Clients overpaying SALT? They need your help. Here's how to get started.

Are your clients overpaying their sales and local taxes (SALT)? The odds are good – and the more complex their businesses are, the higher the odds grow. For anyone familiar with changes to SALT guidelines, especially following the U.S. Supreme Court’s Wayfair decision , this comes as little surprise. SALT compliance was complicated to begin with and has only become more complex in recent years. Rather than run afoul of state or local regulations, some clients may have grown overly comfortable with the idea of overpaying as the cost of ensuring compliance.

But the numbers add up quickly. When firms help their clients avoid SALT overpayments while also helping them remain compliant, the impact on clients’ bottom lines can be significant. It can be just as powerful for the firm’s relationship with the client – an opportunity to demonstrate next-level strategic value and business impact.

Reverse audits (proactive tax reviews conducted by a business or other third party to identify overpayments, missed tax credits, or other opportunities for tax refunds or savings) are the key to helping clients avoid overpayments. They can be just as important at critical business moments: when clients are undergoing a state tax audit, have significantly expanded their businesses, have conducted a large transaction, or following major changes in tax laws.

Don’t wait for an audit letter
Do your clients have underlying SALT issues? If so, it’s better to find out long before they receive an audit letter, for reasons beyond mere compliance. Instead, work with clients on a real-time basis throughout the year to uncover and remedy addressable issues as they appear. Work with them to put corrective measures in place. Contact their vendors ahead of time to make sure they’re paying or charging taxes appropriately. Minimize their risk exposure as much as possible to avoid any unwanted surprises if and when the auditors come calling.

Throughout this process, your firm will help shore up clients’ business operations, strengthen their relationships with vendors, and ultimately improve their bottom lines – in addition to helping them remain compliant, avoiding any last-minute compliance-related fire drills.

Schedule a tax tune-up
The SALT environment is shifting rapidly, right under your clients’ feet. As a result, at any given moment it’s difficult for them to even know whether they’re compliant, whether their automated systems are tuned to deliver the right results, or even if their current processes are matched to the job at hand. From commodity code mappings to state-by-state registrations – it’s a lot to keep track of.

That’s where a “tax tune-up” can help – a well-planned, well-organized, thorough review of all the key factors involved in the clients’ SALT strategy. Here’s a look at some of the top issues firms should help clients address as part of their tune-ups.

• Commodity code mapping. In the world of e-invoicing, clients have to depend on whatever the vendor is uploading, including which commodity codes they’re assigning to product. That can be a problem when the codes are wrong, or simply not specific enough. Conducting a commodity code mapping exercise can bring the higher level of accuracy and precision that is required for SALT compliance today.
• Vendor management. Vendor spend reports analyze the client’s relationships with all its AP vendors to determine where spend is going, then home in on addressable spend that affects sales and use taxes in certain aspects of the AP. From there, it’s much easier to assess use tax requirements for all parties. For example, if sales tax isn’t built into a vendor’s invoice, the client likely owes taxes and must remit it to the state, ultimately avoiding audit complications.
• Regular compliance reviews. When compliance is undertaken as an annual exercise, it can lead to unwanted surprises. Which in turn can require clients and firms to redirect valuable resources at a moment’s notice to time-consuming compliance tasks. This type of inefficient, reactive approach can be avoided through regular compliance reviews – routine “good hygiene” exercises designed to stave off larger issues down the road.
• Nexus analysis. As clients’ businesses change, grow and expand, so does their nexus exposure. It’s important to keep track of these changes as they occur. With the right software and a commitment to regular nexus tune-ups, firms can help clients stay on top of nexus changes at every step.
• Registration. Do clients need to register in more states? Are they moving out of states where they’re currently registered? State tax authorities will come after clients whether they’re registered or not, so it’s best to routinely assess registration requirements throughout the year.
• Exemptions. Clients should stay active in their vendor campaigns, reaching out to them, filling out exemption certificates, and keeping the lines of communication open. Similarly, when they purchase new SaaS solutions, the exemption certificates may be specific to the state in which the solutions were purchased, but users of the solutions could be spread across multiple states, requiring a different approach to exemptions.

Right technology, right people, right support
Having the right technology solutions in place to support a reverse audit is critically important, but it’s just as important to have the right network of stakeholders in place to ensure a successful outcome. Be sure to engage the right people from the client, your firm, providers of SALT-oriented tax automation solutions such as Vertex , and legal representation (internal to the client or from a firm they’ve retained) to make sure all the bases are covered. Some SALT engagements also involve additional expert providers of reverse audit services as well.

Using reverse audits to help clients remain in compliance with constantly changing SALT regulations can be complicated. That’s why CPA.com and Vertex, working together, offer a host of resources designed to help make sure your firm has all the tools and insights it needs to cut through the complexity and deliver on your clients’ SALT needs.

Start with the Firm Advisor Program from CPA.com and Vertex, which offers detailed, hands-on support to help firms guide their clients through this complex issue. Also be sure to check out our recent webinar, “Maximizing client savings: The power of reverse audits and tax software solutions” for a more detailed discussion of these issues featuring experts from CPA.com, Vertex, KeyTax, and Wawa.