Are You Picking the Wrong Rate for Sales Tax?

Understanding the sales tax rate sourcing provisions for states in which you have sales tax nexus is critical in determining the correct sales tax on a transaction. If you don’t, you could end up charging and collecting the wrong sales tax rate.

In general, states employ two sourcing methods, origin and destination.  In states that have origin based tax rate sourcing provisions, the activities that create sales tax nexus, as well as changes in your company’s activities in the origin state, may be an important factor in determining the sales tax you should be charging in that state.  

The sales tax rate may be affected by two considerations:

  • Whether your company has nexus in the state as the result of having one or more locations in the state.
  • Whether nexus arises from the mere presence of sales activities in the state. 

If you are selling into an origin-based sales tax state, it is critical that you regularly review your company’s, as well as your affiliated companies’, activities in the state. Failure to do so could result in paying the wrong sales tax rate in one or more origin states.

Periodic nexus reviews of your company and its affiliates’ activities are cost effective ways to identify this potentially expensive sales tax issue.

More details on this issue and examples are available at the Salt Strategies blog, in an entry written by Joseph A. Pizzimenti and Timothy Reiter.

About the author:
Joseph A. Pizzimenti, Esq., is a tax director at Margolin, Winer & Evens LLP, an accounting and business advisory firm with offices in Long Island and New York City.

 

You may like these other stories...

Truckers and other owners of heavy highway vehicles take note: Your next federal highway use tax return is due on September 2.The September 2 due date, which was pushed back two days because the normal August 31 deadline...
The head of the IRS has a message for taxpayers and tax preparers who have endured long wait times while on the phone with the tax agency: Call your member of Congress.During his keynote speech at the 69th Annual Meeting of...
Regulators struggle with conflicts in credit ratings and auditsThe Public Company Accounting Oversight Board (PCAOB), which was created by the Sarbanes-Oxley Act in 2002, released its third annual report on audits of...

Already a member? log in here.

Upcoming CPE Webinars

Aug 26
This webcast will include discussions of recently issued, commonly-applicable Accounting Standards Updates for non-public, non-governmental entities.
Aug 28
Excel spreadsheets are often akin to the American Wild West, where users can input anything they want into any worksheet cell. Excel's Data Validation feature allows you to restrict user inputs to selected choices, but there are many nuances to the feature that often trip users up.
Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.