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How to Talk to Your Clients About Sales Taxby
Many accounting professionals avoid conversations about sales tax compliance like the plague. While this conversation may initially seem overwhelming, accountants are in a unique position to provide support that these clients likely aren’t receiving elsewhere.
Having this conversation with clients can not only help protect their business’ future, but it can also help accounting professionals begin to expand their services – and, ultimately, their practice.
Don’t let sales tax become the elephant in the room. Have the conversation. Read through the top five signs a client needs sales tax support. Then, use the topics below to guide the discussion with your client.
Know Their Liabilities
The first thing to know is whether or not your client has sales tax obligations and where their liabilities are. Most businesses will understand the need to collect and remit sales tax within their home state. But they may not fully understand all the surprising nexus triggers out there.
In general, a business has nexus in a state if it in some way benefits from state infrastructures. For instance, does it:
- Use the roads and bridges?
- Generate trash?
- Have remote employees?
- Attend trade shows?
These are just a few of the examples of nexus triggers out there. Check out this nexus guide for more information.
If your client is a Fulfillment by Amazon seller, make sure they understand where their products are being stored. Amazon has dozens of fulfillment centers nationwide, and the use of these warehouses triggers nexus for sellers.
Understand Their Process
It’s important to understand where a client is starting with sales tax compliance. Are they currently collecting and remitting sales tax at all? Many businesses, especially e-commerce businesses, aren’t aware of the sales tax obligations they may have.
If they are collecting and remitting sales tax, how are they doing this? By hand? With a SALT? Using software? Understand how much time and money they are currently investing in their sales tax solution. There could be areas where they can make the process more efficient.
Additionally, use this opportunity to provide clarity into your role in sales tax compliance.
Explain Their Liability
This is an interesting time in the sales tax world. States are realizing they have some serious holes in sales tax collection and are looking to make moves to fix that. This means that the likelihood of being audited is increasing. It’s important for clients to understand how regulations are changing. As more business moves online and the volume of online transactions increases, the attention on online sales tax compliance will only increase.
Once you’ve explained what their possible liabilities are, talk to them about next steps. Would they be prepared for an audit? Audits can go back three to five years, so it’s essential to consider past behavior and weigh that when considering future practices. If a client is audited, or wants to prepare for an audit, encourage them to check out some resources to get started. Audits are scary for businesses, but they’re a reality it’s best to prepare for.
Communicate Their Options
Talking with your clients about their sales tax compliance doesn’t require that you provide sales tax support. It simply empowers your clients to understand the pros and cons of their choices, and find the solution that best serves their business.
There are three main sales tax solution options your clients can select from.
1. DIY. If your client is only selling in one state, a do-it-yourself approach is a good option. To determine if this is best, have them calculate the number of hours they’re spending on sales tax compliance versus the money saved by keeping this process in house. Keep in mind, by completing sales tax independently, you have to ensure you’re paying the correct sales tax rates. Local jurisdictions regularly change their rates. If a client decides to monitor these changes themselves, make sure it’s done correctly to ensure accuracy.
2.You can help. Many accounting professionals see sales tax support as a new opportunity to expand their services and grow their practices. Surprising to many, you can offer sales tax support without investing an exorbitant amount of time. Leveraging an automated software allows you to provide the support with guaranteed rates and support for filing.
3.They can automate. If adding sales tax to your service package is not something you’re interested in, refer clients to an automated software. This provides them with the resources they need to protect their business without your involvement. Simply help them determine which sales tax option works best for their business and send them on their way!
Don’t make the mistake of not talking with your clients about their compliance. The sales tax world is increasingly changing, and helping your clients prepare for these changes is essential to protecting their business.