On May 6, 2013, the Senate passed the Marketplace Fairness Act of 2013 with a vote of 69 to 27. MFA is heading to the House of Representatives and the collection of sales tax by out-of-state sellers is closer to becoming a reality. What does it mean for exemption certificates? As it stands now, certificates are needed to cover tax exempt sales within states where your company has nexus. With the passage of the bill, you will have to collect a certificate from every tax exempt customer you sell to, regardless of whether you have nexus in that state of not. For some businesses, certificate collection just increased exponentially.
Depending on the state, specific exemptions apply for certain purchases. Some exemptions are logical and transcend states, such as purchases by the federal government. Other purchases that appear to be exempt might not be, such as purchases by state and local agencies or exempt organizations. These types of organizations are not exempt from sales tax in California, for example.
How do you know what laws apply in each state ― especially if you run a small business without a tax department? Do you understand when you need to collect a sales tax exemption certificate? How do you request, accept and store certificates? States have increased audits to ensure compliance and generate revenue in the slow economy. How will you respond if your company is audited? Just as there is software to assist in calculating and remitting sales tax, there is software for exemption certificate management. Marketplace Fairness is on the way and it’s a good idea to start looking for software that can accommodate your compliance needs now and scale to meet the needs of your company as it grows.
Other recent “Exemption Certificate Mgmt.” posts by Silvia Aguirre:
- Exemption Certificates for Federal Government Purchases
- Marketplace Fairness: What Does It Mean For Exemption Certificates?
- Will Oregon Start Charging Sales Tax? If So - Are You Ready?
- Canada is Bringing Back Exemption Certificates!
- Louisiana Changes State Forms to Include Parish Exemptions
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