Service Sales and Wayfair

I was chatting with a new acquaintance who was a headhunter based in Chicago.  When he asked what I did for a living, I said that I did training on sales and use taxes.  I fully expected the conversation to come to a full stop at that point, as it usually does.  Nobody knows what to say when I mention I talk about sales tax for a living.

But not this time.  He said, "Yeah, I heard something about this...a big Supreme Court decision, right?"

I brightened. "Yep, it's a pretty big topic in my world right now."  At least it's more exciting than sales tax holidays and local rate increases.

As the conversation veered into what HE did for a living, I felt the need to expound upon the potential exposure he had (this is why I don't have any friends).  "Just out of curiosity, do you do any work in Pennsylvania?"

"Yep, I have a couple of really good clients there.  Why, do you know anyone who's looking?"  At least we had in common the fact that we were always working.

"Did you know that headhunting (employment agency) services are taxable in Pennsylvania?"

"What are you talking about?  It's a service.  Services aren't taxable."  He's from Illinois so he's allowed this bit of naiveté.  

"They are in a couple of states - including Pennsylvania."

"Yeah, but I'm in Chicago.  I never even go to Pennsylvania...I do everything by phone."

"Yeah, but the services are being received in Pennsylvania.  And with that new Supreme Court decision, they can go after you, even if you've never set foot in PA.  How much do you bill to PA in a year?"  By the way, cool people just say PA instead of all those syllables.

He kind of looked off into space, "Oh, at least $200,000."  

"Yep, you should be worrying."

Again, no friends.

People who sell services almost never realize that the services might be taxable somewhere.  In the past, that probably didn't make any difference because of the Quill rule about physical presence. My new friend never visited PA and had no physical presence there.  Therefore, no problem.
 
But in a post-Wayfair world, the physical presence hurdle has disappeared.  Now it's just a question of volume of sales.  So if a service provider does enough business in the state, he is probably going to be liable for taxes.

Three pieces of advice that apply to everyone, but to service providers in particular:

1.  List the states in which you sell more than, oh, say $100,000 per year, or make 200 transactions per year (these are the Wayfair thresholds which may or may not be the minimums*).  I hope your accounting system can provide this information.  Otherwise, find a temp to do some serious spreadsheeting (that temp might be taxable too!).

2. Is what you sell taxable in those states?  This is a different type of research.  Use whatever research tools you have available.  

3. If the result is that your sales in a state exceeds those thresholds, contact your friendly sales tax professional.  Then, based on her advice, panic.

*Most states seem to be gravitating towards these numbers.  But not all of them. 

Jim Frazier - The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer on the right.

The Most Important Piece of Software Acquisition Advice I can Give

 

Because of the Wayfair decision, a lot of you are going to be considering buying sales tax software.  I have a bit of advice for you.

In a previous career, I was in accounting software sales.  And in a subsequent career, I was a software acquisition consultant.  From that experience, I wrote a short whitepaper, which has been lost to the sands of time (and a failure to do proper backups).

That document contained a lot of good advice about believing sales people (don't), trusting demos (again, don't), implementation planning (ha!), etc.

But the best advice I can give, and the easiest, is VISIT the references that you get from the vendor.  Don't just call them....VISIT them.  And if it means you'll have to spend a couple of nights in Vegas on the company's tab, well, that's just the price that has to be paid.

Try to get three references that are in your same line of business, or at least close enough to make the conversations meaningful.  Ditto for company size and multi-state exposure. 

Visiting the references means:

1.  You can look them in the eye when they tell you the software works well.  This is much better than the response of "fine" you'll get in a phone conversation.
2.  You'll be able to spend more time with them than just a phone call, so you'll get more details and hear more about the dirty laundry.
3.  You'll learn more in general just by visiting another business in your line.
4.  You'll have another user you can talk to when things go wrong.
5.  Don't be a piker - buy lunch or dinner.
6.  Paying for a round of golf is even better, if you like that sort of thing.

Your vendor may be leery of you doing this.  But if that's the case, ask yourself why.  I always hated it when they asked for references.

The Sales Tax Guy
    http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars.

Sales Tax Tip: "When did you decide about nexus?"

"Do you have nexus in Minnesota?"

"Nope" 

"When did you decide this?"

"Oh, about 5 years ago." 

"Has anything changed in the last five years?"

"No, I don't think so."

"Have you added any sales staff in the last five years?"

"Oh, yeah, sure."

"Are any of them visiting Minnesota once in a while?"

"Yeah, there's Tony.  He covers that part of the country.  He really whines about it in the winter, too."

"Ahem."

"Oh.  Right.  Excuse me, I have to make a call."

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This small drama presented by The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com and there's more sales tax news and links here http://salestaxnews.blogspot.com

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Do I have to get exemption certificates in states where I don't have nexus?

I get this question every once in a while - so hey, it's a blog entry!

The situation is that you're selling something taxable to a customer in state A.  You're in state H.  Do you have to get an exemption certificate from them when you don't have nexus? 

It depends.

1.  How sure are you that you don't have nexus?  Nexus situations can change.  You may have decided in 2010 that you don't have nexus in state A, but in the meantime, those jerks in sales have made a couple of big sales there, sent in a crew of installers, made arrangements with a repair firm to provide service, and the VP of sales has been visiting every couple of months.

If you haven't figured it out, you now have nexus in state A.  But if you're basing your assumption on the decision you made in 2010, you're gonna be in trouble.

It would sure be nice to have that exemption certificate.

2.  How much of a hassle is it to get the certificates?  If your customer in state A is practically begging you to take his certificate, then, oh, what the hell, take it.

On the other hand, if your customer is one of those pain-in-the-butt mega-retailers who refuse to cough up the resale certificate, then, maybe you want to take the chance.

So the two factors to consider are your confidence level in whether or not you have nexus balanced against the hassles of getting certificates. 

Another thing to consider is that Congress may eventually pass something that looks like the Marketplace Fairness Act.  That means that if you're a larger company*, you'll eventually be required to collect taxes in all states, regardless of whether or not you have nexus.  So you'll need to be getting certificates from all the states anyway.  But this is probably a couple of years off (I hope).

Frankly, putting on my strict, no-risk controller's hat, I'd establish a policy that we get exemption certificates from everyone.  That way if that dang sales guy goes behind my back to state M, I'm covered. 

*part of the argument is what "large" means

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer on the right.

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com
and there's more sales tax news and links here http://salestaxnews.blogspot.com

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Decision Tree for Exemption Certificates from Other States

 
This particular topic was covered four years ago.  But since I get questions related to number 3 so often, I thought it might be time to brush it off and add a few extra touches.

What are the seller's responsibilities are when they ship to another state?

Question 1: What state does the delivery occur?  This determines the state rules you follow.  If you ship from Alabama, but the buyer receives the goods in Rhode Island, then you need to check Rhode Island's rules.

Question 2: Is what you sell taxable in that particular state?  Now don't go making any assumptions based on what you're used to .  Remember, the rules can be completely different in the other state.  You need to make sure!  If you are certain that what you're selling isn't taxable there, then you can now stop, take a deep breathe, and relax. If, however, your sale is taxable there, then I'm afraid you'll have to proceed to question 3.

Question 3.  Do you have nexus in that state?  It's WAY more complicated than what you think.  It's not just a matter of having an office there.  There are some very surprising ways that you can have nexus in a state. If you have nexus, you need to get the exemption certificate.

 But if you're SURE you don't have nexus, you are finished.  You can stop.  Unless...

There are some folks that will get certificates anyway, even if they don't have nexus in the state.  They do this for three reasons:

a. It's easier to just establish a policy that the company will always get certificates if the sale is taxable.  Procedures often work better with less conditional statements.  This keeps it simple for the staff, although it's more work.

b. They may have made a mistake in determining their nexus in the state.  Or it could have been a judgement call.  It might be safer to get the certificates just in case the auditor decides against them.

c.  Things change.  The company might not have nexus today.  But all it takes is for marketing to assign a sales person to regularly visit the state and you suddenly have nexus.  So collecting the certificates now is a protection against any future whims by those people in the sales and marketing department.

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The Sales Tax Guy http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars. http://www.salestax-usetax.com/

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

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Great Article: Best Practices in Transaction Tax Systems Implementation

from Diane Yetter and yettertax.com

This is a VERY detailed road map to implementing a sales tax system.  It's been my experience over the years that people don't really plan these things.  Read this before you begin the process.  It's long, but detailed.  And it'll help assure you only have to do this once.  Enjoy the article

Great Article: Solving the Pains of Sales Tax Returns

from Avalara

A pretty good overview of why you may wish to get rid of doing sales tax returns.  This whitepaper covers the challenges of doing them yourselves, and the benefits of outsourcing.  Yes, there's a page on Avalara, but the rest of the piece is "sales-free."  Enjoy the article.

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This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles." 

The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Great Article: Sales Tax Exempt in Mississippi? A State with No Forms

from salestaxsupport.com and Silvia Aguirre

When I first came across the Mississippi web site, I found it distressingly empty of the usual stuff, including forms.  While the article gives you advice about Mississippi, to me it shows the logic that applies anytime you find yourself in a similar situation where the state offers little guidance.  Punt.  Get as much as you can that will prove your point. Enjoy the article.

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This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles." 

The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Great Articles: Exemption Certificate Management

from Avalara - two related articles.  The first is on whether or not you need exemption certificates in states where you don't have nexus. The second is a white paper on exemption certificate management processes, including a handy and comprehensive checklist, best practices and workflow.  And there's a bit about certificate management software too.  Hey, someone's gotta do it.  Enjoy the articles.

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This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles." 

The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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One way of treating your auditors

Years ago, I was the controller of a company with a very cooperative owner.    "Chet" had a pretty luxurious office with TV, video games, bar, lots of space including a private gym, and his own shower and bathroom.  He had also hired a very competent secretary by the name of Jane (and in those days, they were actually called "secretaries").  Truth be told, Jane pretty much ran the company.  Chet just went along for the ride.

By the way, the picture is not of Chet, but I thought this article could use a mildly relevant illustration.

Whenever we got word that the sales tax auditor (or any other enemy auditor) was coming, we'd tell Chet he had to go on the road for a couple of weeks.  His response was, "Got auditors coming, eh?  Great!  I've got to get out of here anyway.  Jane!  What customers should I go visit?"

So we would put the auditors in Chet's office and told them they'd have it for three weeks - until Chet returned.  And Jane continued in her role as secretary, but now she was the mother hen for the auditors instead of Chet.  And she did even more for them than she did for Chet.  She NEVER got Chet coffee, but she'd bring the auditors coffee, pop, snacks, make copies for them, etc.  She'd even order lunch in for them.  And she kept the door to their office closed so they'd have "privacy."  She would also "sssshhhhh" any conversations among the other executives that might be occurring outside of Chet's door so the auditors didn't hear anything embarrassing. If the auditors needed to go anywhere in the company she would escort them.  The auditors were isolated pretty effectively from the staff of the company.  Jane enjoyed her job as the auditor's "guard."

And the auditors lived in the lap of luxury for three weeks.  But ONLY three weeks.  They knew that, when Chet returned, they would be relocated to the dimly lit room in the sub-basement behind the furnace where we used to keep the asbestos.  They were motivated, in other words, to wrap it up.  

Just kidding...about the asbestos part.

We never knew exactly what they did for those three weeks, but they usually missed really important things that we worried about them catching.  One IRS auditor completely blew the LIFO inventory adjustment, for example.

If you don't know what that is, rest assured it was a big "estimate" on our part.  It's the kind of thing you REALLY don't want the auditors to ask questions about.

Every day, those auditors seemed to go home well rested. And that was important because we cared about the health of state and federal employees.

Whenever we put the auditors in Chet's office, we always had very fair, reasonable assessments.  And we never found the need to appeal.  Amazing.

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This article was inspired by revisiting this one.  I've often talked about this story in seminars, but never wrote it up.  And touching up the old post convinced me to do this entry.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details that haven't been discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
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Picture note: any images above are hosted on Flickr. If you'd like to see more, click on the photo. 

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Great Article: 12 Sales Tax Tips for Small Businesses

from Avalara

They've been posting these tips over the last few days and I have been enjoying the pace.  Finally they have them all posted and I strongly recommend you all read them.  They're short, readable, and range from exemption certificates to nexus.  They give examples and they're all valid and important tips.   Enjoy.

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This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles." 

The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Let the other guy do it!

I wrote an article yesterday where the customer was insisting that they weren't taxable and I suggested that they were.  I also suggested that the customer provide the seller with proof that the purchase was exempt.  I wanted to link to an article I wrote on this narrow subject, but found that I never did write anything.  So here ya go.  And yes, I'm going back and adding the link to yesterday's article.

I've written many times about where to find answers.  Most of these resources require that you spend money, and all of them require that you spend your valuable time.  But here's the thing.  If you're a regular reader of this blog, or other sales and use tax publications, then you are probably much more well-informed on sales and use taxes than just about anyone else you're going to routinely meet.  

When you find yourself in a situation where a vendor or customer is insisting that the sales tax law is different than you believe, make them prove it.  Don't waste your time researching the issue when they are probably wrong.  Remember, you're smarter than they are.

By the way, proof isn't "well, that's what my boss said."  Proof is in writing with references to statutes, regulations, bulletins or court cases.  "Well, the auditor told us to do it this way," isn't enough either.  

Here's one way the dialogue might go:

You: "I understand what you're saying, but my boss and I have been to several sales tax seminars and webinars* and I read a lot about sales and use taxes and I've never heard about that rule.  Can you email me the statute that gives the details.  I'm going need something to show my boss."  

Remember to always use your boss's persnicketiness as an excuse.  

Them: "Well, I don't have that.  That's just what my boss told me to do." 

You: "And I appreciate that.  But I still have to charge you tax unless I can show my boss something authoritative that shows it's exempt.  You must have something like that in the files.  Maybe you can call your CPA." 

Let them pay the money to have the CPA research it.  Remember that you're smarter than them.  Relax.  Go fishing. **

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* an admittedly shameless plug 

** picture tie-in

The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details that haven't been discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Great Article: Saying “I Do” to Tax Software

from http://www.salestaxsupport.com

Suzy Soo outlines five popular sales tax software systems and does a pretty thorough job of reviewing how you can match your needs against what they offer.

http://www.salestaxsupport.com/blogs/sales-use-tax/sales-tax-software-automation/how-to-select-sales-tax-software/

This link is part of a series called "Excellent articles that I wish I had written."  The short name is "Great Articles." Enjoy.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/

Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

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Great Article: Three Deal Breakers for Acquisitions

From the good folks at http://salestaxinsight.com

About a year ago, I wrote a true horror story about this problem.  This article summarizes the problem much more succinctly than I was able to do. 

This link is a new series we're offering called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy and learn.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Great Article: How a Color Coded Map of the US Can Reduce Sales Tax Nexus

This is from TaxConnex and talks about a simple, graphic and proactive way for a business to manage nexus.

http://www.taxconnex.com/Blog------/bid/70899/How-a-Color-Coded-Map-of-the-US-Can-Reduce-Sales-Tax-Nexus

This link is a new series we're offering called "Excellent articles that I wish I had written."  The short name is "Great Articles."  Enjoy and learn.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/

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Sales and Use Tax Books You Should Own - Redux

This article first appeared back in 2007 and I thought it should see the light of day again. 

These are sales and use tax books that I strongly recommend as reference tools. If you have to worry about a few states, you really should own them. If you are in only one state, they may be overkill, but are still worthwhile.  Both books cover all of the states.

Guide to Sales and Use Taxes (from Research Institute of America)
This book has an enormous amount of information for each state, with the material broken up into 15 subchapters within each state chapter. It also has an opening chapter which is basically "sales tax 101." If the book is weak, it is in two areas: there aren't any citations, and it sometimes provides too much data with too little interpretation. These deficiencies are made up for in the next book.

Sales and Use Tax Deskbook (from the American Bar Association)
Each state's treatment is written by an attorney who specializes in that state's sales and use taxes. While I've only met a couple of them, I heard of many more. So far, they have all been heavy SUT litigators and highly "plugged in."

The book actually provides less detail than the Guide (above), but does provide more interpretation of the laws, as well as citations. So you can read the basic information, then drill down to the statute, regulation, bulletin, court case, opinion letter, etc.

Here are two particularly useful items provided by the book:

1.  It gives you the rules for taxation of exports out of the state. Now you'll have ammunition for your discussions with vendors who are charging you their state's tax as opposed to the correct one (yours).

2.  For most states, the book shows the "drop ship" rules, which will, again, help with vendors who really don't understand this particular topic.

I actually recommend both books if you have the budget.

First of all, owning both books gives you the ability of second sourcing or even third sourcing your research. It's always helpful, on confusing issues, to see if the books agree.

The other reason is updates. By owning both books, you can flip-flop your purchases. One year get an updated version of the inexpensive book, next year get the expensive one, and so on.

Finally, you'll notice I'm not offering to sell you these books. That's because I want you to trust that I'm not biased here. I'm not recommending them to make money. Contact the publishers and they'll be happy to sell them to you.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo.

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Historical Places

I had a question from a webinar participant last week about the "landmark exemption."  I had to honestly respond that I didn't have a clue about what he was talking about.  In a subsequent exchange of emails, I figured out that Texas has an unusual and obscure exemption for contractor's services performed on buildings that are the National Register of Historic Places.

I've been doing training on Texas sales and use taxes for eight years and that's the first time I'd ever heard of it.  My excuse is that Texas has some of the more spectacularly complicated rules about contractors.  And this is a pretty obscure rule.  In order to find information on it, I finally had to resort to doing a text-search for "historic" in my RIA database.  But once I figured out what was going on, I found that there were a couple of good lessons for you folks.

First of all, who would have thought there was an exemption such as this?  I did some additional research in other states and only found one other state, Connecticut, that has a generic exemption for construction related costs on historic buildings.  TWO STATES!  There are a couple of other exemptions floating around, but they tend to be for specific projects such as a YWCA building in DC, provide tax credits if the projects promote tourism, or are for projects covered by non-profit organization exemptions.   

I find it hard to justify this exemption.  The tourism related credits I get - there's a tax revenue pay-off for the state that will probably offset the credits.  But, with states desperate for money, they're giving exemptions for restoring a historic building?  Now I am a big fan of historic places - they're one of my photography projects.  But is the presence or absence of a tax credit really going to have an affect on an owner's decision about restoration?  I'll bet the net result is that some well connected folks get some tax benefits, and the state loses a lot of money unnecessarily.  Sigh.

The second point is that there are some really obscure exemptions out there.  Always be looking to take advantage of the lack of common sense on the part of our elected representatives.  Pay particular attention to continuing transactions that will result in big dollars, as well as the one-off big deal. And, now that you've read this, keep an eye out for historic site exemptions while you're at it.

Finally, to complete the discussion about historic places, there's another exemption that is a little more common.  Many states impose sales tax on admissions charges.  And many of those states grant exemptions for admissions to historic sites.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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A Sneaky Sales and Marketing Trick - Revisited

Listen up sales and marketing people.  Since I'm currently working on educating you, here's an important tip that I wrote back in June 2010.

If the following conditions are happening to you, you really, really need to read that article.

1.  Do you have an out of state competitor who regularly steals business from you because they don't have to charge tax, but you do?

2.  Do you know, or at least suspect, that they have nexus in your state? 

3.  Are you sneaky and nasty?  Actually, that's kind of a silly question if you're in sales.  I kid.

Then take the steps mentioned in this article.  You probably didn't know you could do these things (neither do most accounting types, so don't blame them), but depending on your state's laws, you can at least make some trouble for that competitor.

Enjoy. 

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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Illustrations and Parables: Don't overcharge the tax.

This article is based on a recent story about a retailer who kinda screwed things up. I’m not going to identify them, or give you a link to the original story because I’m going to severely mock them and I don’t need no trouble with no lawyers. Consider this fiction “inspired” by actual events.

1. The store has been overcharging their customers for nine months by 1 percentage point. The correct rate was 7% and the store was charging 8%. No mockery here…this stuff happens.

2. This is not just one store. There are several other stores in the chain. So I’d assume they have competent accounting folks. This, as it turns out, is a big assumption.

3. The extra money wasn’t paid to the state. The error was at the cash register, but they were remitting tax to the state at the correct rate. So they were holding on to all that overcharged tax. The owner wasn’t sure how much was over-collected, but estimated it was a couple of thousand dollars. Wasn’t sure? Does he have accountants, or monkeys with pencils?

4. A customer finally noticed the error (after nine months) and called the store. The assistant manager said there was no error, because the store was in a special taxing district; and that’s why the rate was a point higher than expected.

5. The customer then called the city and found out there was no special taxing district. In other words, the assistant manager was, er…wrong. What a surprise.

6. The customer then called the store again and was told, again, that the store had not made a mistake. Amazing how much trouble those assistant managers can get you in. They’re OK for checking restrooms and time cards, but you really should never let them near the phone. And if a customer calls about the same issue twice, maybe the problem should get escalated. I’ve never done much customer service training, but that seems like an obvious idea.

7. The customer called the local newspaper and they called the store. This time the assistant manager awoke from his stupor and got the owner involved. Within an hour, the owner called the paper, admitted they had made a mistake, had reprogrammed the cash registers, and was pretty embarrassed about it. He guessed that the mistake was when the last rate change had occurred (which makes sense). Amazing what a call to the local media will do.

8. The customer (and me for that matter) can’t understand why it took nine months for anyone to notice this. It seems like there was a general ledger account that had a whole lot of extra cash sitting in it. Heck, I wasn’t the world’s most detailed-oriented controller, but even I would notice that.

9. The owner said he’d issue refunds to anyone with receipts (who keeps those for very long?) or who is signed up for the store’s rewards program, which tracks purchases. But the rest of their customers…there shall be no refunds for them.

10. The owner then said he’d donate the remainder to charity. But the state said, “Not so fast, buckaroo.” The law (which is pretty typical in most states) says that, if too much tax is collected, it must be turned over to the state. The state did say that they’ll refund him the money after he refunds it to the customers; if he provides proper documentation. But the state gets the money first, and the excess stays with the state. Here’s a tip for the owner…before you start babbling to the media about a topic (sales tax) for which you obviously don’t have a clue, you might want to do some research. Or call those people with the letters after the end of their names.

OK, enough with the mockery. Here are three pieces of advice for those of you who collect sales and use tax from your customers. And these will be getting added to our best practices webinar as well.

1. Balance!
Every month, someone in accounting should be reconciling the amount of taxes you collect to the amount of taxes you pay. This should be one, relatively easy part of the normal sales tax return preparation. Unless you’re really sloppy, I can’t imagine that this would take more than a few minutes.

There, was that hard? But doing this will avoid these kinds of embarrassing and tough to solve mistakes that will really tick off your customers. And you’ll avoid the press calling your boss. We don’t want that.

2. Double check when the rates change!
Whenever there is a rate change, expect that this kind of thing will happen. So check your sales for the first few days or weeks to make sure that every system (or sales person’s price list, manual, etc.) has been updated with the correct rate change. If you overcollect the tax, refund it immediately. Usually if you do it within the same month, the state doesn’t care.

3. Escalate tax issues quickly
Don’t let non-financial personnel make decisions or talk to customers about sales and use tax. They really don’t know what they’re talking about. And you probably want to get a sales tax pro involved quickly.

Remember, this is not an uncommon occurrence. Don’t let it happen to you.

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only. Research these issues thoroughly before making decisions. Remember: there are details we haven't discussed, and every state is different. Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/

Picture note: the image above (I’m thinking that’s the assistant manager) is hosted on Flickr. If you'd like to see more, click on the photo.

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Paperwork. There's no excuse.

As I've been perusing the news, one particular problem, which is eminently solvable, keeps coming up.  So let me just say now: make sure you know what the paperwork requirements are, that you fill out the proper forms, and that you do things ON TIME!

Three examples:

Numerous sales and use tax appeals are lost because the businesses who suffered the assessments didn't file the necessary notices on time.  Come on!  And don't rely on the auditor to tell you what your deadlines are.  I've seen at least one situation where the auditor gave incorrect information about the appeals process.  When the taxpayer used that as an excuse, the courts basically said, "tough."  Independently verify what you need to file and when you need to file it.

Enterprise zones, opportunity zones, etc. give nice sales and use tax exemptions, usually for businesses located in economically distressed areas.  But there's paperwork and approvals that you must fill out and file.

And the classic example of paperwork that most of you are failing to get - exemption certificates.  Get them.  Remember that some states don't have to give you any time to get them when the auditor shows up.  And you won't be able to get them from some of your customers when you ask.  So get them now!

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The Sales Tax Guy
http://salestaxguy.blogspot.com

See the disclaimer - this is for education only.  Research these issues thoroughly before making decisions.  Remember: there are details we haven't discussed, and every state is different.  Here's more information

Get these articles in your inbox - subscribe at http://salestaxguy.blogspot.com

Don't forget our upcoming seminars and webinars.
http://www.salestax-usetax.com/
Picture note: the image above is hosted on Flickr. If you'd like to see more, click on the photo. 

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