As an accountant or tax professional meeting with clients for year-end tax planning, now is the perfect time to proactively discuss sales tax. Doing so can help clients eliminate risk, potentially save money, and avoid headaches down the road. A recent lawsuit should serve as a cautionary tale.
 

The Risks of Inaction

In North Carolina, an online retailer filed a complaint against their accounting firm for failing to advise them on sales tax obligations after the Wayfair decision. The retailer ended up paying $2 million in back taxes and penalties. 

Don’t let this happen to you or your clients! Read on to learn about sales tax nexus, how to identify risks, money-saving tips, and when to bring in a specialist like TaxValet.

 

 

 

Understanding Sales Tax Nexus

Sales tax nexus refers to the thresholds a business must meet before being required to collect and remit sales tax in a state. There are many ways to get sales tax nexus, but the two most common ways are economic nexus and physical presence.

Economic Nexus Thresholds

Economic nexus is triggered when a business exceeds certain sales or transaction thresholds in a state. While the specifics vary, most states require sales tax collection once sales exceed $100,000 or 200 transactions. The period (e.g. calendar year or 12 months), types of sales included, and other details differ by state. See TaxValet’s economic nexus spreadsheet for a state-by-state lookup. 

Physical Presence Thresholds

Physical presence nexus is established by having property or personnel located in a state. 

Common examples include:

Physical presence requirements still apply even in the era of economic nexus.

 

TaxValet - The Ultimate Sales Tax Checklist

 

Sales Tax Triggers to Review

When meeting with clients, keep TaxValet’s Sales Tax Risk Cheat Sheet handy. Asking key questions can uncover sales tax risks:

  • When was their last comprehensive nexus study?
  • Are they paying sales tax on exempt products?
  • Are they paying sales tax on purchases for resale?

Carefully reviewing clients’ sales tax compliance can prevent headaches from undetected nexus triggers or overpayments.

 

Sales Tax Savings Opportunities

Here are two ways you can potentially help your clients save money when it comes to sales tax:

  • Check if they are paying sales tax on inventory purchases. If they are, they might not need to as long as they have the right resale certificates on file. 

  • Compare how much sales tax was collected versus how much was actually paid to the state to see if they’re overpaying.

These simple steps can lead to major savings, often tens of thousands of dollars annually.

 

Leveraging Sales Tax Experts

If you come across a client that could use some expert sales tax help, we’d love to chat with them! We provide…

  • A team of trusted advisors that provide a done-for-you setup, stay on top of tax law changes, manage sales tax audits for you, proactively monitor sales tax nexus changes, and more. 

  • Automated sales tax filings and payments with hands-free data connections for all of your sales channels.

  • One simple monthly fee that includes an audit and penalty guarantee, and industry-leading customer support.  

The best way to introduce a client to TaxValet is to schedule a free consultation. 

Being proactive about sales tax helps avoid liability and audits while maximizing savings for your client’s bottom line. Consider a partnership with TaxValet for comprehensive sales tax solutions.

 
 
TaxValet - The Ultimate Sales Tax Checklist
 
 

Disclaimer: Our attorney wanted you to know that no financial, tax, legal advice or opinion is given through this post. All information provided is general in nature and may not apply to your specific situation and is intended for informational and educational purposes only. Information is provided “as is” and without warranty.

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