Do You Need the "Matrix"? | AccountingWEB

Do You Need the "Matrix"?

Does your company or client utilize a sales tax software solution to make tax determinations regarding the products they sell, and goods and services they purchase?

If not, your company and client may need the "Matrix."  Okay, I mean sales and use tax matrix.Problem

Companies who don't use a sales tax software solution to make tax determinations still need to make those determinations and be accurate.  They may not have decided to use a software solution either due to volume of activity, type of industry, complexity of transactions, etc.  Therefore, a manual solution may be necessary.

If that is the case, a sales and use tax matrix can help.

SolutionFrom a sales tax perspective, it is important to gain an understanding of all products, goods and services the company sells. Then conduct research for the states in which the company has nexus to determine the taxability of the goods and services the company sells. The result of the research is put into a matrix reflecting the taxability of the goods and services which the company sells on a state-by-state basis.

From a use tax perspective, a company needs to gain an understanding of the most frequent goods and services the company purchases. Then conduct research for the states in which the company uses those goods and services to determine the taxability of those goods and services. The result of the research is put into a matrix reflecting the taxability of the goods and services which the company purchases on a state-by-state basis.

Both matrices are then utilized as a daily tool by the company’s accounts payable or purchasing department to determine when sales or use tax should be self-assessed on an invoice or purchase.

Why?
 
Regardless of volume of activity or industry, companies need to do the best they can to mitigate sales and use tax exposure.  States are hurting for revenue and auditing companies of all sizes.  Reducing potential sales and use tax liabilities, and penalties and interest has become even more important.

This blog

Brian Strahle is the owner of LEVERAGE SALT, LLC where he provides state and local tax technical services to accounting firms, law firms and tax research organizations across the United States.  He also writes a weekly column in Tax Analysts State Tax Notes entitled, "The SALT Effect."  For more info, visit his website: www.leveragestateandlocaltax.com

You can reach Brian at strahle@leveragesalt.com.

Connect with Brian on LinkedIn. Follow Brian on Twitter. Join the Leverage | SALT LinkedIn Group, connect and contribute with your colleagues!  

Because state and local taxes are deceptively simple and endlessly complicated.

More from this blog