With sales and use tax being a complex and ever-changing area, it’s crucial to have an effective and up-to-date record of your sales and use tax activity. Accounting software is widely used by small to medium-sized companies to track financial transactions, as well as additional data surrounding business operations. Most organizations utilize a software tool to capture, at a minimum, sales and procurement activities to enable reporting and performance analysis capabilities and to maintain documentation in support of potential audits. Understanding your accounting software and/or ERP system and identifying both strengths and weaknesses are essential to creating an effective sales tax process for your company. In this article, we’ll take a look at some commonly used systems and items to consider as you design or maintain your sales tax process.
For companies selling products and services that are subject to sales tax in one or more jurisdictions, QuickBooks® Desktop includes a Sales Tax module that can be activated to capture appropriate taxes. However, a prerequisite to using the Sales Tax function is setting up the specifications necessary for QuickBooks® to determine the correct treatment of tax based on criteria defined by the user. Upon creating your company in QuickBooks®, sales tax rules must be established to determine the taxability of products and services as well as the tax rates and jurisdictions specific to your company. Sales tax is calculated based on the tax settings created and maintained by QuickBooks® users, and therefore the risk of incorrect tax treatment exists. The sales tax rules need to be monitored and adjusted by users for changes in tax rates, by jurisdiction, as well as modifications to tax laws for products and services in any state with potential nexus. This manual process can lead to errors in tax calculations and ultimately result in incorrect sales tax returns and payments.
The design, regulation, and routine updates required of the QuickBooks® Sales Tax module are tasks that are both timeconsuming and conditional on the knowledge of the administrator. Vertex SMB is a sales tax solution specifically customized for small to middle-market businesses that eliminates the dependency on user tax knowledge and manual updates by offering a reliable solution to automate your sales tax process. Vertex SMB includes up-to-date tax rates for over 33,000 jurisdictions worldwide, and it maintains over 400,000 unique taxability rules that are updated by the system to ensure that sales tax is being captured accurately. Exemption certificate management, tax return filings, and payments to state and local tax agencies are additional features available to maximize automation and simplify the entire sales tax function for your company.
Sales Tax Automation
As tax technology evolves to manage new complexities, innovative tools are introduced to fulfill the shifting needs of small and mediumsized businesses. The recent development of a powerful connector between Vertex SMB and QuickBooks® Desktop has demonstrated how the challenge of capturing accurate sales tax amounts in a tax world where laws are changing to keep pace with advancements in technology can be met with a comprehensive solution proven to simplify and streamline the sales tax process. The QuickBooks® and Vertex SMB connector allows communication between the platforms that automates the sales tax function from beginning to end. Once the connector is configured, it will apply the latest tax rates and taxability rules to QuickBooks® products and services, as well as prepare sales tax returns and remit payments on behalf of companies. This automated process drives the timely and accurate calculation of sales tax in a cloud-based environment.
The implementation of an automated sales tax process has the added benefit of minimizing internal costs associated with incorrect tax calculations, which includes eliminating employee hours dedicated to monitoring and updating the elements that impact taxability in your accounting software. The integration of a sales tax solution, such as Vertex SMB, with either accounting software or a simple schedule of monthly business transactions is a key to beginning the process of sales tax automation and introducing efficiencies in the tax department almost immediately upon implementation. Finding the right solution to address your company’s needs is essential. Sales tax software can offer features from taxability determinations and tax calculations to filing returns and remitting payment to applicable jurisdictions. Implementing a solution that complements a company’s circumstances will allow for a shift in focus to areas that directly contribute to the profitability and overall success of the business while having confidence that the sales tax function is being captured in an accurate and efficient manner.
State and Local Tax Laws
Sales tax rules continue to change and grow as states address evolutions in technology and their impact on sales tax laws. Tax professionals can certainly help determine taxability in the appropriate jurisdictions, especially when the fact pattern is complex. A sales tax solution like Vertex SMB is customizable for your company’s specific tax profile; however, understanding new and changing tax laws outside of the software is necessary to ensure proper tax calculation and reporting.
Wipfli associates have the experience and resources to remain knowledgeable about real-time changes in the sales and use tax arena so we can provide accurate and timely advice to our clients. Please contact Wipfli if you would like further information on the sales tax services available. An automated solution could change the way your tax department approaches sales tax and have significant impact on your bottom line.