States are getting more aggressive with online sellers, so plan on an audit notice arriving at some point. Waiting until it shows up leaves you scrambling for records you should already have. Kelley Birrell covers the ongoing practices that keep you ready, then the four steps to take once the notice lands: gather sales data from every channel, get your returns and exemption certificates in order, prepare to respond, and bring in help.
Sales Tax
The Secret to Surviving a Sales Tax Audit (Without Losing Your Mind)
5 min
Transcript
0:00 Why an audit is a matter of when
Hey there, ecommerce warriors. If you caught our last video on the latest trends in sales tax audits, then you know that things are starting to heat up in the world of sales tax compliance. But if you missed it, don't worry. We are diving into something just as important today: how to prepare for a sales tax audit, because let's be real, in the current climate of states becoming more aggressive towards online sellers when it comes to sales tax audits, it's really more a matter of when you get audited, not if. So, stick around because I'm going to walk you through everything you need to know to get your business audit ready. Trust me, you do not wanna be caught off guard.
So here's what we'll cover today. First, we're going to cover the ongoing sales tax best practices that you should be following to stay compliant and have things running smoothly in the first place. Then I'll walk you through the steps you need to take when a sales tax audit is on the horizon. And finally, I'll give you a heads up of what to expect during an audit so you're not caught by surprise.
0:50 Ongoing best practices
Let's kick things off with the ongoing best practices that can make your life so much easier when that audit notice arrives. And if you're thinking, oh, I'll just wait till the notice gets here to start worrying about it. Mmm, bad idea! By that point, it's too late.
First up, know where you have nexus. This is critical and I cannot stress it enough. It is crucial for you to know exactly where you have nexus, because that is where you are obligated to collect and remit sales tax. Once you've identified those states, make sure that you have registered to collect sales tax in each of them.
Here's a pro tip. Do not start collecting sales tax in a state where you have not already registered. That is illegal and it can get you in some seriously hot water. So make sure that you register first before you go on to the next step, which is to set up your sales channels to collect the correct amount of sales tax. And of course, after you've collected it, you've got to remit that tax back to the state according to their deadlines.
Now, I know that all of this can sound pretty overwhelming, but the good news is that sales tax automations can make this process so much easier. Automating your sales tax calculations and filings can be a game changer, because not only does it help you to stay compliant, but it also reduces your likelihood of errors. Plus, it makes the audit process go way easier because all of your records are already organized and ready to go. Now we have a lot of experience with sales tax engines and tools, so if you'd like to see a comparison, check out this video here, or you can see the link in the description below.
2:17 Four steps when the notice arrives
Okay, so now you've got your ongoing practices down. Awesome. So let's talk about what happens when the audit notice arrives. There are four steps that you'll want to follow to be audit ready.
First step, gather your sales data, and I'm talking from everywhere: wholesale, marketplace, retail, everything. Make sure that you've got it all together and that it's easy to access.
Step two, get organized. Review and organize your sales tax returns and all of your supporting documentation for this particular time period. One thing that is absolutely crucial here is to make sure that you have on file valid exemption and resale certificates for all of your wholesale customers and transactions, because if you don't, you are on the line for the missing sales tax. Accuracy is key, so make sure to double check everything.
Step three is be prepared to respond. Develop a plan for responding to audit questions and requests. Be prepared to provide all documentation quickly and clearly. Also, it's a good idea to designate one point of contact for the audit. That means that all of the communication will go from that person to the auditor, reducing the risk of miscommunications.
Step four is to get help, and this is a big one. Consider hiring a qualified sales tax firm. Professional help can make all the difference in helping your audit run smoothly and reduce your liabilities. By following these steps, you are setting your business up for success, even in the face of an audit.
3:37 Quick recap
Okay, let's do a quick recap. Preparing for a sales tax audit is all about being proactive. Know where you have nexus, register where you need to, and automate your sales tax processes to reduce errors. When that audit notice comes, gather your documents, review everything, and get a plan in place. And again, don't hesitate to bring in professional help if you need it. Remember, the best way to handle an audit is to be prepared before it even starts. Waiting until the state comes knocking at your door is not a winning strategy.
4:06 Getting help before the notice comes
If you're feeling a bit overwhelmed, don't worry, because that's where we come in. Our team of sales tax experts can help you get your ducks in a row so that you are ready when that audit notice comes. Schedule a call with us today and let's help you get your business not only compliant, but also audit proof.
Thanks for watching. If you found this video helpful, like it, ask your questions in the comments, and subscribe for more helpful videos like this. And don't forget to check out our other videos if you'd like more tips on how to help your ecommerce business run smoothly. Catch you next time.