PBS™ Distribution: Sales Tax Compliance
This post is for small to mid-sized distributors that are vetting distribution software solutions. We hope you find it useful.
Distributors have faced various challenges this year, and in the midst of business disruptions and uncertainty, compliance management remains crucial to avoiding regulatory penalties.
The 2018 Supreme Court Wayfair Ruling has the potential to encumber small businesses that sell outside of their home state by forcing them to track and comply with a different set of sales tax laws for each state.
Non-compliance with the new sales tax regulations could possibly result in a million-dollar fine or more. Passport Business Solutions™ with AvaTax installed from Avalara can help you.
Sales Tax Tracking and Compliance
PBS™ has extensive sales tax tracking capabilities in AR, OE, POS and PBS Manufacturing CO packages.
We allow each customer to be coded as non-taxable with an exemption number, or as taxable with a tax code that offers five levels of tax jurisdictions and rates.
This has worked well for our customers until June of 2018, when the Supreme Court changed the game in their Wayfair decision and allowed each state to force companies that had no physical presence in the state to collect their state sales/use tax and remit it to the state.
Since that time, sales tax has gotten much more complicated, especially for companies who do business on the Internet or in many states.
Many companies who sell B2B to recurring business customers are still able to use our built-in tax processing as they tend to not have a lot of brand-new customers; once they have set up a customer on our sales tax it just keeps working for them.
But if companies are selling to many new customers on the internet, then they have to look up the tax rates for each new customer. That is where our integration to Avalara comes in. We send sales and shipping details to AvaTax, receive fully calculated taxes, and automatically populate these amounts into your PBS orders.
Penalties, Back Taxes, and Interest
If a company does not collect sales tax for a couple years and then gets audited by the states where they sell a lot to customers, they are liable for the following:
- Pay the uncollected sales tax
- Pay the penalties on the unpaid sales tax
- Pay interest on the monies owed
And the state that is after them cares nothing about them as they are not citizens of that state.
The alternative, by comparison, is pretty simple. Collect the sales tax from your customers and pay it to the state.
We have partnered with Avalara, a leader in cloud-based automation for Sales and Use Tax Compliance to enable tax calculation within our platform that is fast, accurate, and easy to use.