Are You Ready for the Risks of Sales and Use Tax Errors?

It’s a great time to be a consumer, especially someone who is not only frugal but tech-savvy as well.  However, that means it is a challenging and risky time to be providing goods or services.

Today’s shoppers can use tools such as smart phones to scope out good deals and make sure they are charged properly. It is much easier to come to this realization while in the store, instead of the traditional way where they go home, realized there was a mix-up in their receipt, and then returning to the store.

Businesses that aren’t prepared for this type of vigilance expose themselves to serious risks.

Bar-code tagging has made it easier for items to ring up at the same price they are displayed as on the shelf. But things get complicated when sales tax must be added at a final transaction. Due to a complex tax code that keeps being updated, there can be slight modifications in the formula that municipalities must follow when setting their tax rate. Retailers that accept internal coupons as well as manufacturer coupons make rates even more confusing.

And even if you might want to declare “close enough,” the modern shopper may sometimes know how much they should be charged. And instead of politely pointing out your error in overcharging or undercharging, they may connect with other customers and create a class-action suit.

What could be an easy fix within your financial management system or at least a “teachable moment” to show that you try to do the right thing, can now turn into a messy court action involving lawyers and potentially a huge financial pay-out if you’re found liable for incorrectly calculating these amounts.

Consumer awareness groups – as well as business associations – are beginning to acquire stories of taxation gone wrong – or right, depending on your perspective. For instance, a customer in Pennsylvania filed a federal class-action suit against Wal-Mart alleging that he was overcharged on his tax when he used a double coupon to buy shaving cream – to the tune of 21 cents. The case was later moved back to Pennsylvania court. Though the simplest solution would be to credit him that amount and be done, he and other supporters are quick to point out that the whole local and state taxation systems need to be adjusted.

But businesses don’t have to face this risk – especially smaller ones that may not have the resources as the world’s largest retailer.

Businesses can take advantage of a program like Vertex SMB Tax Central which helps improve financial and legal compliance for taxation. It uses the data you enter from Microsoft Dynamics GP, NetSuite, or Sage 100 system to inform you about accurate taxes for directly purchased and shipped items.

It keeps a detailed history of transactions, including whether something was charged or declared exempt, and what tax rate was applied.

Even better, the program automatically adjusts when new taxation information is announced from different taxing authorities.

Sources:

https://www.huffingtonpost.com/2013/07/25/walmart-tax-overcharge-class-action-lawsuit_n_3653608.html

https://www.bna.com/sales-tax-slice-b17179922348/

https://ww2.cfo.com/accounting-tax/2015/02/inaccurate-sales-tax-calculations-spur-class-actions/