October 14, 2014
By BJ Cook,
This is a guest post written by our partners over at Avalara.
Ah, the great outdoors. Fresh air, clean water, lush forests. Or maybe white snow, blue skies, and a crisp cold day. Whether for hunting, fishing, hiking, skiing or any of the activities people are flocking outdoors for, the market is exploding both locally and across the internet for companies making time tested or new, innovative products that the outdooring public wants. Many of the companies creating these products may have started as a few folks and a better idea or two, but with growth and expansion, if they aren’t careful, their success can bite back.
The collection of sales tax is one of those areas a company can run afoul. Many outdoors companies have independent reps, a surefire way for a state to consider a company has “Nexus” – the relation with the state, and expect that company to collect, report and remit sales taxes on transactions in that state. Not to mention, a requirement to collect 1099’s for those reps. Many other activities can drive Nexus – participation in trade shows or conferences, fairs, festivals, traveling sales people, and the list goes on. In some states, it’s even possible that a that an operation to shoot a promotional video that involves employees or hired hands could be viewed as a nexus triggering event by some auditors out there. Having people on the ground for an unbroken period of time, existence of stock or promotional materials for the shoot, development of intellectual property, renting equipment in-state, buying insurance or even leasing a condo or soundstage could all be looked at as potential Nexus events. As more and more contacts or activities occur going out to shoot a video could all be drivers. In some states, even the types of products the company sells can get them on the hook. For instance, some states have taxes on clothing and apparel that might be different or additive to general sales tax.
Lots of these companies may work also with resellers or distributors, and, while they don’t need to collect sales tax on those transactions with their channels, they do need to maintain sales tax exemption certificates for all of them. Managing this for sometimes 100’s of resellers can seriously limit your kayaking time.
Automating sales tax calculation, exemption certificate management and even the filing of sales tax remittance helps eliminate the risks associated with keeping a company growing, and free your team up to enjoy the outdoors, not get caught up in a maelstrom. Limelight is partnered with Avalara to help outdoor companies (and many others) navigate the waters of sales tax confusion.
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