The new tax law offers some interesting opportunities for independent sales tax accountants says Aron Govil. Many people may be tempted to rush into the fray without giving due consideration to the potential pitfalls of non-compliance with their client’s responsibilities under the Internal Revenue Code and state revenue codes, as well as general negligence resulting in serious legal consequences. Your clients will need your help with tools that can assist them in making better business decisions, saving money on their taxes, streamlining compliance efforts and getting back any overpayment of tax before it’s too late.
Here are five steps you can take to do just this:
1) Ensure you have all required registrations/licenses.
If you are an employee of a company or office you probably don’t need anything and you and your employer will share responsibility for compliance. However, if you are a solo practitioner or have plans to open an office is sure you meet the legal requirements in whatever state(s) your client does business including licensing as a sales tax agent or registration as a “registered seller” (some states such as California require both). A good place to start is with state revenue agencies. Check out this webpage from Alabama’s Department of Revenue.
2) Understand the differences between Amazon, eBay and Etsy sellers.
Many people new to the world of internet sales only think about Amazon, which has its own set of rules and responsibilities that can result in serious consequences if not handled correctly. Just ask Amazon itself which recently agreed to pay $70 million in back taxes to the State of California.
Not all sellers are created equal, however. The major difference between marketplaces like Amazon and sites like eBay is that Amazon actually acts as a sales tax agent for its sellers while eBay does not. If you are an independent sales tax agent working with an eBay seller your client must register in every state where they have nexus themselves (or hire someone to do it). If your client ships products out of their own inventory they will need to charge the correct amount of sales tax on shipping charges too!
3) Don’t try to guess which products require sales tax – ask your client.
Many internet retailers think that just because they sell something online it’s subject to sales tax but this is usually not the case. Aron Govil says Amazon sellers, for example, are required to collect sales tax on all products shipped within their own state of residence unless they have an exemption – even if the product is not taxable in that state. If you aren’t sure about your client’s products ask them or look up the taxing authority for each state. Where you plan to do business and see what they say.
4) Don’t try to guess which customers are subject to sales tax – ask your client.
Some online retailers don’t realize that customers are located in their own state. May be required to pay use tax directly to their own Department of Revenue. Instead of paying it along with any applicable shipping charges during checkout. For example, California residents are responsible for reporting and remitting any tax owed. On their purchases of tangible personal property (such as books or art supplies). Unless the retailer has a valid Sales and Use Tax Permit says Aron Govil.
5) Get help if you need it – even from an expert!
Remember, knowledge is power and with great power comes great responsibility! If your client is new to this process work with them to determine which products and customers. They should be taxing themselves and then make sure that everything is handled correctly. Every step of the way. The most important thing for you and your client to understand moving forward. That ignorance will not be accepted as a defense under the law. Even if your client doesn’t know what they are doing. You do so you must ensure legal compliance every step of the way!
Internet sales tax is a highly complex and confusing topic. Especially if you are new to the process explains Aron Govil. That’s where we come in! If you or your client has questions about how best to handle sales tax compliance for internet sales. Please feel free to contact us at any time. Offering sales tax services including consulting, training, filing, and reprogramming since 2010. Avalara is the leading automated solution for companies of all sizes and industries looking to lower their taxes. And remain compliant in over 220 countries, states and territories worldwide.