Sales Tax Compliance Guide 2024

Alex Kehayias | Feb 25, 2024

Sales Tax Compliance Guide 2024

As we progress through 2024, sales tax compliance presents challenges and opportunities for businesses across the United States. Whether you’re a burgeoning startup or an established enterprise, understanding and adhering to evolving sales tax regulations is a strategic business necessity.

Changes in sales tax laws, such as amendments in economic nexus thresholds and modifications in marketplace facilitator statutes, have profound implications. These changes reflect the evolving nature of commerce, especially in an era increasingly dominated by remote transactions and digital marketplaces.

What Is Sales Tax Compliance?

Sales tax compliance involves grasping and following the diverse laws and rules established by state and local governments. It’s all about correctly figuring out, collecting, reporting, and paying the sales taxes due on the goods and services a business sells. It’s a vital part of a business’s legal and financial duties.

The impact of getting sales tax right varies widely, depending on the type of business and its size. Small businesses, particularly those spreading their wings, often find the maze of sales tax rules daunting.

The challenges are different but no less complex for larger businesses, especially those operating in multiple states. They have to juggle a plethora of tax laws, each with its own quirks, which can be a significant task.

This gets even more intricate for online businesses and e-commerce players, where transactions span across state lines and beyond.

In any case, dropping the ball on sales tax compliance can lead to fines, legal problems, and even damage to your reputation. It’s essential for businesses to make sales tax compliance a key part of their operating plan.

This is where Mosey’s platform steps in. It eases this burden by keeping you up-to-date with the latest changes in tax laws, streamlining the compliance process through automation and providing expert advice. Automate opening sales tax accounts for your business in any state through Mosey.

Several key trends in sales tax laws are emerging, significantly impacting compliance strategies. Understanding these trends is essential for businesses to adapt and maintain compliance effectively.

1. Economic Nexus and Marketplace Facilitator Laws

The landmark South Dakota v. Wayfair, Inc. decision continues to influence the sales tax landscape. States are refining economic nexus laws, which determine tax obligations based on a company’s sales volume or transaction count within the state, regardless of physical presence.

This evolution is pushing states to reconsider transaction thresholds, with several likely to lower or eliminate them in 2024. Simultaneously, marketplace facilitator laws are being fine-tuned.

These laws require online marketplaces to collect and remit sales tax on behalf of third-party sellers. Initially focused on online retail, these laws are expanding to cover other industries, adding layers of complexity for businesses operating in digital spaces.

2. Retail Delivery and Bag Fees

A notable trend is the introduction of retail delivery fees and bag fees by states and localities. As environmental concerns and e-commerce grow, these fees are becoming more prevalent. Retail delivery fees, already enacted in Colorado and Minnesota, reflect a response to the rising number of online deliveries and their environmental impact.

Similarly, local bag fees, with some states considering statewide implementations, add a new dimension to sales tax compliance, affecting retailers across various sectors.

3. Sales Tax Holidays

Sales tax holidays, periods during which specific items are exempt from sales tax, are increasing in frequency and scope. While popular among consumers, these holidays create compliance challenges for retailers, particularly those operating in multiple states.

The trend toward more extended and diverse sales tax holidays requires businesses to stay vigilant and adaptable in their tax collection processes.

4. New Exemptions and Broadened Sales Tax Scopes

States continually revise their sales tax laws, often introducing new exemptions for essentials like groceries, diapers, and tampons while broadening the tax base to include previously exempt goods or services. This fluctuating landscape necessitates constant vigilance and flexibility in compliance strategies.

5. Home-Rule Sales Tax Complexities

Home-rule states, where local governments administer and levy local sales taxes, present unique challenges. Businesses operating in states like Alabama, Alaska, Arizona, Colorado, and Louisiana must understand a plethora of local tax laws, adding layers of complexity to compliance efforts.

Although efforts are underway to simplify these processes, the road ahead is filled with nuances and intricacies.

6. Technology’s Impact on Sales Tax Laws

Advancements in technology are reshaping the sales tax domain. Digital goods and services, such as e-books and streaming services, are increasingly coming under the purview of sales tax laws, though some states lag in updating their legislation.

As commerce continues to evolve with technologies like digital advertising, the metaverse, and NFTs, tax laws are striving to catch up, presenting both challenges and opportunities for businesses.

In this environment, Mosey’s compliance platform stands as an important tool for businesses. By providing up-to-date information, automated compliance solutions, and expert guidance, Mosey helps businesses navigate these trends efficiently, ensuring that they remain compliant and focused on growth.

What Are the Challenges of Sales Tax Compliance?

Sales tax compliance presents many challenges for businesses, shaped by various factors that add complexity and require diligent attention.

1. Home-Rule Jurisdictions and Their Impact

Businesses face plenty of tax regulations in home-rule states, where local jurisdictions have the authority to set and enforce their own sales tax laws. This decentralized system means a business operating in these states must comply with numerous, often varying, tax laws.

Understanding and adhering to each jurisdiction’s rules can be a significant administrative burden, particularly for businesses with a broad operational footprint.

2. Constant Changes in Sales Tax Laws and Rates

Sales tax laws and rates are in a state of perpetual flux. Legislative changes, court rulings, and shifts in economic policies can lead to new tax regulations or the modification of existing ones.

For businesses, keeping track of these changes across different states and localities is a daunting task, yet crucial for ensuring compliance and avoiding penalties.

3. Compliance with Local, State, and Federal Laws

Sales tax compliance is about understanding state laws and navigating local and federal tax regulations. This layered compliance scope demands a comprehensive approach to ensure that all legal obligations are met, adding to the administrative workload of businesses.

How Are Sales and Use Tax Compliance Different?

Sales and use tax compliance is essential to a business’s overall tax strategy. Sales tax is a tax on the sale or lease of goods and services collected by the retailer at the point of sale. On the other hand, use tax is a tax on the use, storage, or consumption of goods or services on which no sales tax has been paid.

Use tax is typically imposed when goods are purchased from an out-of-state vendor for use in the state and are paid directly by the consumer.

Why Is It Important To Comply With Sales and Use Tax Regulations?

Compliance with both sales and use tax regulations is essential to avoid legal issues and penalties. While sales tax is often more visible, use tax can be overlooked, leading to compliance gaps. Businesses must be aware of when and where use tax applies, especially in out-of-state transactions.

What Are Some Common Pitfalls for Sales and Use Tax Compliance?

Common pitfalls in sales and use tax compliance include failure to recognize taxable transactions, incorrect tax calculations, and lack of knowledge about jurisdiction-specific rules.

Mosey helps businesses manage these challenges by providing an automated platform that takes into account the nuances of different tax jurisdictions, ensuring accurate tax calculations and compliance.

Additionally, Mosey’s resources and expert guidance can help businesses effectively understand and meet their sales and use tax obligations.

How To Register for Sales Tax Accounts

Registering for sales tax accounts is important for businesses engaging in taxable transactions. Begin by researching state-specific requirements, ensuring compliance with local regulations. Most states offer online registration portals, simplifying the process.

Prepare essential documents such as your Employer Identification Number (EIN), business details, and banking information. Access the state’s revenue department website and complete the registration form, providing accurate information to avoid complications.

Be aware of filing frequencies and deadlines, and maintain meticulous records of transactions. Proactive registration ensures legal adherence and facilitates smooth operations, preventing potential penalties and legal issues.

It’s also important to note that if you have an existing account with the state’s department of revenue, let’s say for withholding tax to run payroll, you can likely add a sales tax account with much fewer steps. We recommend taking a look at your existing account before attempting to register from scratch.

Mosey is here to simplify sales tax account registration for you. We automate this step, so you don’t have to worry about the additional legwork. Focus more closely on innovating your business, and let us handle the logistics.

Simplify Your Sales Tax Journey with Mosey

Mosey gives you a comprehensive solution for maintaining sales tax compliance. By automating the process of opening the right sales tax accounts with the state and managing filing deadlines, Mosey significantly reduces the complexity and time investment required for compliance.

Mosey’s platform is designed to be user-friendly and is constantly updated to reflect the latest tax laws and rates, ensuring businesses stay compliant with minimal effort. Embrace the ease and confidence Mosey brings to handling all your compliance needs effectively — join us in transforming your challenges into opportunities for growth.

Book a demo today and take the first step toward effortless sales tax compliance.

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