If you have any experience working with sales tax, you’re likely aware that trying to manage the entire process can get complicated fast. I frequently tell my students and clients that sales tax is a team sport – you can’t do it on your own. But with some expert guidance, you can get a much better handle on the “big picture” when it comes to the sales tax process. And as with many things in the accounting, tax or financial arena, one of the first steps is gathering the right data.
I’ll outline some of the key categories and pieces of data you’ll need to manage the sales tax process. I’ll also explain the 5 categories of data you’ll need to gather, what you’ll need it for, and some examples of the data you’ll need for each of these items.
In the world of sales tax, nexus is one of the first and most important concepts you need to understand. In short, nexus is what determines in which jurisdictions (states, cities, etc.) you are required to collect and remit sales tax. But in order to determine where you have nexus, you need to gather some data. Once you have the answers to these and other questions related to where you have activities, then you can determine where you have nexus. Here are a few of the questions you’ll need to ask yourself to determine your nexus exposure:
If you’ve established nexus for sales tax purposes, you are required to complete a sales tax registration in that jurisdiction. Before you get started on the registration application, you’ll need to gather some data. Here are some of the items you’ll need to take into consideration:
Next, you’ll need to determine the taxability of the product or service that you’re selling. There are many questions and factors that go into correctly determining the taxability, but here are a few of the most important questions you should be gathering data on:
Once you’re registered to collect and remit sales tax in a jurisdiction, it is vital that you stay sales tax compliant. In order to do this, you’ll need to gather the right data. A few of the key pieces you’ll need for sales tax compliance are:
As part of your duties in the tax department, it is very likely that you need to submit reports to management. There are some items you’ll want to monitor that will be of interest to management. Here are some of those items: