Learn which business processes help to ensure you stay in compliance with state and local taxes

1. Purchase orders It is a good idea to estimate the sales tax on your purchase orders for several reasons, including letting the vendor know you are expecting to be charged. If the sales tax is not included, you are required to take the extra step of reporting consumer use tax to the taxing authorities.
2. Customer Information If you have a database of your customers, you should consistently update their information to ensure the proper sales tax is being applied so you do not overcharge them. Although this process plays more to customer satisfaction, it can also give you information on your customers and their locations, which can help estimate the amount of sales tax you are expected to collect. Plus, if you have nexus in another state, you need to collect sales tax from customers in that state. In IL, sales tax is determined on your company’s location rather than where the customer is located. Most other states are determined on the “ship to” address.

3. Inventory Check that you have your resale exemption certificates in order when you purchase your inventory. When you do resell the item, be sure to include any final tax calculations. Don’t forget to track items you donate, use internally, or use as a sample, since use tax is usually applies to these areas as well.
4. Sales With thousands of taxing jurisdictions and millions of rules on taxation, charging the proper taxes can be difficult. Illinois updates their state and local taxes every 6 months and other states will update throughout the year, so you will need to check all of your systems and make the updates.

5. Credit Card Payments Check that sales tax is being included in the preauthorization process. Credit card charges can fail if the preauthorized amount is less than the total, which could require your company to manually enter the amount to complete the charge. If you are selling online, be sure to consider how your shopping cart is set up to handle sales tax. Not only including sales tax in the preauthorization process keep you compliant, but it also gives your customers a true picture of their purchase.

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