Managing exemption certificates to document sales tax exempt transactions is potentially one of greatest liabilities found in a state sales tax audit. Proper review and storage of exemption certifications can eliminate sales tax audit liabilities and reduce audit cycle time.
Knowing when to collect resale or exemption certificates, how to properly review and validate them, and what means to store them are fundamental keys to efficient state and local sales tax audit defense. A software that can digitally store data and images of fully vetted exemption certificates is essential for US taxpayers. Allyn provides US exemption certificate management solutions powered by our software.
Items to consider in the solution:
Businesses that sell for resale, in wholesale markets, or to exempt entities must operate within multistate sale and use tax compliance obligations. Tax professionals need to understand critical issues related to requirements for ensuring sales tax exemptions and obtaining exemption certificates.
When a sale occurs, businesses with nexus, must either charge applicable sales tax to the purchaser or accept a properly executed exemption certificate to exempt the transaction from sales tax. As each US state sets its own rules for exemption or resale certificate requirements, diverse complexity exists for the tax professional in clearly discerning compliance requirements of each transaction.
Several US states accept other states’ exemption certificates, several accept a multi-jurisdiction certificate or Streamlined Sales Tax certificate, and some differ in their treatment of sales made to exempt organizations and government agencies. Accepting the correct certificate form is essential for audit defense.
For a certificate to be properly completed and valid, it must contain the following key elements at a minimum:
Any missing fields could jeopardize the exempt nature of the sale and result in a sales tax audit liability if not rectified. The best time to ensure a fully completed exemption certificate is received and stored is at the time of the transaction.
A business can minimize its sales tax audit exposure, reduce current audit liabilities, and improve tax compliance by utilizing a standard process coupled with a digital solution for the collection, verification, and storage of exemption certificates. Allyn offers CERTlocker as a complement to our Exemption Certificate Management services.
Allyn also offers full service end to end management of the exemption certificate process including obtaining certificates, verifying completeness of certificates, capturing key data from the certificate and customer, and digitally storing the certificate and date in a secure, web-based portal for client access and audit use.
For more information, please visit our Tax Publications, Tax Resources, and Tax Technology. To contact us about Allyn Tax Exemption Certificate Management Solutions, please enter your contact information below or directly email Tax@allynintl.com.