Tax & Accounting Blog

Sales & Use Tax and the 3 Legged Stool

Indirect Tax, Sales Tax Calculation June 4, 2009

When we work with prospective clients, we break sales & use tax down to its basic elements.This helps us understand the needs of the prospect and their specific sales use tax requirements.

In doing this, we like to use the 3 legged stool analogy.Just as a stool needs at least 3 legs to stand, sales & use tax needs at least 3 data elements to be calculated. The 3 data elements are the answers to the following questions:
1.What are you selling?

2. Who are you selling it to?

3. Where is it being consumed?

Now, there are a lot of complexities that we can layer on these questions, but those can only come after we have these answers.If you can answer these questions and you have a means for capturing the answers in your system or business process, then you are well on your way to building your basic sales & use tax process. In my future blogs, we will discuss each of these legs so that we can build our sales & use tax stool together.