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‘Urgent’ marked in red. A form letter was a warning I would face jail time and a bench warrant to be issued for my arrest. As my face flushed and fight or flight kicked in, I read the letter again. Luckily, a speeding ticket payment was simply overdue, and I needed to pay… or else I would be in contempt.

For many, getting a letter from a government agency has a similar reaction. There can be panic or uncertainty when a bureaucratic letter which effective says “You are out of compliance.” If you get a letter from an out-of-state department of revenue, the concern is likely warranted.

In prior articles, we introduced the concepts of sales tax, nexus, and what types of things are subject to sales tax. In this article, we will explore pragmatic means to plan and organize back-office administration and support.


If you read article #1-3, there are many factors to consider and a plethora of nuances. But taking a step back, we can start scoping our problem by answering a few questions:

  • In my home state, are my products or services taxable?
  • Am I, or do I plan, to do business out of my home state?
  • Do I have offices, employees, or some sort of presence outside of my home state?


By answering the above questions, a ‘breadbox’ can be estimated. From here, drill down questions and information can begin to be further explored to best administrate sales tax on invoices and compliance with a department of revenue.

While reading these articles may have elevated your knowledge, we do not believe it wise to ‘go it alone.’   Accordingly, if your business is expanding or if you may have been doing business nation-wide for years, we recommend the following:

  • Trusted Financial Advisor

Collaboration with a finance professional that is trusted is a solid first step. CPAs and CFOs are familiar with sales tax and can advise, quantify, and otherwise outline the issues and potential exposure a company may have.   It is always pragmatic to have a second opinion but having someone who understands your business and who is experienced in financial operations is a valuable resource to validate and operationalize any change that may be required.

  • Technical Resource

Regardless of the experience a CFO or CPA has, sales tax is a very focused and niche-based discipline. The tax laws are continuously changing, and the case law/interpretation of a given state’s law requires a level of specialization and focus. Deploying a technical resource to review and inspect your business scenario is a critical step for someone who lives and breathes this information every day. As important, the technical resource can usually provide strategy and advise to mitigate past sins.

What we would recommend, is that the CFO (or whoever your senior financial leader is) get data organized, supporting information, a description of the company (and its product/services offerings), and any positions/assumption. Not only will this be more efficient in terms of introducing a technical resource that is not familiar with your company but will mitigate the cost of the overall project.

  • Software to ongoingly automate

Once the determination of how things should work in each state are understood, then human decision and input needs to be taken out of the equation. Setting up an automated system that administers tax on invoicing as well as remitting monthly reports will improve the error rate as well as staff’s time/cost. Various sales tax software packages are tailored to integrate with general ledger software (like QuickBooks) and will be able to apply the proper rates at both the state and local levels with canned reporting and automation features.

What we would recommend is that you have your finance staff be part of the implementation of any sales tax software; ensuring that the technical conclusions are set up properly.

  • Documentation

We would recommend that the company formally document both the positions and processes. A good technical resource will provide a memo to document their findings such that the effort is simply saving electronically. Best practices would also suggest mapping out how an invoice process works as well as process of remitting sales tax to a given state. Key to have and important for the back pocket in the event of an audit.

  • Updating assumptions and facts

Periodically, an owner and its finance leadership should evaluate the existing business, processes, and any potential, new information that may change conclusions. For instance, the introduction of new products/services may lead to additional tax impact. Evaluating new hires, out-of-state becomes part of an annual planning process.

The finance staff should evaluate the sales tax process and transactions to ensure that the process is operating as designed.


Sales tax is not something that necessarily burns up a conversation at a party.   As a business owner, Sales Tax compliance is a serious consideration. “Whistling past the graveyard” (ignoring the problem) is an option, but the bell will eventually toll. As technology increases, the states hungry for revenue will seek out those companies that owe. Penalties and interest, on top of the actual amount due, can cripple the cash flow of an organization.

I am Aaron Jaeger, leader of Credo’s CFO practice, CredoCFO. My approach is to work as an extension of your executive team to help you meet distinct goals and create—as we say at Credo—Results That Matter.

Whether you are in hyper-growth mode, launching a new product, or considering your exit strategy, CredoCFO offers fully customized financial strategies to achieve your objective.

Let us get to know you and your business. Please click here to schedule a call at a time that works for you.

Aaron Jaeger