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1. http://www.ct.gov/drs/cwp/view.asp?a=1428&q=265798
Many states allow manufacturers to use Direct Pay Permits. The Direct Pay Permit allows a manufacturer to make purchases without paying sales tax. When a part purchased using a Direct Pay Permit is pulled from inventory, the part must be tracked for how it is used and tax accrued if it is used in a taxable manner, or usage tracked if used in an exempt manner. Another struggle manufacturers face is when they make bulk purchases that are then shared among multiple internal plants or facilities. If plant A runs out of bolts, they are shipped from a central inventory instead of direct from a vendor. The central inventory must track where each item goes and for what purpose in order to establish taxability of that item. In the example above, a bolt for a repair to a conveyor system might be taxable in one state, but exempt in another. So you must know: 1) 2) 3) 4) the inventory item used was a bolt which state it was shipped to the purpose of the bolt the taxable nature of that purpose
It is a lot to track and execute accurately. Once the identification of use and taxability is determined and documented, then you must ensure that the correct amount of use tax is accrued for each item and file a use tax return in a timely manner. In some states, there may be several different possible tax rates depending on the item and how and where it is used. Each state will have their own specific qualifications for a manufacturer in regards to whether or not you can use Direct Pay Permits. You must apply and be approved and also understand clearly what you can purchase sales tax-free using the Direct Pay Permit. However, there is a general stipulation that the manufacturer will have a system that clearly tracks and shows the amount of sales and use tax owed.
In a Nutshell: Create a Repeatable, Consistent Process for Sales and Use Tax Compliance
As with other manufacturing processes, having a repeatable, consistent process with sales and use tax compliance means automation. Automating sales and use tax compliance with a solution that ensures that consistent, accurate process means a solution that delivers: Accurate sales and use tax calculations for collections that take into account product taxability, location, rules and regulations. An exemption certificate management process that enables digital collection and storage of exemption certificates as well as transaction association and timely renewals. Flow-through returns processing that provides a liability worksheet for review for each return filed, empowering your company to have oversight and visibility to all your sales and use tax liabilities and remittance. Best practices in managing your sales and use tax processes and easy access to all data in case of an audit. Up-to-date sales and use tax rates and information. Using an automated solution for sales and use tax compliance helps manufacturers and distributors stay up-to-date with the latest changes in sales and use tax information. Consistency, repeatability and accuracy help to reduce audit risk and potential negative assessments. Critical features to look for in an automated solution: Easy integration with your back-end financial applications and/or inventory management software. Ecommerce integration capability. Geospatial technology to ensure to the rooftop level accuracy for locations. Accuracy and speed. Accessibility of informationanywhere, anytime.
Learn more about AvaTax. Call 877.780.4848 today. AvalaraMaking sales tax less taxing.
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