As we have detailed in our previous posts, the laws surrounding sales tax for businesses that operate entirely or partially online have become increasingly complex in recent years. Due to the precedent set by the 2018 Supreme Court ruling Wayfair, companies have been found liable for sales taxes in states where their products are purchased, regardless of whether or not the business resides in that state. As a result, some states are retroactively seeking taxes for online sales going back several years. This creates potential liability issues for entrepreneurs who have sold products to out-of-state customers or clients.
It is therefore now more important than ever for businesses to update their sales tax strategies to ensure that they are compliant with recent legal changes and avoid costly lawsuits and back taxes in the future. According to Accounting Today, there are three main approaches that you can take when seeking to update your sales tax procedures.
Hire a Third-Party Specialist
Many businesses are avoiding unnecessary strain on personnel by hiring third-party companies to take care of all of their sales tax strategy needs. While this may cost more up-front, it ensures that employees in your accounting department can remain focused on higher-level tasks such as preparing for tax season. Since these professionals are highly trained in best practices when it comes to sales tax, outsourcing can also bring a lot of peace of mind since you won’t doubt whether your business is in compliance.
Create an In-House Team
If you have the resources to create an in-house team that specializes in sales tax procedures, then you may not find the need to outsource. In using your existing staff to study recent legislative changes and adjust your tax strategy accordingly, you can save money up front. In addition, your employees may appreciate the opportunity to develop their careers and learn new skills, and you can tailor the roles you create to the specific needs of your business. You can also trust in the loyalty of your existing team members, who are all already invested in your company’s wellbeing.
Seek a Hybrid Solution
It’s also an option to hire third-party consultants that specialize in sales-tax procedures to work closely with existing staff. This hybrid solution can minimize the strain on your existing team while still ensuring that your business is in compliance with all legal changes and is not subject to retroactive taxation. Since consultants often work with many clients, they have a wide range of experience that they can tailor to your individual needs, ensuring that their work with your staff is efficient and that they implement key strategies pertinent to your industry and business model.
Regardless of whether you choose to outsource your sales tax strategy, keep it in-house, or hire consultants to work alongside your existing team, regularly auditing and adjusting your policies on sales tax is a must. Doing so will help you avoid potential back taxes and lawsuits and bring you peace of mind so that you can focus on other aspects of your business.