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Streamlined Sales Tax in Operation – THE Most Often Asked Question...

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Part 4 of “Streamlined Sales Tax: From Registration to Maintenance”

This is the fourth post in a multi-post series. In the first post (“Is Streamlined Sales Tax Right for Your Business” ) blogger Cory Barwick (of CCH) boils it down to three key factors which a company needs to review if they are considering Streamlined Sales Tax for their business. In the second post of the series (“Okay, SST is for me… Now what? The SST Registration Process”) we explored the ins and outs of the SST registration process itself and selecting your technology partner and we then looked at the service agreement between seller and technology partner (“Getting to Know Your New Technology Partner – Your Services Agreement”).

Hopefully, you found the process of contracting with your “Certified Service Provider” or “CSP” - as well as  the integration of the their software into your accounting package - a little less painful thanks to some of the pre-planning that you were able to do after reading the earlier installment in this series.

Admittedly, there is a host of other topics that could be addressed, but for the sake of keeping this blog focused, let's move on with SST and look at the challenges that you may now be facing in your daily tasks.

Sales Tax Made Simple?

So, here you are and everything is going wonderful, right? Chances are, the answer to that is, no, Cory, they are not … What have you got me into here?

Okay, so SST may not be sales tax made simple from the onset, but for professionals that have been in the industry for a while, it is much simpler than some of the more traditional states. And, while your CSP is there to help you get things right, chances are things are still not quite as simple as they used to be even with that help. Rest assured, though; all this is there for good measure. Your company is now fulfilling its obligation to collect and remit tax which will save you a lot of trouble down the road.

In this installment, I would like to review the one question that we receive most often from SST registrants regarding day-to-day operations:

Why has my customer's invoice changed?

Companies who are new to SST can find the collection and remittance process somewhat frustrating – especially as it can impact longterm customers. Under SST, some of these customers may now be charged tax on invoices that in the in the past did not show any tax due. Or they may be required to pay a different rate and amount of tax than they had in the past. There are many reasons for this but some of the more common are as follows:

1. Your company is now registered to collect a tax where it was not obligated to do so before.

This is the most common change to your sales tax requirements under SST. Remember that you voluntarily registered to collect tax in at least 22 states. For many businesses, this may be quite a few more than before. Check if your customer is in one of the new SST states and then you can explain to them that you are now collecting tax under SST guidelines. Once they understand that you are doing this, they may be happy that they no longer have to self-accrue and remit use tax on their own. Others may be frustrated over a “price increase” but remember that you are only collecting what is due and once you explain that, your customers should come around.

2. The item that your customer is purchasing may have an updated tax rule.

Frequently, new SST registrants will find that they may have inadvertently not been collecting tax on an item that they should have been. Fortunately, that is one of the reasons why you signed up for SST in the first place. Often, your CSP will have a tax matrix built into their software that you can use to provide support on the change in the tax rule to your customer. Alternately, or if you would like further support, you can refer your customer directly to the tax matrix on the SST website. The states are providing this information for your benefit as well as the benefit of your customers as they are at risk for audit just as much as you are. Most taxpayers in the end wish to comply with the law so having SST on your side is a great way to provide support for your company's new tax footprint.

3. SST requires various address resolution requirements that you may not have had the ability to apply before.

This is the most infrequent reason that tax would change, but it does occur. In this situation, your CSP has cleaned up your customer's ship to information and determined that a certain set of state certified jurisdictions apply to that address, each with its own sales tax rate. Sometimes, this may have been different than the rate that your system was applying before but again, rest assured that this is the accurate rate that should apply. In this situation, your CSP can easily help you explain how the address rules were applied so that you may provide support for your new rule to your customer.

Streamlined Sales Tax can deliver great advantages to companies that are active on a multi-state basis. However – as with any new business process – companies can face some challenges as they go through the initial transition.    Working closely with your CSP can help you to not only understand these issues – but to also help you to better communicate such issues to your customers – helping to make sales tax a little simpler for all.

Stay tuned!  Next up we'll be looking at the SST in operation but from the perspective of interacting with your CSP.

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Other recent “Streamlined Sales Tax (SST)” posts by Cory Barwick:

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