We’ve all heard the saying about “death and taxes”, and, as the quote would imply, sales tax affects nearly every business in one way or another. Manufacturers and distributors are no exception. Even if the majority of your sales are exempt, sales tax management is still time consuming and error prone, and if not managed properly it can leave you facing unnecessary risk for a costly negative audit.
Five key areas where manufacturers face specific challenges with respect to sales tax are:
- Selling B2B (to resellers/retailers) – including exemption certificate management
- Selling B2C direct – applying up-to-date, accurate rates, rules, and boundaries on all taxable sales
- Use tax and input items taxability – making sure you’re accurately self-assessing use tax on products purchased based on how and where they’re used
- Drop shipments on behalf of retailers or distributors – some scenarios can create nexus, and states vary on freight cost taxability
- Nexus creation resulting from installations/repairs – taxability and nexus creation rules around these services vary from state to state
As with the manufacturing process in general, having repeatable, consistent processes with respect to sales tax management can help ensure quality. And the best way to establish this consistency is through automation.
Automation can help you streamline processes while becoming more accurate (and thereby reducing audit risk) by providing accurate tax calculations without the need to keep up with thousands of rate, rule, and boundary changes every year. Streamlined exemption certificate management, including digital storage and automatic transaction association, ensures all exempt sales are properly documented and keeps the sales cycle moving. Stress-free returns processing takes away the pain of preparing forms and remitting payment.
Taxes are certain. And with states hiring more auditors and creating new legislation designed at broadening their tax base, audits are starting to become a pretty sure bet for most businesses, as well. But with a few simple proactive measures, manufacturing and distribution businesses can not only survive an audit, but can thrive by streamlining processes and freeing up resources to focus on what’s important.
To learn more about addressing key sales and use tax challenges through automation, download our free whitepaper: Sales Tax Quality Process and the Manufacturer/Distributor.
Interested in learning more?
Upcoming webinar: Stay ahead of Sales Tax Changes
Hosted by: Avalara
On Wednesday, September 11th at 10am CDT/ 11am EST