The full sales tax process involves many steps which must be managed monthly, or even several times a month. The process includes:
Determine and monitor sales tax nexus on a state-by-state basis (the state of the buyer for eCommerce, the state of the seller for a brick and mortar)
Manage various exemption certificates
Register and renew sales tax IDs in the states in which you have an obligation
Prepare and file sales tax returns based on filing frequencies (monthly, quarterly, annually)
Pay respective jurisdictions where you are registered to collect and remit, also maintain a paper trail to include proof of mailing and payment
Maintain documentation in the event of turnover or a change in personnel
Create bandwidth to address all customer questions and internal business questions related to sales tax
Manage sales tax audits and respond to nexus questionnaires issued by the jurisdictions
Maintain an accurate tax calendar to include changes in filing frequencies, filing methods, and changes in payment methods.
The sales tax process cycle and steps:
Register in State
Product/Service Sales
Collect Sales Tax
Prepare Sales Tax Return
File Sales Tax Return
Remit Sales Tax Due
As you can see by the steps above, the sales tax process in the e-commerce industry is very daunting and time consuming. Sales tax rates differ from state to state where you have a sales tax nexus. If not set up properly in the beginning, it can be confusing and cause potential penalties. If you’re starting the process or need to address sales tax for your online or brick-and-mortar store, consider reaching out to a professional who can handle the workload for you with greater accuracy, and in less time.
