SALES TAX ADVISEMENT
Let us help you figure out the best ways to get exempt from sales tax, within legal limits.
sales tax advisement
Sales tax may not be the most glamourous of tax areas (let’s be honest, only we believe that ANY area of tax is glamourous), but it’s an important cog that keeps the tax wheel turning efficiently. It’s also one of the larger areas where things can quickly spiral out of control should you find yourself out of compliance, as sales tax penalties in various states can seem severe. Sales tax has also functioned as a largely gray area until recently, with the South Dakota v. Wayfair Supreme Court case decision giving states the needed ammo to go after out-of-state sellers that have no physical presence in the state (and even more importantly, giving them the opportunity to expand their reach for income taxes on businesses as a result of this decision).
States designate their own sales tax rate and are largely responsible for their individual state’s requirements regarding compliance. Since it’s a state by state evaluation and calculation, this area seems to be one of the more misunderstood, as there’s just so much information that inundates business owners, especially new ones.
What is sales tax, in general terms? Here’s how to calculate sales tax: the buyer and seller agree to the sale of goods for a set price. The seller then charges an additional amount on items sold as a tax based on the state sales tax rate (multiplied by that pre-tax sale price), with the buyer paying the tax. The seller is basically a holding agent for this collected sales tax; the amount is then remitted to the state at certain points. As such, the seller does not receive the full benefit of the total sales price; instead, their portion is solely the pre-tax portion of the sale.
One of the most important areas in this ever-changing world is sales tax nexus. As mentioned, the Wayfair case has really opened up the door for states to say “look, we know you’re selling in our state and now you have to collect sales tax on sales here”. This was not how it was pre-Wayfair, which is why so many companies took aggressive stances related to sales tax, possibly pushing us to where we are today. If you operate a business that has multistate exposure, now is the time to really dig into your operations and determine where there may be risks associated with your sales tax collecting policies. This is a discussion that can/should be had with our sales tax experts here at Savvy & Suite. We’ll walk you through the risks of exposure, as well as the areas where it may make sense to be aggressive. We’ll also make sure you have your ducks in a row when it comes to sales tax exemptions, which could exist if you are a manufacturer selling to a middleman that is not the end consumer.
Luckily, most states have online sales tax portals that offer insights into that state’s sales tax requirements, as well as a way to make payments online. These sites are important, especially due to the fluid nature of sales tax (and associated requirements) post-Wayfair. They’ll be updated frequently as regulations change and are helpful to taxpayers who may be in search of items such as these. We scan these pages so you don’t have to; we’ll be ready for any sales tax question, regardless of state. There are also states that do not have a sales tax, so this may come into consideration when deciding whether to sell into a state or not.
As mentioned, there are various ways to be considered exempt from sales tax, either paying or collecting. One way, stated above, is by acquiring exemption certificates from the buyer of your products, which basically state that they are not the end user, exempting you from sales tax collection. The same goes the other way: if you’re acquiring goods that you process and sell to the end user, your original purchase of goods may be exempt from sales tax. Because it is so state-specific, these exemptions may not apply, but it’s important to know that they’re out there. Another example is if you exist in the nonprofit sphere; often states exempt such organization from sales tax due to their mission. This can even apply to things like sales tax on utilities!
This arena offers planning and compliance opportunities that Savvy & Suite can help navigate. Are your customers super price sensitive but don’t care about whether or not that final number includes tax, which you don’t get the benefit of receiving from the sale price? We have reverse sales tax calculators that can aid in pricing, allowing you to price your products in a way that even the stingiest of customers won’t complain.
For compliance purposes, it may be overwhelming knowing which forms to file in which state. After all, the New York State Sales Tax Forms are assuredly different than the forms associated with the California state sales tax. That’s precisely the reason we’re here: our two decades of experience position us well relative to the competition as far as the breadth of knowledge when it comes to the sales tax arena.
In the changing sales tax landscape, it’s good to have someone on your side that’s been through it all. At Savvy & Suite, we truly have been through it all and are well-equipped to navigate through the post-Wayfair world. Calculating sales tax seems easy, but because the process is unique to each state, it can get tedious. It’s also necessary to determine if you are even subject to sales tax in the first place, as states provide various exemptions if you meet certain criteria. Sales tax exposure is quickly becoming a hot topic, as states are becoming more aggressive in how they determine who is responsible for collecting sales tax on sales in their states.
States are also getting behind a digital transition, as they are developing online tools, with resources and payment portals that makes the process a bit easier. Savvy & Suite can help with planning and compliance needs, regardless of the state in question.