Randolph Johnston
Randolph Johnston

Sales and Use Tax Issues in 2010

Why you and your clients need to solve them.

December 10, 2009
by Randolph Johnston, MCS/MCP

Businesses are having a tough enough time in just staying afloat. While paying attention to what your firm does best — running your businesses — the last thing you need to think about are the constantly changing rates, rules and boundaries of sales-tax jurisdictions. But if your firm gets these things wrong — charging too much or too little to customers — your firm can find itself in the kind of trouble that will take away from their bottom line.

With state coffers depleted and lawmakers looking to fill budget holes without raising taxes, sales-and-use tax audits are on the rise like never before. If you are the industry accountant responsible, you can reduce your time for filing and payment of taxes. If you’re the trusted advisor or accountant to these businesses, that trouble could become your own. As a CPA, if you don’t proactively inform your clients, that’s an omission, which can be a problem for you and/or your firm.

Automated sales-and-use tax products help solve these problems, and present an opportunity for client service for the proactive firm. There are many competitors in the market, from high-end competitors like Vertex or Sabrix, to mid-market competitors like Avalara, CCH Sales Tax and SpeedTax. Recommending or using a sales-and-use tax product is almost a requirement today with the complexities of tax rates and boundaries. Using tax tables and zip codes to look up tax rates is inaccurate at best. Certified Sales Tax Provider (CSP) products protect your clients from these costly audits by keeping them compliant, making your job that much easier, and in some states they are exempt from the audits entirely.

For example, Avalara offers a CSP product called AvaTax that is a software-as-a-service solution. Avalara offers the fastest, most accurate, and affordable Web-based sales tax compliance service available. AvaTax operates as a module within a company’s financial system or online shopping cart, providing a fully integrated and automated sales tax management system, which includes functionality to protect against audits, obsolete data, and changing tax laws. Additionally, as you will see later, publishers often offer special programs to CPA firms to minimize cost to the firm while helping you assist your clients.

Solutions for Brick-and-Mortar and E-Commerce Clients Alike

Regardless of whether operations are brick-and-mortar storefronts or online-only businesses or affiliates, sales-and-use tax products can solve the trickiest sales and use tax issues, no matter how many jurisdictions in which they may have nexus.

No matter how your business operates, online, offline or both, you need to ensure that every single transaction has sales tax calculated at the precisely accurate rate and using precisely the correct rules, no matter how many rate, boundary, rule or other changes might have gone into effect during that particular billing cycle — at the time of the sale, within tenths of a second. Can you think of a business that has time to keep up with these changes?

A Special Program for Accounting Firms, From Sole Practitioners to Large Firms

Your firm can serve either as a recommender — referring your business clients to providers such as Avalara solutions — or as the direct solutions provider, while you can rely on AvaTax to handle the calculations for you. Additionally, Avalara offers end-to-end compliance solutions, so you don’t have to worry about time-consuming and error-prone filing and remittance activities. As of January 2010, Avalara will pass along a deep discount to accounting firms for its services, either in the form of direct discount or a coupon your firm can pass along to your clients.

Failure to Act Could Be Your Biggest Mistake

Whether you are in industry or in a CPA firm, you need to have sales-and-use tax software implemented. The effort associated with purchasing, setting up, integrating and running these systems is minimal. The penalty for failure to act can be large. Investigate your options now, and have a solution in place by year end!

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Randolph P. Johnston, MCS/MCP, is executive vice president at K2 Enterprises. He is a nationally recognized educator, consultant and writer with over 30 years experience in strategic technology planning, systems and network integration, accounting software selection, business development and management, disaster recovery and contingency planning and process engineering. Please note the views expressed in this article are solely the author’s and in no way reflect the views of the AICPA or CPA Insider™.