by Blake Ellis, Nathan Focht and Jonathan Barsade
Just in case you were too busy last summer, let’s recap: as early as winter 2013, you might have to charge sales tax on every item you sell online.
First, some history, for years retailers have taken advantage of a loophole and not charged sales taxes for online sales. Naturally, brick-and-mortar stores complained about the unfair advantage. Last year, the U.S. Congress introduced the Marketplace Fairness Act to give states the power to enforce sales tax rules on all online sales – even when the purchaser and seller reside in different states. Interestingly, this bill is cosponsored by both sides of the legislative aisle. As Tennessee Republican Governor Bill Haslam spells out, “This discussion isn’t about raising taxes or adding new taxes. This is about states having the flexibility and the authority to collect taxes that are already owed [emphasis added].”
So how do you prepare for the unknown? Here are 10 steps to beef up your tax approach – without losing any sales.
Online sales tax compliance requires multiple operations occurring in real time – figuring out where the transaction occurs, what the tax rules are and then calculating the respective taxes. Plus, your sales tax provider must have the ability to put together data, complete all tax returns, file those returns and make the tax payment(s). A single compliance provider should perform all of these tasks.
Your tax compliance solution should not require more than a couple of hours (if even that) in set-up, installation and complete integration. You should not need to hire additional technical professionals to figure out how to connect the solution to your shopping cart.
Though tax rules change frequently, you shouldn’t have to update your shopping cart with rates and rules. Your provider should track all rule changes in all jurisdictions – state, county, city and local – and update the system automatically.
Address verification service
To accurately determine where a transaction takes place, the software should be certified by the US Postal Service (CASS certified). Certification also ensures that the item purchased will not be returned by the postal service due to an undeliverable address.
By their very nature, transactions are dynamic creatures, which can lead to customer satisfaction as well as product returns, credits and refunds. Your tax provider needs to be ready for these possibilities as well.
Who’s not afraid of being audited? Your provider must be able to give a single detailed answer to any question the auditor poses regarding your sales revenue: how the items were taxed, whether the taxes were calculated down to the item level and if you have accurately tracked all exemptions.
The tax solution must be connected to your shopping cart in real time. In other words, any delay in taxes being calculated or requiring the customer to click additional buttons means that you will lose the sale.
Congress isn’t giving you any breaks, thus you’ll need to file in many states. To make it easier on you, your tax solution shouldn’t require you to perform tasks such as printing tax forms or checks; signing forms or checks; or mailing a return. Your provider should be able to file your tax returns anywhere in the U.S – both state and local. A solution that files in some states but not others speaks volumes about the provider’s reliability – or lack thereof.
Fully redundant, highly secure, highly scalable
Do not compromise on the security of the system. Think about it this way: would you agree to take payments from your customers in a non-secure environment?
All of the above should be available in a cost-effective tool: a next-generation solution built around scalability, automation and ease of use – without compromising quality.