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6 Tips to Audit-Proof Your E-commerce Business

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6 Tips to Audit-Proof Your E-commerce Business

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No one wants to face a tax audit. So how can you prepare your business to avoid scrutiny? We present 6 tips to make sure you business is in top shape to avoid a sales tax audit. Originally presented as a webinar by Susan Petracco from AccurateTax and Zeph Dumlao from Miva Merchant on June 17, 2014.

No one wants to face a tax audit. So how can you prepare your business to avoid scrutiny? We present 6 tips to make sure you business is in top shape to avoid a sales tax audit. Originally presented as a webinar by Susan Petracco from AccurateTax and Zeph Dumlao from Miva Merchant on June 17, 2014.

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6 Tips to Audit-Proof Your E-commerce Business

  1. 1. 1 2LOREMIPSUM DOLORSIT AMET, CONSECTETUR ADIPISCINGELIT. MAURIS Determine Your Nexus Nexus is a seller’s minimum level of physical presence within a state that permits a taxing authority to require a seller to register, collect and remit sales and use taxes. - Marcum LLP
  2. 2. 1 2What activities can create nexus? Determine Your Nexus  Home office / satellite offices  Remote sales people  Trade shows  Using a drop-shipper or fulfillment house  Having an affiliate program
  3. 3. 2 2For Each State Where You Have Nexus: Learn the Tax Laws  Sourcing rules  Special tax rates for certain products  Product thresholds  Sales tax holidays
  4. 4. 2 2 Cheat Sheet Learn the Tax Laws We provide links and information about sales tax for each state in our sales tax reference section at: http://www.accuratetax.com/sales-tax-information/
  5. 5. 3 2Three Most Common Options Configure Miva Merchant  State-based Sales Tax  Zipcode-based Sales Tax  Hosted Sales Tax Service like AccurateTax
  6. 6. 3 2State Based Sales Tax Configure Miva Merchant  One rate per state  Items can be taxable or non-taxable  Shipping charges can be taxed or untaxed  Suitable if every state you have nexus in has a single tax rate regardless of product or shipment  Examples: Michigan, New Jersey
  7. 7. 3 2Zipcode Based Sales Tax Configure Miva Merchant  Tax rates are broken down by 5-digit zipcodes  Requires a third-party module and management of tax rate data  Suitable if every state you have nexus in defines tax rates by 5-digit zipcode boundaries  Example: Nevada comes close but no states really do this any longer.
  8. 8. 3 2Third-Party Sales Tax Service Configure Miva Merchant  Sales tax module communicates with an online service to determine boundary (shipment location) and tax rate data  Rate and/or tax amount returned to cart and charged to customer  No need to manage your own data  Examples: California, New York, Florida, Washington
  9. 9. 3 2Which Option to Choose? Configure Miva Merchant  Determine based on states where you have nexus and the complexity of their tax law  Consider the cost of time spent managing data versus a turn-key solution Add-on services might be beneficial, such as account setup, reporting, remittance, and exemption certificate management
  10. 10. 4 2Automatically Record Sales Keep Detailed Records Record your sales in an accounting package. Automation (such as Miva Synchro and Quickbooks) saves time and prevents copy-and- paste errors Make sure each order reflects the correct sales tax amount and which state the tax should be remitted to Use Quickbooks reports to assist with filing
  11. 11. 4 2Remember Cancellations & Returns Keep Detailed Records  Mark cancelled orders as soon as possible  Properly account for returns  Accurate bookkeeping will help minimize the need for amended returns
  12. 12. 5 2Why Should You File on Time? File Returns on Time  Filing late makes it more likely that the government will inspect your business and returns  Filing late incurs fees, penalties, and/or interest
  13. 13. 5 2How to Stay on Track File Returns on Time Keep a calendar of due dates If you file electronically, print a copy of your receipt or confirmation number and note the date/time submitted
  14. 14. 5 2How to Stay on Track File Returns on Time Make sure paper returns are postmarked by their due date Don’t forget to include a check with your account number
  15. 15. 6 2Taxes Change, and So Should You Adapt to Changes  If you’re maintaining rates using state- or zipcode-based sales tax modules, make sure to keep your rates updated
  16. 16. 6 2Taxes Change, and So Should You Adapt to Changes  Pay attention to any new activities that could create a nexus in a new state: starting an affiliate program, adding a drop-ship vendor, adding/changing fulfillment companies
  17. 17. 26 Tips to Audit-Proof Your Business Review 1. Determine Your Nexus 2. Learn the Tax Laws 3. Configure Miva Merchant 4. Keep Detailed Records 5. File Returns on Time 6. Adapt to Changes
  18. 18. Find this presentation online at: http://www.slideshare.net/accuratetax/ Questions & Answers @AccurateTax facebook.com/AccurateTax Email: info@accuratetax.com Call us at 1-866-400-2444

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