Regardless of what type of business you’re in, one thing is certain – you’re going to pay taxes. And if you’re going to pay taxes, it’s important to be able to track and report them so your payments are accurate, not only at the state and federal levels in the U.S., but also in any countries where you might operate a subsidiary. The process can be complex, but a robust ERP solution can help you manage the process, making tracking, reporting and paying your taxes simple and accurate.
Talk to anyone in a company’s finance or accounting department, and they’ll tell you dealing with sales tax is one of their biggest headaches. Many companies rely on data pulled from multiple spreadsheets and cross their fingers that the tax rates are current. It’s risky and opens the door for human error and inaccuracies. An integrated, centralized ERP system saves you time and money and provides you with the opportunity to use your finance team’s time more effectively. You’ll realize how easy it can be to access the transactions that determine your taxes rather than manually searching through spreadsheet after spreadsheet.
Determining Your Sales Tax Obligation
Sales tax obligations apply to all sellers, regardless of business size or business model. Whether your business is large or small, and whether you operate from a bricks-and-mortar location or through an online shopping cart, you must follow the same sales tax rules. Additionally, sales tax rules apply regardless of order method, whether an order is received in person, called in by phone (or mailed or faxed) or electronically submitted through an e-commerce shopping cart.
In the U.S. there are a number of factors which determine whether an item is subject to sales tax:
- Nexus, also known as sufficient physical presence, is the determining factor of whether an out-of-state business selling products into a state is liable for collecting sales or use tax on sales into the state. Nexus is required before a taxing jurisdiction can impose its taxes on an entity.
- Is the item taxable or not taxable? Food isn’t taxable. But books and motorcycles are. Which applies to you?
- Is the customer taxable or not taxable? This is important if you’re selling to a church or other tax exempt organization.
- If you sell and ship taxable goods or services to customers located in other states that impose a general sales tax, then you must determine whether you have established nexus in that state. If you are deemed to have nexus, then you are required to collect that state's tax on all taxable transactions into that state.
How it Works
When you sell an item, a customer’s order, quote and sales order must examine the customer and their ship-to information and determine whether the item will be taxable, and if so, at what rate, to properly calculate the tax due. A robust ERP system can maintain all of the necessary information for this complicated process. Current tax rates are automatically loaded and updated. No one on your team will spend valuable time manually entering hundreds of different tax rates.
With the push of one button, you can calculate, report and pay your sales tax liability.
Around the World
Doing business in another country? A robust ERP system can accommodate international taxation as well. Whether you’re in Canada, Mexico or a European country, your taxing needs are supported.
The U.S. and Canada require a report showing your sales, percent of sales that is taxable and the tax you owe. This one page summary fulfills your reporting requirements. However, many Central American and European countries require tax audit files, which are essentially an export of your entire general ledger in a specific format for auditing purposes. Countries want to ensure businesses are correctly reporting their taxes. Many ERP systems don’t provide these tax audit files, so be sure the system you’re considering offers this critical feature.
Regardless of whether you’re calculating VAT, GST, PST or other taxes, an integrated system will make the necessary calculations for more than 40 countries. Calculate, report and pay – all with one click.
Electronic Capability Anywhere in the World
One final consideration for your robust ERP wish list solution: the ability to submit electronically to most countries. Many countries are moving to electronic tax filing. Make sure you will be able to take advantage of this benefit through your ERP system.
An Integrated Solution
Sales tax is one of the most complicated aspects of doing business. It’s no wonder companies are seeking simpler solutions to address their tax concerns. An integrated ERP system makes it simpler, providing the ability to calculate, report and electronically pay your tax liabilities in more than 40 countries around the globe.