Audits on the
Sales and use tax audits
are on the rise, and state auditors are taking aggressive positions.
In almost every audit, customer exemption certificates will be
reviewed. To ensure that your company is doing all it can to comply
with the law, follow these five steps regarding exemption
COLLECT THEM. This sounds like a no-brainer, but many companies
simply don't collect exemption certificates from their customers at
the time of sale. Yes, your customer must generate the certificate,
but you're the one who must have it in your possession during an
If you are having a
tough time getting a certificate, go ahead and charge sales tax on
the invoice. (In fact, your default should be to charge sales tax
unless a properly completed certificate is on file from a customer.)
The threat of this charge will likely motivate your customer to
provide the documentation.
2. BE TIMELY. For
sales in states that are members of the Streamlined Sales and
Use Tax Agreement (SSUTA), exemption certificates must be
collected within 90 days of sale. If this deadline is missed, the
auditor will allow 120 days to provide a certificate. However, during
this time, the auditor can argue that the certificate isn't valid
because it couldn't be accepted in "good faith."
Don't put your company
at the mercy of such a subjective call. Stay on top of certificate
CERTIFICATES FOR ERRORS. Auditors can disallow incomplete or incorrect
certificates. It is the seller's responsibility to ensure that
certificates are signed and dated and that they provide all required
information and claim the correct exemption.
4. GET UPDATED
CERTIFICATES. In some states, certificates expire and must be
renewed. And some states require certificates for just the first
purchase while others issue them on a continuous basis. To cover all
the bases, implement a process to update certificates regularly.
5. EDUCATE YOUR
TEAM. It's not enough to just make sure accounting personnel are
aware of the rules. Your sales and customer service employees should
be up to date as well so that everyone understands the importance of
sticking to an established collection process without