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Top 4 tips for SMBs to manage taxes
Taxes can be a huge stumbling block for brands, and we aren't just talking about end of year taxes. We're talking about sales taxes that can sometimes circle the globe. One expert shares his top tips to ensure SMBs don't overpay on taxes.
Kristina: Why are sales and use taxes so hard to manage?
Jonathan Barsade, CEO, Exactor: Sales tax in and upon itself isn't overly complicated, however with over 10,000 taxing jurisdictions, tracking all the different rules and rates, how they apply, when, how to calculate, is a daunting task. The problem isn't the calculation, but rather tracking all of the exceptions. Is there a tax holiday? When (oftentimes states will issue notice of a tax holiday only a week before the actual date); is there a threshold, and if so - how is it calculated? Are items fully taxable when the price exceeds the threshold (like the clothing threshold in New York)?; or only the amount that exceeds the threshold is taxable (like Massachusetts)? How is shipping taxable?, is if fully exempt?, fully taxable?, or only the portion of the shipping cost that can be allocated to taxable items? How is the electronic product delivered, like software - is it delivered via download?, or shipped on a DVD? These are just a sample of the issues that face a taxpayer.
Kristina: How are SMBs currently coping with sales/use taxes?
Jonathan: Many are still using manual methods, however more and more are realizing that there are software tools and services that can provide a fully automated solution at a very reasonable cost, a solution that will assume the entire burden of compliance with sales tax, allowing the business owner to focus on generating sales
Kristina: What can they do to protect themselves from overpaying these taxes?
Jonathan: The automated solutions will typically provide a means for calculating taxes and filing returns accurately and on time. This assures that taxes are not over or under paid, and avoids incurring unnecessary fines and penalties associated with misfiled and mis-paid tax returns
Kristina: What are your top 4 tips for SMBs to ensure they don't overpay these taxes?
Jonathan: 1. Use a software tool or service that guarantees its results
2. Use a software tool or service that assures you that it calculates taxes based upon (i) physical address (not just zip, which is an inaccurate method for determining tax rates); and (ii) actual line items within the invoice (not a simple calculation based upon invoice total, so that you are assured that taxes are not calculated on items that are non-taxable).
3. File your returns on time
4. Make sure that payment is remitted on time and in full
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