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Your startup probably doesn’t have much expertise on tax compliance.
Your startup should probably do something about that. Like, now.
Let’s say you’re a Silicon Valley-based startup with a cool new solution for selling movie and event tickets online. Odds are, your sales efforts will start locally. If you get your first sale in San Mateo County, you need to remit sales tax in that county. Simple right? Sure, until you start scaling.
Follow the bouncing ball.
“Movies fall under different tax rules than say sports tickets, concerts or digital downloads,” says Lisa Serwin, chief financial officer of VentureBeat. “So you have to understand from a tax perspective each business area that you’re in,” she says, adding that things get even more complicated when you start selling in different counties, states and nations.
“For example, if you go to a movie in Florida, that ticket is subject to an admissions tax. The same is true in Texas. But if you go to a movie in let’s say Maryland, that tax does not apply,” she explains. “So, if you don’t collect a tax you’re supposed to, you can be on the hook for that remittance later on. The same goes for collecting tax you’re not supposed to. How would you even go about refunding the tax on thousands of tickets that you’d wrongly collected and what kind of financial impact would that have on your business?”
Get it wrong, just once, and you’re staring down the barrel of an audit. Have a problem with one audit, one time and tax audits can snowball into a distracting and unpleasant financial lifestyle for your startup.
“If you get audited early-on in Santa Clara County and there’s a problem, you’re probably going to have more problematic audits in other jurisdictions down the road.” says Serwin. “So, if you can get off to a clean start with your tax compliance, your life will be easier.
With that in mind, here are four tips from Serwin to get your startup’s tax compliance off to a good start.
1. Think about your finance team earlier.
In the early days of your startup, your human resources emphasis will likely be on engineering, product and sales talent. But paying attention to the composition of your finance team is equally important. If you don’t get the right team in place early-on, you may be looking at a long, steep climb to tax compliance.
2. Make sure your understanding of local tax compliance requirements aligns to the geography of your product plan rollout.
As you grow, you’ll be selling into more and more tax jurisdictions, each with their own unique rules and requirements around remittance. By taking the time to align your tax know-how with the geography of your sales roll-out you set yourself up for superior compliance, fewer headaches and less chance of an unhappy audit experience.
3. If you’re going international, seek help.
As complex as dealing with 10,000 different US sales tax jurisdictions can be, the challenge becomes absolutely mind boggling when you start selling to mobile consumers moving around foreign jurisdictions all around the world. Challenge: What’s the correct sales tax and jurisdictional remittance on a Toronto Blue Jays ticket sold to a citizen of France who buys the ticket from their mobile in the lounge at Heathrow for a game in New York City? You don’t want to be an expert at this. You want a partner or vendor that is.
4. As you scale across states and nations, think about the ideal software tools for you.
There’s a variety of software tools out there to help demystify taxation and assure your compliance across jurisdictions. Take the time to study these tools, weight their relative merits to your unique needs, and develop a business case for the right solution for you.
You’d put the same effort into building your marketing stack, so why not invest a bit of time to avoid the potential financial pitfalls of an audit?
Don’t miss out! Get more great advice from Lisa Serwin and other tax experts by checking the free webinar “Sales Tax:The secret weapon to boost your bottom line.”
If you’re a software or high tech company ready to jumpstart your growth phase, do you understand how much of your limited resources are being sapped trying to manage the tax compliance for every transaction? We didn’t think so. Sales tax compliance is probably the last thing anyone wants to think about – and yet, it can make or break your revenue stream.
We’re talking to a VP of e-commerce of a major high end retailer, a highly sought-after sales tax guru and our own CFO, each of whom have solved the sales tax compliance equation – and have figured out a way to keep the government happy while streamlining their organizational process flow. By offloading these non-value add activities, business owners, CEOs, and CFOs can focus on what really matters – kicking up all kinds of revenue and adding value back into the business while making the competition weep into their pillows each night.
Join us for an interesting hour of real-life rock stars who have solved their nightmares with innovative sales tax compliance tactics and strategies.
In this webinar, you’ll:
- See real world scenarios of several organizations who have mastered sales tax compliance and requirements
- Learn action items to prepare your organization to optimize non-value-add business admin activities and reporting time
- Get your questions answered regarding sales tax strategies by the industry’s top experts during our live exec roundtable Q&A
- Hear the latest update on the Congressional “internet sales tax” (Marketplace Fairness Act)
Scott Cohn, Vice President of eCommerce, Chinese Laundry
Lisa Serwin, CFO, VentureBeat
Jordan Goodman, Sales and Local Tax Partner, Horwood Marcus & Berk
This webinar is sponsored by Avalara.