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No one wants to face a tax audit. So how can you prepare your business to avoid scrutiny? We present 6 tips to make sure you business is in top shape to avoid a sales tax audit. Originally presented as a webinar by Susan Petracco from AccurateTax and Zeph Dumlao from Miva Merchant on June 17, 2014.
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12LOREM IPSUM
DOLOR SIT AMET, CONSECTETUR
ADIPISCING ELIT. MAURIS
Determine Your Nexus
Nexus is a seller’s minimum level of physical presence within a state that permits a taxing authority to require a seller to register, collect and remit sales and use taxes.
- Marcum LLP
12What activities can create nexus?
Determine Your Nexus
Home office / satellite offices Remote sales people Trade shows Using a drop-shipper or fulfillment house Having an affiliate program
22For Each State Where You Have Nexus:
Learn the Tax Laws
Sourcing rules Special tax rates for certain products Product thresholds Sales tax holidays
22 Cheat Sheet
Learn the Tax Laws
We provide links and information about sales tax for each state in our sales tax reference section at:
http://www.accuratetax.com/sales-tax-information/
32Three Most Common Options
Configure Miva Merchant
State-based Sales Tax Zipcode-based Sales Tax Hosted Sales Tax Service like AccurateTax
32State Based Sales Tax
Configure Miva Merchant
One rate per state Items can be taxable or non-taxable Shipping charges can be taxed or untaxed Suitable if every state you have nexus in has a single tax rate regardless of product or shipment Examples: Michigan, New Jersey
32Zipcode Based Sales Tax
Configure Miva Merchant
Tax rates are broken down by 5-digit zipcodes Requires a third-party module and management of tax rate data Suitable if every state you have nexus in defines tax rates by 5-digit zipcode boundaries Example: Nevada comes close but no states really do this any longer.
32Third-Party Sales Tax Service
Configure Miva Merchant
Sales tax module communicates with an online service to determine boundary (shipment location) and tax rate data Rate and/or tax amount returned to cart and charged to customer No need to manage your own data Examples: California, New York, Florida, Washington
32Which Option to Choose?
Configure Miva Merchant
Determine based on states where you have nexus and the complexity of their tax law Consider the cost of time spent managing data versus a turn-key solutionAdd-on services might be beneficial, such as account setup, reporting, remittance, and exemption certificate management
42Automatically Record Sales
Keep Detailed Records
Record your sales in an accounting package. Automation (such as Miva Synchro and Quickbooks) saves time and prevents copy-and-paste errorsMake sure each order reflects the correct sales tax amount and which state the tax should be remitted toUse Quickbooks reports to assist with filing
42Remember Cancellations & Returns
Keep Detailed Records
Mark cancelled orders as soon as possible Properly account for returns Accurate bookkeeping will help minimize the need for amended returns
52Why Should You File on Time?
File Returns on Time
Filing late makes it more likely that the government will inspect your business and returns Filing late incurs fees, penalties, and/or interest
52How to Stay on Track
File Returns on Time
Keep a calendar of due datesIf you file electronically, print a copy of your receipt or confirmation number and note the date/time submitted
52How to Stay on Track
File Returns on Time
Make sure paper returns are postmarked by their due dateDon’t forget to include a check with your account number
62Taxes Change, and So Should You
Adapt to Changes
If you’re maintaining rates using state- or zipcode-based sales tax modules, make sure to keep your rates updated
62Taxes Change, and So Should You
Adapt to Changes
Pay attention to any new activities that could create a nexus in a new state: starting an affiliate program, adding a drop-ship vendor, adding/changing fulfillment companies
26 Tips to Audit-Proof Your Business
Review
1. Determine Your Nexus2. Learn the Tax Laws3. Configure Miva Merchant4. Keep Detailed Records5. File Returns on Time6. Adapt to Changes
Find this presentation online at: http://www.slideshare.net/accuratetax/
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