Manufacturers face sales tax risks at many points along the supply chain. Whether selling to retailers, directly to consumers, or supplying wholesalers and distributors, the unseen costs of errors in sales tax management can decimate the bottom line. In Part 1 of this article, we’ll look at one example along the supply chain that pose sales tax risk, and what manufacturers can do to address it.
Selling to retailers
Problem: For manufacturers selling directly to retailers, the main challenge is effective management of exemption certificates. After all, errors managing exemption certificates are one of the primary causes of a sales tax audit.
It is incumbent on the manufacturer to store and file these certificates and supply documentation to the correct taxing authority. Common mistakes include simple things like a missing signature, or incorrect name or address. Or, more significantly, filling out the wrong certificate and filing with the wrong state, or using expired certificates.
Solution: The management of accurate exemption certificates can be a thorn in the side of even the most well intentioned tax accountant. By automating the process, manufacturers stand a better chance of answering confidently when the auditor comes knocking.
Check back for more in part 2 of this article in which we’ll discuss selling directly to customers. Until then, learn more about sales tax risks in the Exemption Certificate Survival Guide below.