3 Ways to Protect Your Business from Financial Risk
Nothing ventured, nothing gained. No risk, no reward. These are both popular sayings for many entrepreneurs and business owners, and a pioneering attitude that, undoubtedly, serves them well. But, there are times when it’s better to play it safe—like when it comes to sales tax compliance. In this case, your best bet is to have proven practices in place that can help you navigate this complex landscape and avoid speculative errors that could have more than a marginal impact on your profits.
Here are 3 smart business practices for keeping on top of transactional tax compliance:
Use the right tools to get 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.” You can often find geolocation tools online, for example Avalara offers this capability for free at salestax.avalara.com.
Be audit ready
The most critical action you can take to pass an audit is to collect sales tax properly over time and ensure that you have properly documented every step of the transaction. Audits are much less painful when transaction history, exemption certificates and other relevant information is readily available. If your practices, calculations and records are in good shape, you should be too.
Streamline your process
The more time you spend calculating, collecting, and remitting sales tax, the less time you have to spend on revenue-generating activities. Outsourcing and automation are efficient, cost-effective alternatives to manual processes. Look for a cloud provider that integrates with your accounting, point-of-sale, ERP or ecommerce system and offers a full suite of transactional tax services—calculation, filing and handling of exemption certificates.
Of all the best practices outlined above, this last one—outsourcing tax compliance —gives you the best return on investment by pretty much taking care of the rest. You’ll spend less time worrying about sales tax and more time focused on your business. Make the choice to automate and save the speculation for less daunting decisions—like which font really works best for your website.
Take the next step in getting on top of compliance by reading these “Top 10 Sales & Use Tax Tips.”