In this blog post we will discuss the importance of knowing your products and customer base in order to properly charge tax to your customers. What is being sold and how your customers will use it are critical elements that drive your tax policy. Planning for product and service expansion during the holiday season and looking ahead for the tax impact ensures you remain in compliance as you venture into new business activities.
How well do you know your customers and products? It’s a question you need to ask yourself in preparation for the fast-approaching holiday shopping season. The accuracy of your sales tax calculations is directly related to your understanding of what you’re selling and who’s buying.
What are you selling? From apparel to software, states differ on how they tax just about everything. The more you know about what you sell, the better equipped you are to formulate tax policies that contemplate the idiosyncrasies of sales tax laws. Your inventory may change in order to support not only the increased volume of holiday shoppers but also their desire to grab that “Flash Sale” or “Black Friday Only” product. Ensuring you’ve accounted for these seasonal items’ taxability is critical.
Who’s buying? While most of your customers may be end-consumers, some may be resellers or even non-profit organizations, possibly exempt from paying sales tax. Since the holiday shopping season may draw many first-time customers to your business, make sure your tax automation solution can support this flood of new customers and account for their exempt status. Knowing who and why your customers are exempt from tax will impact the accuracy of your tax calculations, and, in turn, elevate their customer experience.
How are they using your products? Knowing your customers includes understanding how they’re using your products. If you sell items that are taxed differently based on use, you need a solution for distinguishing between business and personal use, for example.
The more you understand your customers and products, the better equipped you are to create sales tax policies that drive accurate tax calculations. In the rush of the holiday shopping season, you can’t afford to get it wrong.
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ONESOURCE Indirect Tax provides powerful tax automation software combined with the most comprehensive global tax (supporting over 15,800 taxing authorities in the U.S. and in over 180 countries) arming customers with a single tax engine that enforces tax rules and accurately calculates sales, use, and VAT taxes. ONESOURCE Indirect Tax can be deployed in either the cloud or on premise to accommodate companies of all sizes.