Pitney Bowes Software, a global leader in customer data, analytics and communications management, today announced a series of tips to help businesses navigate the highly complex geographical component involved in various tax calculations. During an audit, many U.S. businesses discover that inaccurate or outdated geolocational data has led them to take too much or too little tax on customer payments or employee withholdings. For example, if a residential property line or a municipality’s boundary moves in any direction, it could have important tax implications.
With tax season fast approaching, Pitney Bowes Software offers the following Top Tips for dealing with various geolocational tax requirements:
- Don’t rely on the postal system for establishing tax rate - Many companies use the postal system to verify addresses to establish the rate payable for various taxes such as sales tax, payroll tax and personal property tax. The postal system was designed to deliver mail not determine taxation and the postal boundaries do not align with the taxing areas. Also a number of premises are not assigned postal addresses, often leading to miscalculations. In addition, 20-30 percent of municipalities change their boundaries each year, making it difficult to keep up with precise tax jurisdictions. Companies need to access and upload a verified tax code provider list in order to manage each location.
- Calculate the sales tax requirements for all sales locations - This is particularly important for companies selling goods or services over the Internet. Traditionally it has been a consumer responsibility to declare out-of-state Internet purchases and pay use tax, an impractical process to date. As a result states are moving to place the burden on the seller and many businesses have voluntarily signed up to aid in this effort. Congress is currently considering federal law changes that will mandate sellers to collect sales tax.
- Closely track any mobile assets to establish their whereabouts - Companies must establish the location of all the mobile assets. From vending machines to telephone cable, each is taxed and often audited according to their exact location on a given date. A company’s capability to track their mobile assets closely can save significant time and money.
- Undertake a detailed assessment of the location where an employee is working at all times - It is crucial to establish where employees work and live in order to apply the correct tax withholdings. Some states like Ohio and Pennsylvania have highly complex rules for payroll tax based on where people are living and working. If an employee splits their time between multiple office locations, even within the same state, this can have a dramatic impact on the rate they must pay.
- Calculate all of the above on at least a quarterly basis - Don’t wait until you are in the same quarter as tax deadline day to start scrambling to organize the accounts and check geolocational data. Make this a regular habit and, at a minimum, carry out a thorough inventory on a quarterly basis.
“Proactive management of geolocational tax issues is an excellent best practice that can immediately deliver cash to a business’ bottom line,” said John O’Hara, President, Pitney Bowes Software. “Businesses are often audited and CEOs should have the reassurance that their firm is using the most up-to-date data to determine the outcome.”