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Risky Business: 5 Industries that Raise Audit Red Flags

Posted by Ashley Lemus on Wed, Mar 15, 2017 @ 11:22 AM

States target certain businesses for sales tax audits according to data

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For most companies, the mere idea of a sales tax audit is a daunting prospect, and probably the most common of strategies is a “fingers crossed we don’t get picked” approach. But for certain types of businesses, just doing what you do can be enough to attract the attention of the state auditor.

According to state departments of revenue data, certain industries are at a higher risk of being audited simply based on how sales and use tax regulations impact their business. The more complex the rules, the higher the odds that errors or oversights will happen. These mistakes can be costly – both for states that are missing out on tax revenues and the companies that fall short on compliance.

 

The audit process uncovered

Unless you’ve been through an audit before, you likely have no idea what to expect, never mind why the state is looking at you or why your business has been selected for an audit. Sometimes, companies are chosen at random. But more often, something you are doing (or not doing) in your business has raised the red flag for state auditors.

 

Sales and Use Tax Audits Uncovered, a new report by Avalara and Peisner and Johnson, aims to set the record straight on why some businesses get audited more than others and the behaviors driving these trends. Analysis compiled from real audit data from two of the four Big Four states, Texas and California, and findings from more than 64,000 audits conducted over a 27-year period went into the writing of the report. Some interesting patterns emerged from this data on the types of companies that tend to get audited, the reasons why they get audited, and what activities make them more vulnerable to an audit.

 

For example:

  • 60% of audits target only four industries
  • One-third of audits are now conducted out of state
  • The two most frequently identified audit errors are improperly managing exempt sales and out-of-state purchases

 

 Avalara avatax saves your business thousands in manual tax compliance costs

 

Lax tax practices are red flags

The study found that certain factors, such as audit history and having a high ratio of exempt sales to total sales, led to a higher risk of being audited. While these seem straightforward, other characteristics like industry type are less understood. What exactly is it that puts these businesses in the state auditors’ crosshairs when it comes to tax compliance?

 

For starters, certain tax practices can put any business at greater risk of audit. According to the California Board of Equalization, the top three most frequently seen problems are: 

  • Not charging tax on out-of-state sales
  • Recorded versus reported difference in taxes collected and remitted
  • Not properly documenting tax-exempt sales

 

Which industries are a target

According to audit data, the industries targeted most by auditors are Retail, Food Service, Manufacturing, Wholesale (/Distribution), and Construction. These were ranked in the top five in both California and Texas. It’s likely that these industries attract attention based on the types of compliance errors auditors uncover when auditing these businesses. For example, sales tax nexus was a common hurdle shared among all five of these industries. Not surprising, given that states have vastly changed the definition and thresholds for nexus beyond the physical presence standards.

 

Beyond nexus, audit triggers were more specific to the tax complexities experienced by each industry. For example, product taxability can be especially burdensome for retailers, wholesalers, and food services, especially given how differently states tax different products and services. Use tax and exempt sales tends to trip up manufacturers and construction companies. And drop shipping can complicate compliance for distribution companies. These and other audit triggers are covered in more depth in the report, along with audit profiles and outcomes for each of the high-risk industries.

 

The report also reveals that states are getting more serious about sales tax audits — especially in recouping lost revenues from ecommerce sales — hiring more auditors and focusing greater efforts on audits conducted out of state. What exactly does being caught in non-compliance cost nowadays? According to Wakefield Research, small to mid-size businesses are out approximately $114,000 in taxes, fees and penalties if auditors find problems. It can be nearly four times that amount for larger firms. 

 

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Reduce risk with sales tax automation

While you may not be able to head off a sales tax audit forever, you can make the process far less painful by managing tax compliance more efficiently. This starts with having a clear understanding of your tax obligations and a reliable way to ensure you can comply with them — now and should they change. Tax automation software like Avalara can provide this assurance.

 

Get your free copy of the Sales and Use Tax Audits Uncovered report to learn more about audit triggers, how to avoid them, and how to protect your business against unnecessary tax compliance risk. 

 

We would love to speak with you about how Avalara and Klear Systems can benefit your organization.

Give us a call at (949) 681-8135,
email us at info@klearsystems.com
or complete the form below and we’ll reach out to you.

 

I Want to Learn More!

Tags: Manufacturing, Distribution, Avalara, Sales Tax

6 Most Common Sales Tax Return & Filing Errors Webinar

Posted by Ashley Lemus on Thu, Mar 09, 2017 @ 10:07 AM

Sales tax filing and reporting rules vary between jurisdictions in major ways.

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Each state has unique filing schedules, forms, payment thresholds and other administrative requirements that make staying on top of returns challenging. Following a few best practices can help you avoid costly penalties and fines.

Join sales tax compliance and tax technology expert John Sallese as he explains:

  • Which part of the rseturns process is the biggest area of tax risk
  • How to identify whether your business has “nexus’ and should file in multiple states
  • The most common remittance errors
  • What typically happens when you fail to register

 

Register today for this highly informative webinar, hosted by Avalara, on the 6 Most Common Sales Tax Return and Filing Errors. Space is limited!

 

Register Now!

Date: Wednesday, March 22

Time: 11:00AM PT / 2:00PM ET

Duration: One hour

 

We would love to speak with you about how Avalara and Klear Systems can benefit your organization.

Give us a call at (949) 681-8135,
email us at info@klearsystems.com
or complete the form below and we’ll reach out to you.

I Want to Learn More!

 

Tags: Avalara, Webinar, Sales Tax

Webinar Alert: 5 Reasons Every High Growth Company Stumbles with Sales Tax

Posted by Ashley Lemus on Mon, Jan 16, 2017 @ 04:42 PM

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Is your SMB growing at a high rate but experiencing some difficulties with sales tax?

 

Register now to learn 5 Reasons Every

High Growth Company Stumbles with Sales Tax

Date: Tuesday, Jan. 17
Time: 2:00 PM ET / 11:00 AM PT

Managing sales tax is definitely a challenge many organizations encounter when it comes to growing their business.  That's why it's an important activity to keep on your company's radar.

Join Avalara, an industry leader in Sales Tax preparation, presents the Growth, Change, and Sales Tax webinar as they teach you how to manage sales tax as a growing company should, with minimal effort and complete accuracy.  

 

Gain insight into:
  • 5 activities that put growing companies in tax risk
  • Expert advice from a sales tax expert

 

You'll also be invited to participate in an interactive Q&A with the presenter, as well as receive a free recording and cheat sheet guide.

 

Busy on January 17? Register anyway and you'll still receive the recording—free of charge!

 

Register now

Date: Tuesday, Jan. 17
Time: 2:00 PM ET / 11:00 AM PT

 

New to Avalara? We would love to speak with you about how both
Klear Systems and Avalara can benefit your organization. 
 
Give us a call at (949) 681-8135,
email us at info@klearsystems.com
or complete the form below and we’ll reach out to you.

 

Tags: Avalara, Webinar, Small Business, Sales Tax

5 Successful Holiday eCommerce Promotions

Posted by Ashley Lemus on Mon, Nov 14, 2016 @ 04:09 PM

This Thursday Avalara is partnering with Ecommerce expert Nexternal: A Highjump Company to help you take a break from this busy time of year.  

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Enjoy a delicious brunch while these companies inspire you to push through the holiday season!

 

Avalara, an industry leader is Sales Tax preparation, and Nexternal will share their tricks of the trade that will cover five successful holiday promotions to help boost sales and improve efficiency, bringing you creative ideas to get you fully inspired as you head back to work and conquer the day.

 

 

Date and Time

November 17, 2016

9:00 AM - 11:00 AM

 

Location

Hotel Irvine

17900 Jamboree Road

Irvine, CA 92614

 

 

However, space is limited, so be sure to register and reserve your spot.  And don't forget to bring your teammates!

 

Tags: Avalara, Helpful Tips, Business Management

Avalara Invites You to So Cal A-List Networking & Training Events 

Posted by Ashley Lemus on Mon, Oct 10, 2016 @ 04:37 PM

You're Invited!

 

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Avalara is offering some exciting Southern California A-list events this week,

and they want YOU to join them!

 

On Wednesday, October 12th, The Pelican Hill Resort will be hosting thousands of customers, partners, products specialists, and industry experts to discuss best practices, showcase new products, and provide training for users.  

 

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BUT WAIT, THERE'S MORE!

 

Avalara doesn't just have one, but two events, that they're inviting you to this week.

 

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Join Avalara on Friday, October 14th at the luxurious iPic Theater for a VIP Movie Matinee viewing of The Accountant, an upcoming film by Warner Bros. starring Ben Affleck, at 2:30 PM.

 

Reservations to this private event are first-come, first-served, and space is limited so you definitely don't want to miss out!

 

Avalara is an authority on sales tax for both Sage 100 and Acumatica.

 

New to Avalara? We would love to speak with you about how both
Klear Systems and Avalara can benefit your organization. 
 
Give us a call at (949) 681-8135,
email us at info@klearsystems.com
or complete the form below and we’ll reach out to you.

I Want to Learn More!

 

Tags: Acumatica Cloud-Based Solutions, Sage Software, Avalara, Accounting & Finance

The Definitive Guide to Sales Tax Webinar by Avalara

Posted by Kimberly Tucker on Fri, Sep 23, 2016 @ 12:08 PM

FREE WEBINAR
The Definitive Guide to Sales Tax
Tuesday, October 11, 2016
2:00pm EST / 11:00am PST

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REGISTER NOW


Do you know when a good or service might be considered sometimes taxable?
Do you know the difference between sales tax and use tax?
If the answer is no, you could be due for a sales tax refresher course.

How you can always be prepared for sometimes taxable
Every company has their own way of handling tax, but when it comes to sales tax, even a pro can use a refresher course.

At some point, it's likely you'll come up against the issue of "sometimes taxable" good and services. That's because, as your business grows or changes, your tax obligations change too!  And different states will often have different rules for how they tax or exempt certain products or services.

 

Some of the trickier "sometimes taxable" items include:

  • Apparel and footwear
  • Books, music and videos (including how they're delivered)
  • Food: What it's made of and how it's served

 

Automating sales tax removes that ambiguity.  With Avalara's AvaTax software handling tax determination and calculation for you, you can be always certain you're taxing or exempting every transaction properly. 

 

Join Avalara's Sales Tax Technology expert, Aaron Wilson, as he explains:

  • How to access the correct rate across 12,000+ tax jurisdictions 
  • How to determine which states you owe sales tax in
  • How to determine who's on the hook for sales tax when using a drop shipper

 

 

JOIN US!
The Definitive Guide to Sales Tax?
Tuesday, October 11, 2016
2:00pm EST / 11:00am PST
REGISTER NOW

 

Tags: Acumatica Cloud-Based Solutions, Sage Software, Avalara, Webinar, Accounting & Finance

Sales Tax CPR - Calculation, Product Taxability & Returns Webinar

Posted by Kimberly Tucker on Tue, Mar 15, 2016 @ 07:30 AM

Sales Tax CPR Training 

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A manual sales tax process can affect the very well-being of your business. Not only is the process time and resource intensive, it leaves your business vulnerable to costly audits and fines.  When you find yourself in a tax emergency (or if the process is just too cumbersome to sustain), don’t panic. 

The webinar will offer six simple steps to perform CPR
Calculation, Product taxability and Returns
and you’ll be on your way to tax pain recovery and less risk. 

REGISTER TODAY

Date: Tuesday, March 29

Time: 11:00 AM PT / 2:00 PM ET

Duration: One hour

Cost: Free!


On March 29th you’ll learn:

  • The best way to determine where you have to collect, file and remit tax (nexus)
  • How to manage product taxability issues
  • Everything you need to know about tax exemptions
  • The right way to file
  • The benefits of a sales tax automation solution


Register now
to learn how sales tax automation

can help your business save both time and money.

REGISTER TODAY!

 

 

Tags: Sage Software, Avalara, Webinar

Sales Tax on Vending Machine Purchases? Avalara Investigates

Posted by Kimberly Tucker on Fri, Feb 05, 2016 @ 05:11 PM

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Avalara, an authority on sales tax for Sage 100 and Acumatica, hosts a weekly showcase of what they consider to be "wacky tax" laws. This week they ask the tough tax questions involving our old junk food-harboring friend, the vending machine.

According to wikipedia, the first vending machine was constructed in ancient Egypt.  In this first machine, a coin was placed in a slot on the top of the machine and as a result a set amount of holy water dispensed. This novel invention lead to coin-operated pencil vendors centuries later in China and then Tobacco boxes in British taverns centuries after that. 

sage100_avalara_salestax_potato-chips.jpgFinally in 1888, vending machines were considered a “viable market” in the U.S.  Fast forward to 2016 and the list of things that chan be purchased from a vending machine is shockingly impressive.

From candy and chips in offices to freshly baked pecan pie in Texas and beef jerky in Washington state. In the United States, vending machines typically disperse food and beverages, hot or cold which begs the following:

Question: Can vending machine sales be subject to tax? 

Answer: Definitely!

In actuality, sales and use tax applies to vending machine transactions varies state by state and the line is so its a little more complicated than it seems.

 

Because Klear Systems HQ is in California, we'll start there:

In the Golden State, cold food items and individual hot drinks (aka coffee) are generally exempt from California sales tax when sold from a store location. Candy, chips, cookies, fresh fruits and vegetables, fruit and vegetable juices, and granola bars are also exempt when bought in-store.

With that being said, everything changes when a vending machine gets involved. ALL OF THE ABOVE are subject to sales tax if purchased from an automated box. In short, they are considered “partially taxable. Tax applies to 33 percent of your gross receipts from vending machine sales of cold food products and hot drinks.”

sage100_avalara_salestax_cute-lollipop-fruit.jpgExceptions:

Tax does not apply to the following:

  • Bulk sales of candy and other food items sold from a coin-operated vending machine for 25 cents or less.
  • Sales of purified drinking water dispensed into a customer’s container when the water enters the vending machine through local supply lines.

The full rate of sales tax applies to the following:

  • All carbonated beverages
  • Hot food products (other then hot beverages)
  • Other food products, such as the little aliens featured in Toy Story, are generally taxable
    (California BOE Publication 118).

And now you know!

Thanks for clearing that up, Avalara!

For more information
on Sales Tax Automation
for Sage 100 or Acumatica,
Please contact us today!

 

Tags: Sage Software, Avalara, Accounting & Finance

Tis the Season for Taxes: How to Manage the W-8, W-9 & 1099 Process

Posted by Kimberly Tucker on Tue, Dec 22, 2015 @ 01:00 PM

 

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The new year is less than two weeks away which means its time to prepare and issue year-end 1099s.

January 1, 2016 brings the new law changes from the Affordable Care Act (ACA), which include changes with reporting coverage offering to eligible employees and employees' dependents on Form 1095-C.

Just as companies continue to increase the use of temporary or contract employees, the 1099 reporting responsibilities continue to grow.  Form 1099 compliance is a further extension of a very taxing ecosystem. It is a VERY involved process that can be quite grueling.

Retaining W-9s, validating Tax Identification Numbers (TINs), managing B-Notices and then loading, printing and submitting all of these forms in order to stay compliant is NOT where you want to spend your time in 2016. 

Register for the webinar and learn how to better manage the entire process.


Managing the W-8, W-9 and 1099 Process

Thursday, January 7th 2016

11:00AM - 12:00PM PST

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The topics covered will include:

  • W-8 and FATCA law changes that may affect your business
  • W-8/W-9 and 1099 services
  • How to manage vendors, contract employees and consultants more effectively
  • ACA key requirements for businesses of all sizes

 

Space fills up quickly!
REGISTER TODAY!


Tags: Sage Software, Avalara, Webinar

Avalara's Commitment to Sales Tax Excellence Pays Off on Cyber Monday

Posted by Kimberly Tucker on Fri, Dec 04, 2015 @ 10:29 AM

Tax automation software probably is not something the average consumer thinks about while making online purchases, but it caused a bit of frustration for e-commerce shops last weekend. Although the Thanksgiving holiday is usually a few days of rest and reflection for companies nationwide, this year the engineers at Avalara were frantically busy.

Avalara’s software automates compliance with transactional taxes, including sales tax and value-added tax - all extremely important aspects of ecommerce. However, right in the thick of the Black Friday shopping blitz, Avalara customers suffered some technical problems that forced some retailers to stop charging sales tax to buyers and as a result take a hit to profits.

Geekwire reported the NYC-based company Food52 noticed problems with their Avalara software early last Friday morning and as a result did not charge sales tax on Black Friday, covering the difference out of their profit margin. In an effort to be consistent and fair to their customer base, the company extended the benefit to Saturday and sent an email with this message:

food52tax

 

Though Avalara prepared and tested its systems for several months in preparation for the Thanksgiving weekend shopping frenzy, Avalara admitted that the software did not meet expectations on Friday.

Once the issue was realized, Avalara's engineering team worked non-stop through the weekend to fix the latency problem, which caused server slowdowns due to issues with the processing of customer addresses.


Avalara's Status Report Page outlines the journey:

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As a result of Avalara's swift response and their commitment to excellence regardless of the Holiday, Geekwire reported Avalara had a “perfect processing day” on Cyber Monday and processed a record breaking 63 million transactions - marking more than a 110% increase in transactions from Cyber Monday 2014.

Transactions were handled at an average response time of 0.12 seconds and Avalara processed a peak of 1,800 transactions per second on Monday.

Avalara Executive Vice President of Engineering Peter Horadan told GeekWire "Our software is an important part of our customers’ infrastructure, which is why you saw their reaction [on Friday]. It’s also why we take our effort to meet and exceed their expectations so seriously.”

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No software is immune to bugs or issues but the quick response and excellent work ethic of Avalara's team even over a national holiday weekend is extremely admirable and we are very proud to partner with a company so committed to their customers!

For more information on
Avalara Tax Automation

Please Contact Us Today!

I Want to Learn More!

 

Tags: Sage Software, Avalara