The 5 Services Small Businesses Need to Avoid Sales Tax Hassles
A 2014 GoDaddy.com survey of 600 small business owners showed that 40 percent of the group considers bookkeeping and taxes the most unpleasant part of owning a small business. No one in their right mind starts a business in order to pay taxes. However, while accustomed to adopting modern technology for many business needs, such as communications or payment processing, more than half of small business owners still use antiquated, “20th century” version spreadsheets—or paper and pencil—to track company finances and manage their taxes. This has to end.
The survey also found that 40 percent reported taking six-plus hours to complete their tax returns. Who has that kind of time? Small business owners are usually busy wearing many hats. They don't have time to be tax experts, too.
As the importance (and complexity) of use tax compliance grows, small businesses are suffering the consequences of manually managing overwhelming calculations. A majority of small businesses lack the staff and resources required to streamline these tasks. They also have difficulty memorizing and applying the right tax laws, and keeping up with the constantly changing product taxability rules—which can all be extremely inefficient, inaccurate, and expensive. On top of that, add in the time it takes to research tax rates that vary from state to state and between different counties, cities, and districts. In the United States alone, approximately 17,000 different taxing jurisdictions currently exist.
Time and time again, we’ve seen companies in our industry incur unnecessary expenses associated with tax compliance (expenses incurred in addition to the actual tax owing), all because the business owner wasn’t managing this aspect of the business, nor using available tools to help in these tasks. Many business owners will spend many billable hours talking with their accountants and investigating possible tax loopholes.
But rather than playing a game of cat-and-mouse with the government, and paying dearly when seeking out the next loophole, modern business owners need to focus on using a 21st-century, fully automated, end-to-end system to help them better manage their taxes throughout the year, and save them much more in the short and long run.
This technology not only offers a solution by automating the process of calculating, reporting, and remitting sales and use tax, but also minimizes human intervention, lowers the cost of compliance, and helps reduce the risk of over- or underpayment.
Many of the cutting-edge software solutions available on the market right now feature dynamic, on-demand tools that deliver reports quickly and easily in real time, improving accuracy and reducing the chance for audits. Companies also can enjoy rapid ROI from investments in these technology solutions thanks to improved compliance and accurate reporting.
Some of the automated tools include unique features that further enhance these benefits. For example, many boast a sophisticated tax-calculation engine that can calculate sales taxes accurately, reliably, and seamlessly in online shopping carts, point-of-sale systems, and financial accounting software for every state, country, city, or special district in the United States, as well as worldwide.
In addition, small business owners can use these solutions to maintain all of the information they need to reconcile books or even provide audit defense. Entity exemption certificates for tax-exempt customers can be stored and applied all in one place, and tax exemptions for transactions can be automatically applied.
So what should the small business owner be looking for in this magical service?
- Comprehensive solution: Make sure you find a solution that can handle multiple tax jurisdictions and update information in real time. Look for a solution that weighs factors such as local tax holidays and can differentiate between the taxability and tax rates of different items.
- Low-maintenance solution: Tax laws change frequently all over the country, and when running a busy company, it can be hard to keep up with new developments. The system should handle changes and updates automatically.
- Easy to use: The solution should not require more than a few hours tops to set up and connect. It should be intuitive and nondisruptive to business operations.
- Files all tax returns: Many solutions will either calculate taxes or generate returns. Not many will do it all. An automated solution will not only calculate the taxes and insert them automatically into invoices and shopping carts, but it also will take the data, generate, and file the returns.
- Audit support: States and taxing agencies will always have questions and issues. The tax solution should provide support that will address these issues and respond and interact with the tax agency to resolve outstanding questions.
Filing taxes doesn’t have to be a huge burden for small business owners. By leveraging the latest automated technology solutions, small business owners can focus their time and efforts on what matters most—building their business and providing top-notch products and services to their customers.
About the author:
Jonathan Barsade is the CEO of Exactor, which provides solutions to help companies with sales tax compliance.