In the dynamic world of business, there is one constant—things change. Sales tax regulations are no exception. With over 10,000 jurisdictions across 46 states, staying compliant is an ongoing challenge for most businesses. This rings especially true for small businesses with limited resources.
To ensure you remain on the right side of the law and maintain customer trust, it's essential to keep sales tax logic up-to-date as sales tax rules change. Continue reading to learn how sales tax software can help.
Benefit #1: Keep Up With Evolving Sales Tax Laws
Sales tax laws are far from static; they frequently change. New tax laws alter tax rates, exempt certain products or services, or introduce new compliance requirements. For example, Maryland passed legislation that extended the state’s sales and use tax to certain digital products in 2021. This was a unique situation given that the legislation was originally vetoed by the Governor in 2020.
In February of 2021, the legislature overrode this veto, resulting in a significant change to how digital goods were treated. According to the state’s constitution, the law was effective thirty days after the override. The Comptroller of Maryland released the updated guidance five days prior to the effective date. Accurate sales tax calculation is vital for businesses to adapt to these changes without disruptions or unexpected costs. Fortunately, having the right tools in place to continuously monitor sales tax laws can help you and your business keep up.
Benefit #2: Adapt to Changes With Improved Data and Automatic Sales Tax Updates
Automatic sales tax updates can be a lifesaver when it comes to staying up to date with changes. Hosted sales tax software automates many aspects of compliance, making it easier to keep up with changes in tax rates and taxability rules. It also allows the vendor to automatically update tax rates and taxability rules, helping businesses adapt to new regulations promptly, as was necessary in Maryland.
Additionally, hosted sales tax software verifies that your business is always using the most current data for tax calculations. Get in touch with one of our experts to learn how Zamp’s managed solution can take care of your sales tax needs from A-Z.
Benefit #3: Maintain Sales Tax Compliance
Sales tax software helps businesses maintain accuracy in sales tax calculations and compliance, which can also help build a positive reputation with tax authorities. Businesses are typically required by law to collect and remit sales tax on taxable transactions. Failing to do so can lead to serious legal consequences, including fines and penalties that can significantly impact financial stability.
Some businesses choose to manage the complexity of sales tax compliance by hiring specialized tax professionals to monitor all of the jurisdictions that impose a sales tax. Although this can ensure your business remains compliant, human labor typically comes at a much greater cost than software.
Benefit #4: Accurately Monitor Sales Tax Holidays
There are 18 states that held or will hold a sales tax holiday in 2023. Typically, the states publish a very specific list of the items and their definitions, and businesses would be required to keep track of the always changing rules. By leveraging sales tax software, you can simplify the process of navigating these varying rates, jurisdictions, and products. This way, your business always charges the correct amount of sales tax, no matter where your customers are located.
As we move into 2023 and beyond, sales tax complexities continue to evolve. With the right tools and strategies, businesses can successfully navigate challenges in the ever-changing world of sales tax.
Contact us to learn how Zamp can take sales tax off your plate from start to finish— so you can focus on growing your business.
Howard Miller is the Director of Indirect Tax Content at Zamp. As a CPA with 20+ years of sales tax experience, he loves sharing his knowledge of all things sales tax with others. Howard resides in New Jersey with his wife, college age children, and two dogs. Howard enjoys cooking for his family and CrossFit.
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