september2021 - 7

COVER STORY
SALES TAX COMPLIANCE
compliance or don't know the risks of
non-compliance. And without guidance
from a professional, they don't
know how to become compliant. "
TAX PROFESSIONALS
NEED TO FILL THE GAP
Most small businesses know that
they have income tax reporting
requirements and turn to their
financial advisors for assistance.
But most tax and accounting firms
have traditionally avoided sales tax
compliance services. The survey
shows that only slightly more than
5% of firms provide all sales tax
compliance services for their clients.
If firms get more involved they can
proactively guide their clients back
into compliance. This means a new
service offering for firms, with a
resulting new revenue channel.
New cloud technologies are
making this more achievable for
firms and more profitable, including
tools that help automate the process
of determining which clients need
to file in which states, and then
determining sales tax rates, rules,
deadlines and thresholds.
The survey also showed that
business advisors are starting to
realize the impact of Wayfair on their
own practices, with 55% saying that
firm technology and workflows must
be adapted to be more virtual and
online. And 41% said they need more
cloud-based software to help them
provide these compliance services
to their clients.
OTHER SURVEY FINDINGS
Accounting professionals have confidence
that their own clients, their
firm, and their personal finances will
improve over the next 12-18 months,
but they are pessimistic on the outlook
overall for small businesses and
the U.S. economy in the same period.
Overall, the survey showed that
56.3% of professionals believe that
the outlook for U.S. small businesses
in the next 12-18 months will get
much worse, somewhat worse or
remain the same. But when asked
about the outlook for their own
small business clients, more than
52% believe their situation will get
somewhat or much better.
* 52% think it is more important
than ever to keep up with cloud
technologies
* 45% say clients need to be flexible
and innovative
* 39% say a transition to more online
sales is critical
When nearly 98% of accountants
think the majority of their small
business clients are in some degree
of non-compliance with sales tax
rules, it's way past time to act.
" Companies and firms have the
same challenge, " said Akmakjian.
" What technologies can I leverage to
be more efficient, whether as a small
business or as an accountant providing
business services and guidance
to those businesses? "
The answer is cloud-based technologies
that simplify and automate
the management of the entire sales
tax process, so that accounting
firms can knowledgeably guide their
clients through compliance. ■
opted to apply sales and use tax to certain digital products.
This should come as no surprise. When people couldn't go
to concerts, movies, shows, or brick-and-mortar stores
- or even visit with family and friends - consumption
of digital goods and streamed content surged. States that
taxed those revenue sources faired better than those that
didn't.
The same holds true for the states that had economic
nexus and marketplace facilitator laws in place.
Final holdouts pass remote sales tax bills
Ecommerce has comprised an ever-growing portion of retail
sales since its inception two-and-a-half decades ago, but its
use exploded during the pandemic. Though sales through
all other channels declined when the coronavirus confined
us to our homes in 2020, ecommerce grew by 44%. The
few states unable to tax online sales by companies with no
physical presence in the state were at a clear disadvantage.
The economic impact of the pandemic on sales and use
tax collections likely contributed to the relative ease with
which Florida passed an economic nexus and marketplace
facilitator law this year. The Sunshine State started taxing
remote sales and requiring marketplace facilitators to collect
and remit taxes on behalf of third-party sellers on July 1,
2021. Missouri Governor Mike Parson followed suit, with a
new marketplace facilitator reporting requirement that takes
effect starting in 2023. Florida and Missouri aside, states
have been remarkably quick to respond to the Supreme
Court of the United States decision on South Dakota v.
Wayfair, Inc. Just three years after the pivotal sales tax ruling,
nearly every state in the Union is taxing remote online sales.
Europe levels the playing field
American states aren't alone in amending their laws to
account for ecommerce and marketplace sales. To help
level the playing field between local brick-and-mortar and
remote online businesses, the United Kingdom overhauled
its value-added tax (VAT) rules for ecommerce: Online
retailers selling to consumers in the U.K. had to comply
with new VAT calculation and collection obligations as of
January 1, 2021, and online marketplaces are responsible
for the VAT on certain third-party sales. Similar reforms took
effect throughout the EU during the summer as a result of
the 2021 EU ecommerce VAT package.
These changes should also help reduce tax evasion,
which is rampant in Europe.
SEPTEMBER 2021 ■ www.CPAPracticeAdvisor.com
7
U.S. to crack down on tax evasion
The U.S. has a different plan to crack down on tax evasion.
Presidenwt Joe Biden wants to give the Internal Revenue
Service an extra $80 billion to hire additional employees and
get serious about rooting out tax scofflaws. His plan also
calls to improve technology that can help the IRS identify
tax evasion.
Whether new zeal for tax audits trickles down to the
state level remains to be seen. It could depend in part on
what the IRS finds if it undertakes this plan.
You can read the full 2021 report at https://tinyurl.
com/95c9epwn. ■
Gail Cole is a Senior Writer at Avalara.
She's on a mission to uncover unusual tax
facts and make complex laws and legislation
more digestible for accounting and
business professionals.
https://www.tinyurl.com/95c9epwn https://www.tinyurl.com/95c9epwn http://www.CPAPracticeAdvisor.com
september2021

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