Do you have employees or independent contractors selling on your behalf in other states? If so, do they know what forms to collect from customers or what is taxable in different states? These are important questions every business should be reviewing at least annually.
States are constantly changing their rules to increase revenues. Many states will change what is taxable before increasing the sales tax rate. With the constant changes in laws it is hard for businesses to keep up to date on changes and inform their employees. States regularly send questionnaires or conduct audits on businesses.
Key Sales Tax Issues
Here are some of the key sales tax issues employees should know. This will also save the company time in the future because exemptions and records will be reviewed on a more regular basis.
- What is nexus? It is the minimum connection with a state to cause filing requirements. Every state is different.
- What can trigger sales tax filing requirements? Employee, independent contractors, inventory, rent, trade shows, deliveries in company trucks and drop shipments can all cause nexus for sales tax depending on the state.
- What States does the company currently filing sales and use tax in.
- What exemptions are needed to prove a customer is tax exempt for each state and how often they need to be updated.
- What items are taxable in the state i.e. shipping, installation or labor.
DHJJ recently did a presentation for a company’s sales staff. The focus of the presentation was what the employee needed to review on a regular basis. The presentation was tailored to states that they filed in. The staff left the presentation with a handout on all the states the company files in.
DHJJ’s Handout Example:
| State | Resale Certificate | Must Include State Specific Number | Resale Validity | Accepts Other States Resale | Not-For-Profit | Shipping Charges | Installation |
| CA | CDTFA-230 | x | Until revoked or circumstance change | Does not have a general sales tax exemption | Exempt, if separately stated | Assembly is taxable, general is exempt | |
| FL | DR-13 | x | Every year | Consumer’s Certificate of Exemption from the FDOR | Exempt if separately stated and optional | Taxable | |
| IL | Form CRT-61 | x | 3 years | Exemption certificate issued by IDOR | Exempt, if separately stated and option to pick up is given | Taxable, if not contracted separately | |
| WI | Wisconsin Sales and Use Tax Exemption Certificate | x | Until revoked or circumstance change | Certificate of Exempt Status (CES) number | Taxable | Taxable |
After follow-up with the company, the sales staff have been more aware of sales tax issues and asking for the proper documentation before sales are final. With state taxation, it is important to stay current on records to help reduce time and stress if or when an audit occurs.
How DHJJ Can Help
If you are interested in a presentation for your company, unique to your business and geared to help your staff understand what information they are required to obtain by law, please contact DHJJ at 630-420-1360.
