Answer: All of them. Any number of scenarios like these can change your consumer use tax obligations.
Certain industries, like manufacturing, construction, and hospitality, often face even greater risks of noncompliance because the use tax rules for these businesses are more complex and can vary from state to state.
These industries may also see more companies making use of direct pay permits, which means the purchasing company takes on all the responsibility to self-assess consumer use tax.
Regardless of size, organizations tend to manually manage consumer use tax using spreadsheets.
This is a laborious process with many manual steps. Check invoices carefully. Are tax rates correct? Compare tax on the purchase order to tax on the invoice. Are they the same? Be sure expense reports include sales tax for any taxable transactions. If the sale is exempt, reference a valid resale or exemption certificate. Auditors tend to zero in on invoices that don’t show sales tax and will request proof that you paid tax.
Many Accounts Payable departments fail to take the few seconds to capture the sales tax paid by vendors when invoices are electronically captured, which makes proving that tax was actually paid much more difficult.
All this is essential to prove compliance. It’s also incredibly time-consuming.
Given these hurdles, it’s not surprising businesses drag their feet, or even worse, simply ignore consumer use tax. However, trying to go unnoticed by state auditors or hoping that penalties for noncompliance won’t be too steep aren’t sound strategies. Failing to properly assess consumer use ranks in the top five for costliest compliance mistakes made by companies.
Managing tax manually isn’t efficient, which is why so many companies now automate it. Consumer use tax has largely been left out of that equation.
AvaTax helps thousands of customers more accurately calculate sales and use taxes based on regularly updated tax data. Businesses of all sizes can achieve compliance with sales and use, excise, VAT, GST, and other transactional taxes for their products and services. Plus, AvaTax integrates easily into your existing business systems and uses a simple transaction import process to manage your data.
And AvaTax for Accounts Payable is your key to getting use tax right. It works with the other applications in AvaTax to reduce risk and keep your business operating more efficiently, so your team can spend more time on revenue-generating business activities and less time puzzling over complex tax questions.
AvaTax for Accounts Payable is a reliable, verifiable, and scalable way to assess and report the consumer use tax you owe. It goes beyond facilitating compliance and provides you with a strategy to manage your consumer use tax state audit. Plus, AvaTax for Accounts Payable integrates easily into your existing business systems and uses a simple transaction import process to manage your data.
With Avalara AvaTax for Accounts Payable, you can:
- Save time and reduce tax errors in one centralized environment
- Identify over- and underpaid tax on your purchases and apply the correct tax
- Avoid fines and fees by automatically applying the tax owed on your returns
So what are you waiting for?
Learn more about Avalara AvaTax for Accounts Payable today or contact your Avalara representative and see how easy it can be to tackle use tax (and redirect resources toward revenue-generating business tasks).