Have you ever heard of the 80/20 rule? It states that 80% of effects come from 20% of causes. It’s often applied to small business to theorize that 20% of your efforts create 80% of your profit. What does that mean for the other 80% of your efforts? While they may be necessary, they aren’t going to put money in your business bank account.
One of those “80% tasks” is dealing with sales tax. While nearly every retailer is required to collect and remit sales tax, doing so isn’t profitable. At the end of the day, you won’t see a bigger bottom line because you file your sales tax return correctly and on-time. What if you could get rid of this particular “80% task” and focus more on the 20% of your time that brings home the bacon? These 5 signs will help you determine if it’s time to automate your business’s sales tax efforts.
1. You don’t have enough hours in the day
As your business grows, your time grows more valuable – and more limited. To make matters worse, your sales tax compliance grows more complicated the more money you bring in. As your make more revenue, your state will ask you to file sales tax more often. And as your business grows in complexity, you’ll likely be required to collect sales tax from buyers in ore states – which means exponentially more sales tax filing. It’s a Catch-22 – just as you have less time to spend on sales tax, it demands more of your time!
If you already don’t have enough time in the day to spend on profitable tasks, then it may be time to automate complex, unprofitable sales tax.
2. You’re constantly paying sales tax late fees and interest
It’s not easy to get into a routine when filing and paying sales tax. First of all, states generally want you to file sales tax either monthly, quarterly or annually. This hinges on your sales volume. The more sales tax you collect from buyers in a state, the more often they’ll want to hear from you.
Also, every state’s sales tax filing due dates are slightly different. Many state sales tax due dates fall on the 20th of the month after the taxable period. But others fall on the 15th, the 23rd, 25th or the last day of the month. Or even on some other date! So, if you have sales tax nexus in three states, you may pay monthly on the 20th of the month, quarterly on the last day of the month, and annually on the 25th of the month. You can see why it’s so easy to forget a filing or file late.
Unfortunately, states aren’t forgiving of late filings and will charge you a late fee plus interest on the amount of sales tax you should have remitted. If you keep scrambling to file sales tax at the last minute or needlessly paying sales tax late fees, it’s time to try sales tax automation software.
3. You’re a big picture person
Sales tax is all about the small details. When filing your return, most states require that you fill in how much sales tax you collected in each and every county, city and special taxing district. This means first parsing each sale and figuring out which district (or districts!) your customer fell into. Then this means you may literally enter “.03” in one box for a county, and “1.41” in another box for an agricultural district, and so on. Worse yet, some states make you round your numbers up and down. That’s all well and good, until you hit “submit” at the end of filling out your sales tax returns and get a big red error message. Then you must go back and try to figure out where your calculations went wrong.
If you’d rather focus on your grand vision for your business rather than nitpicky dollars and cents on a sales tax return, it’s probably time to automate your sales tax filing.
5. You aren’t claiming your sales tax discounts
About half the states with a sales tax will allow retailers who file sales tax on time to keep a small percentage of the sales tax they collect. While this amount is generally very small – 1-2% of the sales tax you collected – it’s free money and you shouldn’t send it to the state when you could have kept it. When you AutoFile your sales tax returns with TaxJar, you always get to keep your sales tax discount. Don’t leave money on the table!
5. You simply don’t want to file another sales tax return. Ever.
I’m willing to bet that you started your business to realize your dreams and assert your independence – and not to spend time on boring, tedious and repetitive tasks like sales tax. (Well, unless you’re a sales tax accountant.) If you simply don’t ever want to deal with sales tax ever again, you can automate your sales tax returns and take this task off your plate!
If any of the above scenarios sound like you, it may be time to let technology take care of sales tax for you.
If you have questions about sales tax, check out our Sales Tax 101 for Online Sellers Guide or ask a question of 9,000+ online sellers and sales tax pros in our Sales Tax Community on Facebook!
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TaxJar is a service that makes sales tax reporting and filing simple for more than 10,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!