Growing your business? Congratulations! Business growth is major backbone of the US economy and you should be proud of your success. Unfortunately, business growth usually comes with some pretty complex tax obligations and audit risk. Before you take expansion too far, understand how it affects your tax obligations and what you can do to keep risk in check. Here are 3 quick ways you can limit audit exposure as you expand:
Automate 1099 filing.
Independent contractors can be helpful in increasing operational capacity without committing to on-going fixed costs or for seasonal staffing needs for construction firms or retailers. However, contract employees can also add to your compliance burden. Hiring, documenting, and managing 1099s and other requirements are highly prone to error, especially when handled manually. Automate the process to ensure compliance, and lower the time and money it takes to file.
Know your product taxability
Innovation can position a company to grab more market share, increase shareholder value, and meet customer demand. But as the number of products and services in your inventory grows, so does your tax risk. Product taxability rules in the U.S. change an estimated nine million times annually, making it easy to unwittingly over or under charge sales tax. Instead of relying on rate tables, implement a tax automation solution right within your existing ERP system. You’ll get guaranteed rates and rules and you won’t have to get accustomed to a new interface.
Onboard digital exemption certificates
As you develop new relationships with distributors, manufacturers, the levels of exposure to tax risk grow as well. Fulfillment by Amazon (FBA) or similar partnerships are a great way to shorten the distance between the product and the end-user, lower overhead and storage costs and scale operations. However, fulfillment centers and drop shippers can be significant enough physical presence to create nexus in certain states and trigger a tax obligation. Make sure you have your files in order and can get to them quickly during an audit by using digital, automated exemption certificate management services like Avalara CertCapture.
Don’t let audit risk get in the way of you growing your business. You can make sure you’re not creating risk by understanding how growth plans could create new tax obligations, keep up with changes in rates and product taxability, and automate indirect tax tasks in your accounting system. By automating these critical business operations, you’ll ensure compliance while freeing up existing resource so you can use them where they really count: growing your business.