4 Ways to Improve Sales Tax Compliance for Micro Businesses

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Are you familiar with micro businesses as a viable business segment and potential client goldmine with their distinct differences in revenue, geographic scope and where they sell products?

According to the Small Business Bank, micro businesses have one owner and up to five additional employees. That’s certainly small, but by no means insignificant; the real impact of this group comes into laser-sharp focus when it comes to the impact on the economy: 92 percent of all U.S. businesses are considered micro businesses!

The National Small Business Association (NSBA) reports that tax compliance is one of the top issues facing small business; in fact, one-in-three small businesses report they spend more than 80 hours each year on sales tax compliance.

Sure, small businesses are country cousins to micro businesses, but their size does not lessen the compliance burden. Micro business owners are often pressed for time and resources because they want to concentrate on developing their companies rather than back-office matters.

In fact, micro businesses actually have greater compliance risk than small businesses because they typically have a larger proportion of sales from the internet and do not have budget for software to help manage sales, CRM or even shipping.

Here’s how to evaluate and improve the sales tax compliance of your current or potential micro business clients:

1. Understand State-by-State Requirements

Begin by defining the nexus requirements of states your clients currently do business with and determine what their current process is for determining and charging sales tax. Are there gaps?

Next, evaluate the nexus requirements for states your client may begin doing business with, determined by their advertising or marketing efforts, and the location of website viewers (available via Google Analytics). Even if your clients are currently compliant, they might not have a system in place to ensure compliance with additional territories.

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About Drew Simek

Drew Simek

Drew Simek is the Managing Principal at Simek Tax. He has over 12 years of experience providing clients with state and local sales tax and use tax services.


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