Editor’s note: This is a guest post by Jennifer Dunn, Chief of Content at TaxJar
As an online retailer, there are plenty of things you might lose sleep over–debt, product development, competitors, profits, etc. The list can go on and on. You don’t need another thing on that list. If sales tax problems are keeping you up at night, it’s time to get to work troubleshooting them. Below are a few tips to get you started.
Tip #1: Know Your Nexus
Nexus states are the ones where your business has a significant presence, and are therefore subject to their state sales tax laws. Knowing your nexus states can go a long way in resolving tax problems because it means that you have a clear idea of what rules you need to follow.
Your business may have a nexus state if you have one of the following in the state:
- A physical office or store location
- Owners, staff, contractors, salespeople, or referral agents
- Inventory
- Distributors
- Other criteria as legislated by the state
Tip #2: Use the State Resources
If you’re having sales tax problems, your best resource will be the state sales tax authority. You can start with the state’s “department of revenue” website for an overview of the state laws and quick answers on commonly asked questions. If that’s not enough to help you, there will also be contact information so you can call or email a staff member.
Tip #3: Crowdsource Options
Small business owners wrangle with sales tax problems all of the time. Chances are that your problems are common enough that someone else has experienced them, too. The benefit of talking to a peer is that they can tell you about their experience as well as the outcome. They can also tell you what they wish they had done differently so that you have a chance to avoid their mistakes.
There are plenty of message boards or groups for business owners and many of them will be broken down by industry or location. You could also try your local chamber of commerce or similar organizations. TaxJar also runs a Facebook group where retailers can discuss sales tax problems and information.
Tip #4: Hire an Expert
Sometimes your peers aren’t enough. In those cases, it might be time to bring in an expert to help you troubleshoot the more serious problems. You need a sales and local tax (SALT) expert to guide you. A SALT is just an accountant who focuses on sales tax work. They can guide you through determining nexus states or walk you through an audit. And most work with multiple states, which is especially helpful for online retailers. You can find a list of vetted sales tax experts here.
Tip #5: Try a VDA
If your issue is that you have realized that you owe a state a lot in back taxes, a VDA might be the way to go. A voluntary disclosure agreement (VDA) is legal negotiation between the state and a business that settles on the amount the business will pay in back taxes while limiting the look-back time for the state. If you owe a great deal of money, it can be a win-win situation. The state gets you to voluntarily pay back taxes, while saving the resources it would take to hunt it down. You benefit because you will pay less than you originally owed. If you choose this route, work with a SALT to get started.
Tip #6: Get Automated
The most common sales tax problems center around accurately calculating and filing your sales tax return in a timely manner. You can avoid this by working with a tool that can help you avoid pitfalls.
TaxJar uses your sales information to automatically calculate what you owe and delivers it to you in ready-to-file reports. You can file it yourself or you can take advantage of the AutoFile option. Regardless of what you owe, it will less than what you might owe with late fees and fines for mistakes.
Do you have questions or something to say about troubleshooting your sales tax problems? Start the conversation in the comments!
TaxJar is a service that makes sales tax reporting and filing simple for more than 10,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!