Sales Taxes for a newbie

MarionOB · ‎09-28-2018

Hi All, I am an accountant for an Irish company that has set up a US company and I'm trying to come to terms with the quagmire of Sales Taxes in the US (and trying to set them up in Quickbooks). We sell Software as a Service so in some states I believe it is not taxable but in other states it is. Other services such as Web Design, etc I am told are exempt also.

My questions are the following :

1. I have figured out how to set up taxable supplies and the sub taxes into a group but what is the situation if it is an exempt supply ? Do I have to get just set it up as zero rated ?

2. If I am setting up a customer who is in a state that shows the supply to be exempt - do I need to get an Exemption Certificate or anything from the Tax Department? even though I wouldn't have any taxable supply to customers in that state ?

3. What about Customers outside of the US ? Do I set them up as an Out of State supply (or is there different terminology generally used in the US)

I am concerned that if I don't set them up correctly to begin with, I will end up finding out that I can run particular reports later to get particular info that might be needed!

Is there anything else I should be away of? Or that I need to research ?

thanks a million

MarionOB

Rustler · ‎09-29-2018

Each state has its own definition of what is taxable and what is not, so you will have to research each state sales tax page to find out what the situation is in that state.

With the recent supreme court decision, sales tax collection, reporting and paying is currently in a quagmire, and there are few definitive answers.

The first issue is the state your company set up in. You will need to register with the state for a sales tax permit, and figure out what instate sales are taxable. Is sales tax reporting in your state on accrual or cash basis, and the state will set the frequency of filing/paying sales tax. Is the state destination based or origin based? destination based means you collect sales tax based upon the jurisdictions for the location the customer is in.

after that refer to this page to see what a quagmire this turing out to be, scroll down to the state by state chart
https://www.avalara.com/us/en/learn/sales-tax/south-dakota-wayfair.html

MarionOB · ‎02-20-2019

Hi Rustler,

Thanks for you reply (and sorry for not coming back to you sooner!)

I am slowly working my way through all the Sales Tax stuff, but Im finding it extremely confusing that we have approx 10 products and it varies by state as to whether they are taxable or not. Thats fair enough, but our accountancy firm wants to charge me $1000 to give me a taxability matrix for each new client/state!! Do you know if Avalara or Taxjar or one of those companies, actually do the research for you if you purchase/subscribe to their software? or does the software merely integrate with Quickbooks and prepare the returns for you ?

Thanks for your advice!

Marion

Rustler · ‎02-20-2019

@MarionOB wrote:

Hi Rustler,

Thanks for you reply (and sorry for not coming back to you sooner!)

I am slowly working my way through all the Sales Tax stuff, but Im finding it extremely confusing that we have approx 10 products and it varies by state as to whether they are taxable or not. Thats fair enough, but our accountancy firm wants to charge me $1000 to give me a taxability matrix for each new client/state!! Do you know if Avalara or Taxjar or one of those companies, actually do the research for you if you purchase/subscribe to their software? or does the software merely integrate with Quickbooks and prepare the returns for you ?

Thanks for your advice!

Marion

Avalara does the work in terms of what tax rates to use. they do not file your sales tax returns for you. just provide the data (taxjar is the same)

with the new sales tax requirements, states have set ceilings, sell so much or so many sales and after that you must register and collect/remit sales tax

https://www.avalara.com/us/en/learn/sales-tax/south-dakota-wayfair.html?CampaignID=7010b000001Y1Na&l...

scroll down for state by state

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