Time to Revisit Sales Tax Legislation?

Online platforms have opened up an extensive world of extra opportunities to increase sales output. However, as organizations virtually traverse over state boundaries throughout the country, sales tax compliance is becoming an increasingly large thorn in their side. Keeping up with local taxation guidelines can be tiresome. States and different counties are always pushing for new legislations regarding taxes for businesses. Sales tax compliance costs time and money that could best be spent elsewhere. ERP can easily handle the tax workload that would otherwise involve hours of manual, tedious labor.

In 1992, Congress signed a bill to allow for the commercial development of the internet. Since then, the internet has grown and become so much more than what was imaginable back in the 90’s. In that same year, however, the Supreme Court ruled in Quill Corp. Vs. North Dakota, that a state could not enforce tax compliance to an out of state retailer, according to taxfoundation.org. In other words, that state cannot collect taxes on business sales done in states where the business does not have a physical presence (where they are reached by online platform only; no brick and mortar). Ever since then, retailers have had “tax advantages” via online platforms.

Respective taxing jurisdictions have been limited in that businesses have been able to make an increasing (online sales are growing) amount of sales without worrying about sales tax. Businesses have thus been able to charge lower prices, or pocket more of the revenue that would normally have been allocated to tax dollars had a product been sold in a brick and mortar store. Lately, both state and local tax enforcing bodies have been searching for a way to redefine a business’s “nexus” of operation, in order to collect what otherwise could be considered lost tax revenues.

An ERP system can help owners navigate this convoluted tax world. Companies need ways to track and record these taxes to ensure that they are collecting the right amount from customers and issuing correct payments to the IRS.  A couple of different tactics have been developed to utilize ERP. First, the system can link postal code with taxing jurisdictions in order to accurately calculate tax based on where the sales transactions occurs and where it is shipped to. Second, product / merchandise databases are leveraged to accurately determine a product sold and link it to specific taxability rates and rules. Finally, ERP can account for sales tax rules to provide a sophisticated system with robust tax calculation capabilities. ERP will also be able to reconcile any future standardization that taxing bodies put forth.

Retailers are using the web to increase sales and exposure to a greater customer base. Customers may not be within state lines of a company, but retailers are still responsible for collecting and accounting for the proper tax amounts. With the help of ERP systems that can integrate with the latest tax software, businesses are able to collect taxes online as well as offline based on the newest tax legislation concerning where the goods are purchased from. By combining the latest tax laws throughout the US and recording the taxes charged to customers, businesses are able to provide clarity to all parties involved when taxes are collected. 

Business taxes are often associated with extended hours, endless spreadsheets, and executives nervously trying to collect debt, reconcile financial statements, etc. The ability to quickly adapt to new tax legislation and provide transparency can help alleviate the issues that come with taxes. Through the use of an ERP system and tax software, companies can now record and track taxes to better understand what taxes are being collected and why. Audits tend to be inevitable these days, but companies can have a better grip on their business through data related to sales and taxes captured by an ERP system.

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