Monika Miles Consulting | TaxConnections

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How To Make Sure You Are Using Sales Tax Compliance Best Practices

There are a few different ways you can “do” sales tax compliance. Here are the four main ways we recommend, as well as which option is generally best depending on your company’s size and nexus:

Someone in-house does returns manually, which usually means filing each tax return individually via each state’s online portal. This is often a good option for small companies that file in five or fewer states. But companies usually need a better solution.
An outside bookkeeper or firm files returns manually. This also requires them filing returns through each state’s online portal, so it may be a good option for small businesses that file in 10 or fewer states, but much beyond that and it gets cumbersome very quickly to try to keep up with manual filing.
Rely on a completely automated software solution, with very little human interaction. There are multiple software solutions out there that calculate how much sales tax to collect and remit, and automatically file the returns for you. This maybe a good option for middle market companies that file in 10 or more states with relatively simple transactions (e.g. they sell online, high volume, tangible property where most items are subject to sales tax). However, we always courage our clients to consider all the ramifications of automation and then also consider the human element. Sometimes the biggest hurdle is the software implementation!
Work with a compliance provider, which uses the software but also offers more interaction with a real person on the team. This is usually a good option for or larger companies filing in 10 or more states with more complicated transactions (e.g. they sell more technology products, software or SaaS that are subject to interpretation about taxability), higher end products with a larger cost per product and lower volume. Again- a well thought out combination of software and human intelligence is often the best strategy. In addition to picking the option that will lead to most effective sales tax compliance, you’ll want to weigh the cost involved with each of the above options.

Miles Consulting Group can help you evaluate the best compliance solution as there are more factors than the ones included above—there can be a wide variety of factors to consider.