Sales Tax Revenue Surge Creates Need for Greater Practitioner Expertise

Currently about USD 400 billion of Sales tax is being collected by the state regulators in comparison to collections of around USD 250 billion in 2003.

Ryan Himmel, chief executive of BIDaWIZ Incorporation (a networking and marketing platform for accounting firms and SMEs) and a CPA is of the view that the growth in sales tax is a result from new business models, technology and complex regulations.

He satated that in order to comply with the sales tax regulations of the state, it is necessary for the companies, irrespective of size, to establish suitable accounting and reporting processes.

Himmel further said that revenue from sales tax is an important constituent of state revenue. As per him, the general sales tax (GST) contributed about 30.1% to the total tax revenue of the state whereas specific sales tax (fuel, tobacco, liquor) contributed 16.3% to the same in 2013. The collections of sales tax has grown over the last decade as regulators make effort to collect each dollar owed to them.

For the purpose of analyzing the sales tax issues faced by SMEs, Ryan Himmel reviewed above 2200 queries related to sales tax which were directed to his team of tax experts over a twelve month period ended on November 30, 2014.

Sales tax queries differed from state to state. For example almost 33% of questions concerning the internet tax were received from California. Himmel noted that this is possibly because of the more complex sales tax regulations for the sellers in California as compared to other states.

Himmel noted that the main concern for clients in New York and Washington was the taxability of products or services. The related sales tax laws in these two states are complex.

The maximum compliance oriented sales tax questions came from California, Washington and New York. Those queries related to the calculation of tax-rates, frequency of filing the tax returns and management of exemption certificates etc.

Mostly the questions were related to the industries like food supplier and restaurants, online sellers, apparel businesses, software development entities, automobile dealers. Himmel said those common things between these industries are vast range of customers, locations and sales channels. Accounting professionals should recognize clients with such sales tax risk profiles and devise a plan or suggestions to address their issues.

Himmel recommended that where the practitioners do not have necessary skills to address related sales tax issues, they can collaborate with a firm or an accountant which can provide the needed services.