Accounting firms can level up their line of service by offering virtual sales and use tax advisory.
The financial services industry has been drastically affected by technology and digitalization in the 21st century. According to an article in Investment Monitor, the Covid-19 pandemic only reinforced the financial service industry’s increasing reliance on digitalization. Technology has revolutionized how accounting firms can serve their clients. In tandem, more and more small and medium-sized businesses (SMBs) are entering into e-commerce to sell goods and virtual services—and they all need guidance around their obligations and liability.
With this technologically-enabled freedom comes a slew of rules and regulations. The 2018 Wayfair ruling brought considerable changes to how nexus is determined in the U.S., affecting the way businesses are required to pay sales and use tax. The myriad new regulations also created opportunities for the accounting firms willing to guide and advise business owners on sales and use tax (SUT). Not enough firms take advantage of the opportunities within SUT advisory, but providing this service is a great way for firms to uplevel their virtual offerings.
Since the U.S. Census Bureau began tracking online sales in 1999, they’ve risen steadily year over year. In the second fiscal quarter of 2020—the height of the pandemic—e-commerce sales reached an all-time high of 15.7 percent of total retail in the United States. Although there was a slight dip at the beginning of 2021 as brick-and-mortar stores began to re-open, data suggests that online sales will continue to be a significant portion of retail sales in the U.S. As e-commerce grows in popularity, more businesses will be affected by various nexus determinations as they sell across taxing jurisdictions. Because of changes in how nexus is determined from state-to-state and the difficulty in navigating the sales tax regulations across the U.S., many companies are likely unaware of their actual sales and use tax obligations.
It can be difficult for businesses to know when nexus laws change and to stay up-to-date with the different nexus thresholds that now exist because of the Wayfair ruling. It’s even more challenging for businesses to know whether or not economic nexus has been reached in a state and whether or not sales and use tax should be paid in that jurisdiction. This is because every state has a different threshold for collecting sales and use tax. Some states might require businesses that do $100,000 or more in transactions to pay SUT, while others might set that number at $500,000. Businesses also have to pay attention to the number of sales they make in each jurisdiction because the total number of transactions can also affect whether or not they need to pay SUT. Without the help of a qualified accountant or tax advisor, it’s easy for companies to become non-compliant, even if it’s accidental.
Firms that aren’t actively helping their clients become SUT compliant are doing them a disservice because noncompliance can lead to penalties and fines. Offering virtual SUT advisory goes beyond compliance. Compliance might mean helping clients fill out the necessary sales and use tax documentation required by regulators; SUT advisory goes a step further to draw insights from the client’s financial data to create strategies that serve their business’s growth.
Offering virtual SUT advisory allows firms to assist a wider range of clients from all over the country because businesses of every size will continue to expand into the arena of e-commerce daily.
Firms, CPAs, and advisors who don’t take advantage of the opportunity to offer virtual services are missing out. Clients may want to work with an accountant virtually for a variety of reasons. They might live too far away from the nearest accountant, or maybe they’re having a difficult time finding an accountant in their own city that shares their values and understands their needs. Giving clients the option to work together virtually is a way to better serve them, and it’s a way to make SUT advisory more readily available to SMBs across the country.
When working remotely for clients, it’s critical to use a virtual private network (VPN) to protect sensitive client data. This will also protect against cyber-attacks, help build client trust, and is an important part of providing high-level virtual services.
Also, be sure to use the most up-to-date technology to bridge the gap between outsourcing SUT work and offering it as a service to clients. Firms that use technology to their advantage can make remote work easy and help their clients maintain SUT compliance.
Utilizing the latest apps and software is crucial for firms to add any virtual services to their offerings. Technology can make it easier to collaborate with clients by automating manual tasks, and ensures the data that clients share is shared securely. LumaTax’s tools and technology make it easy for accountants to work with clients to determine economic nexus exposure. LumaTax is a solution to time-consuming sales tax services—it automatically compares transactional data to state tax thresholds to determine whether nexus has been established.
Our industry-first client exposure survey generates a LumaTax Compliance Score™ for each business to identify those most in need of SUT advisory services, and in the process, provides a picture of the corresponding revenue opportunities for firms. If an accountant knows exactly which of their clients aren’t SUT compliant, it’s easy to offer those clients help to avoid surprises in the future.
Offering virtual SUT advisory services is an easy way for firms to level up their service offerings and stand out against other firms. By implementing the latest technology and learning how to engage with clients virtually, firms can help a wider range of clients become sales and use tax compliant.