This is the first in a series of 11 posts that will be posted here within the next couple of weeks.
Sales tax is a critical source of revenue in 46 states (North Dakota, New Hampshire, Montana, Alaska, and Delaware don't have sales tax). Other than property and income tax, sales tax is the largest source of state tax revenue, and one frequently leveraged to fill budget gaps.
Calculating, collecting, and remitting sales tax is not only good business, it is a legal obligation placed on merchants by the states in which they conduct business. Doing it properly is not only an obligation, it's the best defense against hungry state auditors.
The tactics needed to survive sales tax in 2015 require preparing for the worst (audit) while achieving the best (streamlined sales tax processes).
Whether a company has a sales tax obligation is the crux of the sales tax challenge. There are approximately 11,000 jurisdictions within the U.S. and 100,000+ rules changes annually. That's a daunting set of variables few manual systems can handle. The connection between a company and a state, in which the company acts as an agent of the tax authority and collects and remits accordingly, is called "nexus." In addition to a significant physical presence such as a warehouse or headquarters, nexus can also mean a virtual connection. Large online retailers such as Amazon and Overstock now collect sales tax in states in which they have neither distribution centers nor warehouses. Many online retailers and other remote sellers are not currently required to collect sales tax in states where they have no physical presence. But states struggling to recover from economic recession see this uncollected tax as a major source of potential revenue.