Wouldn’t it be nice if there were a 1-800 hotline number to call when you need to troubleshoot eCommerce sales tax problems?
Unfortunately, because forty-five U.S. states and Washington, D.C. all have their own sales tax rates, rules, and regulations, there’s no one-stop source for sales tax issues. Thankfully, this post from our friends at TaxJar will at least explain how to go about troubleshooting a problematic sales tax issue.
1. Hire a sales tax professional
When most people think of “tax,” they associate a few other things, like “IRS” and “Certified Public Accountant.” But neither the IRS (which is a federal income tax regulation body) nor a CPA can help you with thorny sales tax problems. In these cases, the professional you are looking for is known as a State and Local Tax Expert (SALT.)
Since state and local taxes include sales tax — and these taxes quite different from income tax — you’ll want to make sure you hire the professional who can actually help you with your problem. Going to a CPA to solve a sales tax problem is a bit like going to a neurosurgeon to treat your sore foot; she may know the basics, but she isn’t quite the right expert.
Of course, tax professionals cost money. As you’ll see later in this article, there are other ways to go about solving a sales tax dilemma. However, it’s especially important to consider hiring a professional when there is a great deal of money at stake.
• Are you worried you may owe thousands in back taxes?
• Have you received a notification from a state?
• Are you under audit?
Those are all instances when hiring a SALT would benefit your business. You can find a vetted list of sales tax experts here.
2. Contact the state in question
Each state’s taxing authority, which is usually called the “[State] Department of Revenue,” has a customer service phone number. A few have even gotten with the times and have an email or online support! (Remember, we are dealing with government services here.) You can find a list of the easiest way to get in touch with each state’s tax department here.
It’s important to keep in mind that you will often be talking to a customer service representative (and not a sales tax expert) when you call a state’s tax department. Still, speaking with a state can be a viable option if you have general questions about state tax procedures or the details of your specific sales tax account with the state. If you do want to ask a question about sensitive information, keep in mind that you can always make your call anonymously.
If you want to go a more serious route, you can also request a “letter ruling” from a state. In this procedure, you lay out the facts of your situation and the state interprets their laws to make a determination.
For example, perhaps you want a definitive ruling on whether the new food you invented is considered a non-taxable grocery item in the state or a taxable prepared food. The state would then take time (often months) to determine the correct ruling in your situation.
The procedure on how to request a letter ruling varies by state, and you will often want the help of a SALT to request letter rulings. It’s also important to note that each letter ruling is made on an individual basis. While states do publish letter rulings, and you may find a previous letter ruling that almost fits your scenario, you’ll want to request your own letter ruling to get an answer specific to your case.
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3. Put on your research hat
If you have time, patience, and a good head for legalese, then you may want to attempt to research your problem yourself. You can look up each state’s code of laws online. Some states also provide FAQs or PDF guides to help answer the most common sales tax questions.
Do keep in mind that, sadly, “I misinterpreted what I read” won’t hold up in case of a sales tax audit. If you are dealing with a question that could seriously impact your business, it’s always a good idea to get a second opinion from a pro.
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4. Attend a webinar or training
While not all states do this, some states provide webinars or video training for retailers. This option is great for sellers who are brand new to sales tax and curious about what your sales tax obligations entail.
The best way to find out if your state has sales tax training is to visit your state taxing authority’s website and navigate to “sales tax.”
Related article: Sales Tax on Shipping Charges Explained for Online Sellers
5. Consult the internet
Last but not least, you can always turn to the digital age way of doing things and perform a quick internet search. As with anything found on the internet, your mileage may vary.
Always remember to vet the sources you choose to consult before taking action on their advice for serious business tax decisions. With that said, here are a few great resources to get your sales tax research started:
Related article: How to Navigate the January Sales Tax Perfect Storm
Hopefully, this post has given you a lifeline to turn to if you ever run into a sales tax problem with your online business. Any questions? Send an email to firstname.lastname@example.org and we’ll get you the answers you need.
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!