Tax & Accounting Blog

Sales Tax – what’s the big deal?

Indirect Tax, VAT-GST Management May 12, 2010

I love my job because I get to work with different companies.  My job is to help them build a sound sales and use tax foundation.  I often hear many of these companies are surprised to learn how complex this foundation can be.  That’s because the process sounds simple: take an item cost and apply a sales tax rate to it.  Then you calculate the sales tax and add it to the invoice.  Boom – you’re done, right?  I wish it was so, but NO!

Let’s use an analogy of building a house.  In many ways building a solid sales tax and use tax foundation is as complex as building a house.  While a house is a simple concept, there are millions of pieces in it.  These pieces range from big things such as roof beams, to siding, to flooring, to little things like nails, screws, shims, etc.  This is the same as building a solid sales and use tax foundation.  It starts with big pieces like accounting systems, business processes, item descriptions, cost, to little pieces, like ship to addresses, ship from addresses, customer exemption, invoice structure, contract relationships, etc.  Wow, I could go on forever.   

In order to build a solid sales tax and/or use tax foundation, you have to focus on all of the pieces.  You can’t leave anything out.  If you do, your tax foundation could crumble.  It would be like a house built without nails; it, too, will crumble.  That’s why I spend a lot of time understanding your sales tax and use tax needs.  I also focus on the business structure and internal processes.  I ask a lot of questions, so that we can build a solid foundation that will hold up no matter what the weather may be!