The way we do business is changing and so is the way states and local governments collect sales and use taxes (SUT). SUT rules and regulations have grown so complex and understanding these ever-changing laws is now another burden on businesses. Companies need to make sure they are keeping up with SUT changes or else risk penalties.
Three market drivers are impacting the complexity of SUT:
- States aggressively looking for additional tax revenue
- Proliferation of e-commerce and businesses more easily expanding into multiple states & jurisdictions; and
- Confusion around SUT liabilities and implications surrounding collection & remittance.
CPA firms need to know what these marketplace drivers are to ensure that their clients are SUT compliant.
Driver I: States Aggressively Looking for Additional Tax Revenue
If states could collect on all internet sales for 2017 alone, they could have collected $13billion more in tax dollars which could go a long way toward recovering their $23billion in estimated lost revenue. States are aggressively going after lost SUT with additional auditors, new technology, and new legislation. Some of the new regulations pit the vendor against the consumer. Colorado, for example, can now force vendors to report residents who owe use tax to the state. The states are working to collect as much revenue as they can, but the business owners are the ones feeling the impact.
Driver II: Proliferation of E-commerce and Businesses More Easily Expanding Into Multiple States & Jurisdictions
Driver III: Confusion Around SUT liabilities and Implications Surrounding Collection & Remittance
There are now more than 60,000 distinct sales and use tax rates across the states in over 11,000 local jurisdictions nationwide. But all these rules bring along more confusion and complications that can leave companies vulnerable. They are now being asked to understand the SUT requirements for every jurisdiction where they have done business. An activity that generates nexus in one domain may not produce it in another area. Not understanding these nuances and its impact on collecting and remitting sales & use tax can be costly.
Ever-changing SUT regulation has made it more challenging for business owners to keep up and comply with these regulations. Understanding these marketplace drivers can help CPA firms advise and consult their business clients to navigate this changing SUT environment.
Download our latest whitepaper and watch our webinar, Navigating a Changing Sales and Use Tax Environment to learn more about these market drivers and how your firm can take advantage of the sales and use tax service opportunity.