“In this world, nothing can be said to be certain, except death and taxes.” -Benjamin Franklin
April 15, the deadline for filing of taxes, is just a few days away. Invariably, the date brings about some amount of apprehension in most of us. There are many small and medium business owners who are unclear about what exactly Sales Tax is, or how it differs from Use Tax.
Sales tax is a transactional tax that is imposed for the privilege of doing business in a particular state and/or local jurisdiction, based on the product or service being sold.
Use Tax is a tax levied on tangible personal property bought in one state but used, stored or consumed in another state (where the consumer resides), provided no tax was collected in the state of purchase
Fortunately, there are simple, quick, and automated software solutions available for preparing and filing taxes. One such outstanding product is Avalara Returns– a certified Streamlined Sales Tax compliance service provider.
Before we go into how Avalara Returns, along with AvaTax, makes your tax filing and remittance processextremely simple and hassle-free, let us take a quick look at the sales tax conundrum.
Why is it all so complicated?
- Taxability: Every state (and many jurisdictions) has its own taxation rules for generating revenue. Businesses need to be clear on what is taxable and what is not in order to neither overcharge nor undercharge tax on their products.
- Multiple Tax Rates and Jurisdictions: With more than12,000 jurisdictions for taxation, and frequent revisions of tax rates, it is difficult to keep track of current tax rates at a given location.
- Exemptions: Many states grant special tax exemptions for various industries and services (manufacturing, industry, call centers, warehouses, farming, etc.) However, most of these exemptions come with complex caveats and restrictions. As a result, there are multiple variations of the exemptions, making it very tricky to estimate the correct tax amount in a given state/city.
- Digital merchandise: US states differ in whether or not they charge sales tax on digital goods such as ebooks, podcasts, MP3s, etc. Not only that, there is considerable vagueness on the definition of digital merchandise in different states; some states consider electronically downloadable movies/books/music as digital goods, whereas others include ring tones, newspapers, software etc. too.
- Bundled Transactions: When a taxable product is sold together with a non-taxable product in a package, there is significant difficulty in understanding the tax implications of such a transaction.
With so much confusion abounding in the area of sales tax and use tax, is it any surprise that many businesses worry about complying with the manifold implications of the taxes?
This is where Avalara comes in!
Avalara, being an automated and intuitive system, ensures that your transactional taxes are paid correctly and on time.
Avalara Returns enables stress-free tax filing and remittance with its automated system, giving you the following benefits:
- It can easily populatetax forms with data gathered from integrated financial applications. This saves considerable time compared to manual filling up of the forms and also eliminates errors.
- It can integrate with other financial or ecommerce applications, and perform e-filing or hard copy filing as per requirement.
- Jurisdictional specificities are taken care of by the software, ensuring the correct tax amounts to be remitted to the appropriate tax authorities before the deadline.
- By meticulous filing, Avalara reduces chances of errors. An error-free remittance virtually guarantees that there are no penalties to be paid for delayed or wrong filings.
- As the software is cloud based, it saves the cost of hardware installation. Being responsive, it also reduces the time and cost of training personnel to use the software.