According to Forbes the world of sales use tax is a decidedly murky one for many companies.

What is the sales nexus point that triggers our company from having to file sales tax in that state? Do you have an exemption? Will you follow the next South Dakota vs Wayfair sales tax case and be the next victim? Will closing a store or going into bankruptcy trigger an audit? Is my accounting office really the best source of doing my sales tax returns?

According to Statistica US online shopping is expected to 547 billion dollars in 2019, and cash strapped states want their share of sales tax for those sales.

What is the sales tax nexus?

Simply put, sales tax nexus is the dollar value of sales or the company’s impact on the state. Under the old rules, unless A company such as Amazon had a brick and mortar store in Minnesota, for example, then they were not required to collect sales tax.

However, in 2018, in a case known as the Wayfair sales tax case, South Dakota obtained a supreme court ruling that nexus could be established purely through sales, and brick and mortar stores didn’t matter.

The results of the Wayfair decision are still playing out, but there’s no question that soon, pretty much every online store will need to file sales taxes in every state they operate.

That alone is one reason why many companies are relieving the burden of their accounting office to do the task and relying on sales tax outsourcing.

Companies such as Tax Connect, provide sales tax outsourcing, that not only establish everything needed to file your sales tax within a given state but to Tax Connect but to support you in the event you do receive a notice of a sales tax audit.

Sales tax law is very complicated and can be expensive to defend yourself against. And as with all taxes, with sales tax law, it is up to you to clearly defend yourself in an audit, not the other way around. Otherwise, at a minimum, expect a lawsuit from the state.

A great many sales tax calculator programs exist on the internet, but bear in mind, a sales tax calculator shows you the maximum amount of sales tax owed. They do absolutely nothing to show you any amount of sales tax deduction.

Some states provide a sales tax deduction of up to $100,000 in sales. In addition, on your Federal Income taxes, you can claim a deduction for part of those state and local taxes, but consult your local CPA for all the details.

The bottom line

If you are engaged in online sales, plan on getting acquainted with both a tax attorney and an accounting firm.

States have learned that sales tax audit is a great source of revenue, so even the smallest firms are getting audited. In fact, many small firms may consider switching from a sole proprietorship to full-fledged corporations, because state tax auditors see smaller companies as most likely to have filed their taxes themselves, and maybe filled with errors.

Also, if you don’t want to risk and audit, never be late on your sales taxes. That also is a sure way to generate an audit the following year.