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Sales Tax Matrices and Taxability Guides

August.6.2009

Your company may need a sales tax matrix or taxability guide to ensure employees know how to fullfill their sales and use tax duties.  Sales and use taxes are inherently complex, in part, because each state’s rules vary.  This leaves many tax departments ill-equipped to adequately maintain every tax and accounting responsibility.  Sales and use tax requirements do not only concern tax departments as accurate reporting can require the efforts of any employee with the ability to pay a bill or issue an invoice.

Many companies delegate sales and use tax payment and reporting to persons outside their tax departments.  This is often necessary since anyone with purchasing ability or the ability to issue an invoice can cause taxes to be paid or not paid, collected or not collected.  Needless to say, company staff may not perform these tasks correctly.  To reduce mistakes, many companies hire tax consultants to provide opinions and instructional materials that can be followed by their staff.  Tax opinions and a user-friendly sales tax matrix or taxability guide is often the solution.

Companies operating in many states or in areas where tax rules vary are most in need of such services.  A minor error when repeated can become a major issue over time and may have been completely avoided where a tax debt should have been paid by a customer rather than the company.  For instance, Maryland may consider a certain product’s installation to be an installation that becomes part of the real property, while Virginia may not.  The difference can be significant.  One state may require taxes be collected from the consumer while another may require the company to pay the tax on its materials.  This would affect your company’s project bids, your company’s invoicing process, and, of course, the amount ultimately paid the state.  Mistakes can be avoided by knowing each state’s treatment of these repetitively performed projects.

Tax consultants and tax attorneys can provide accurate opinions on each questionable area and for each state where the activity is performed.  Using those taxability opinions as the basis, the tax consultant can then develop a visual  guide by which employees can accurately issue invoices and pay company bills.

Your tax consultant should meet with your company to discover the relevant facts and circumstance surrounding the transactions at issue.  If a tax matrix or taxability guide is desired, then the tax consultant and the company should determine the chart’s necessary scope and depth.  The consultant’s matrix or guide should cite all relevant laws for future use by the company or for audit purposes.  As an additional benefit, the tax consultant may locate substantial refunds during their analysis and may assist you with obtaining the refunds.  A final review of the sales tax matrix may be needed to ensure both its accuracy and is functionality.

Sales and use tax rules have become increasingly complex.  Sales tax opinions or a sales tax matrix can ensure your company and its staff are accurately reporting its sales and use taxes.

For further information or to have a sales tax study performed on your business, please contact Jeff Rogyom at (410) 929-4578.  Please review the Disclaimer page regarding use of this website and its information.

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