Sales tax can be a complex issue for startups. A lot of founders don’t know when or where they should be registering.
At the same time, not complying with the state tax laws can create penalties, interest, and waste a lot of time trying to get things fixed. That’s why the Kruze Sales Tax Team will evaluate your Sales Tax exposure and tell you which states to register in for sales tax. Remember, even SaaS companies may be responsible for paying sales tax. Then we’ll do the registrations and the regular filings after!
We’re big fans of educating our clients so we put together this list of ten reasons why a startup should consider whether to register for sales tax:
- Physical nexus: If a company has sales in a state where it has a physical nexus, such as an employee or a warehouse, it must register to collect and remit sales tax in that state.
- Economic threshold: Many states have an economic threshold, typically $100,000 in sales or 200 transactions, that triggers the obligation to register for and file sales tax returns.
- Compliance with state laws: Registering for sales tax can help businesses comply with state laws, which may require them to collect and remit sales tax even if they have a small amount of sales in the state.
- Anticipated fast growth: If a company anticipates fast growth, it may want to register for sales tax in advance to avoid penalties and interest in the future.
- Resale or exemption certificates: Some states require a company to register for sales tax before they can obtain a resale or exemption certificate, which can help them save on sales tax costs.
- Avoiding penalties and interest: Failure to register to collect and remit sales tax in a state where a company has nexus can result in significant penalties and interest.
- Building customer trust: Registering for sales tax and collecting it from customers can help build trust with customers, who may be more likely to purchase from a company that is transparent and compliant with state laws.
- Streamlining operations: Registering for sales tax can help streamline a company’s operations by automating the collection and remittance of sales tax, reducing the risk of errors and minimizing administrative burden.
- Protecting against audits: Registering for sales tax and maintaining compliance with state laws can help protect a company against audits and inquiries from state tax agencies.
- Staying ahead of the curve: Sales tax laws and regulations are constantly changing, and registering for sales tax can help companies stay ahead of the curve and ensure compliance with current laws.
Kruze’s Sales Tax Team is here for you. Got a sales tax notice you need help with? Even if you just want to ask questions and aren’t ready to do a Sales Tax Nexus evaluation yet.