Sales & Use Tax Research: How To Do It Right

The following is a guest post by Diane Yetter, founder of the Sales Tax Institute. I am excited to publishing Diane’s second guest post here at The State and Local Tax “Buzz”.  In today’s post, Diane offers her insights on why thorough sales tax research is important, as well as some helpful tips on how to successfully conduct a sales and use tax research project.  You can read more about Diane and the Sales Tax Institute at the end of the post.

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Sales & use tax research can be a daunting project, whether you’re determining your sales tax nexus in one state or 50.  But it can be done – and actually, it MUST be done to be sure your company is in compliance. Here’s how you can get accurate results in an efficient timeframe (notice I didn’t promise it would be a quick process).

1. Make sure you can identify all of the specific taxability scenarios to be evaluated. If a large number of cases are being evaluated, you may want to organize them into groups that have the same facts. It is much more efficient to research all your issues within a state at the same time.  Make sure to use existing knowledge as a starting point for researching the new scenarios.
2. With that foundation set, you can start your research. Now, you should look for provisions in all types of sources. For example, if you are researching what activities create nexus, the statute and regulations might not be clear or on point.  You may find a letter ruling or court case that is more specific to your facts. 
3. Come to a conclusion for your facts. Your research should help you to determine the answer to your question. But it’s important to also identify under what circumstances this conclusion might change. Make sure to retain copies of all research that you used in making your decisions.
4. The final step in a sales and use tax research project is to communicate your results with the appropriate staff members, and then take the necessary action steps based on your research.

And remember, once you’re finished with your sales and use tax research project, you’re not finished with research projects like this forever. Tax laws change and evolve over time, so it’s important to continue to track hot topics that may affect your business down the road.

More about our guest blogger:  Diane Yetter is President and Founder of YETTER, a sales tax consulting firm, and a strategist, advisor, and renowned speaker in the field of sales and use tax. A highly regarded tax professional, Diane was recently named one of AccountingTODAY's 100 Most Influential People in Accounting.  Diane is also Executive Director of Sales Tax Institute offering sales and use tax classes and training.   

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Missed the last State and Local Tax "Buzz" post? Catch it here:

"Massachusetts Joins List of States Offering Relief to Certain Taxpayers Affected by Hurricane Sandy"

Missed Diane Yetter's previous State and Local Tax "Buzz" post? Catch it here:

" 'Clouding' the Sales Tax Issue"

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