SALT Accountant is sponsored by Avalara c c o u n t a n t b y A v a l a r a 8 BEST PRACTICES FOR SALT CLIENTS FOR YEAR-END AND BEYOND A s most SALT practice leaders know, sales tax compliance is a critical but often overlooked aspect of running a business. Don't let your clients close out the year without looking ahead to 2015. Here are eight smart business practices to help your clients stay on top of transactional tax compliance: 1. KNOW NEXUS Nexus means that a business must collect state sales tax if it has a substantial physical presence in a state. Recently, nexus laws have expanded to include distribution, independent agents, remote employees and affliate networks. Be sure clients understand where they are required to collect tax and keep up to date on nexus changes to protect against non-compliance penalties. 2. TRACK PRODUCT TAXABILITY RULE CHANGES Most sales of Tangible Personal Property (TPP) are subject to tax. This has begun to shift to include intangibles, with many states now routinely apply sales taxes to certain services. Keep apprised of product and service taxability as rules evolve and help clients adjust accounting systems and taxing practices accordingly. 3. USE THE RIGHT TOOL FOR THE RIGHT RATES It's common for businesses to shortcut researching sales tax rates by using ZIP code tools. Unfortunately, taxing jurisdictions don't always follow ZIP codes. Tax rates can vary even within an individual ZIP code and counties and municipalities can levy sales taxes in addition to state rates. Geospatial mapping (the same technology as Google Maps) is more accurate and can calculate sales tax down to the rooftop. Help clients fnd geolocation tools online, such as salestax. avalara.com. 4. ENSURE ACCURATE EXEMPTIONS Not all customers are required to pay sales tax. Depending on the rules in a taxing jurisdiction certain businesses and individuals may be exempt. It is incumbent on the seller to collect valid exemption certifcates, keep them on fle and track expiration and renewal dates. 5. REMIT AND REPORT CORRECTLY When it comes to remitting sales tax, businesses must using correct forms and formats for each jurisdiction and meet fling deadlines. This can get complicated with multiple locations and nexus, exponentially upping the odds of missing a fle date, rate change or certifcate renewal date and increasing non-compliance and audit risk. 6. BE AUDIT READY The most critical action your clients can take to pass an audit is to collect sales tax properly over time and ensure they've properly documented each transaction. Sales tax audits are much less painful when transaction history, exemption certifcates and other relevant information is readily available. If practices, calculations and records are in good shape, your client should be too. 7. STREAMLINE THE PROCESS The more time spent calculating, collecting, and remitting sales tax, the less time will be spent on revenue-generating activities. Advise your clients to fnd ways to streamline sales tax calculations and related activities by outsourcing and automating the process. 8. OUTSOURCE AND AUTOMATE Outsourcing and automation are effcient, cost-effective alternatives to manual processes. Advise clients to look for a cloud provider that integrates accounting, point-of-sale, ERP or ecommerce system and offers a full suite of transactional tax services— calculation, fling and handling of exemption certifcates. What better way to help clients wrap up 2014 and prepare for 2015 than to help them understand and plan an effective sales tax strategy. Source: Avalara, Inc.