Webinar presented by Pete Petracco of AccurateTax and Rick Wilson of Miva Merchant. Please click here for more information about Miva Merchant sales tax automation and how AccurateTax can work for you.
June 17, 2010
This archived video of the webinar is available via Vimeo.
This is the slide deck from the webinar presentation shown above, available via SlideShare.net. It contains all of the information in the video with the exception of the demo and the question/answer portion of the webinar.
Rick: Hi everyone, this is Rick Wilson from Miva Merchant. Thank you for taking time out of your busy schedule to be with us this morning.
As you’ve probably noticed, we’ve been doing a lot of webinars lately, usually one about every two weeks, alternating between our own and with a partner. And with that, that means we are limited to about 10 or 12 partner webinars a year. So we’re very careful on picking our partners and who we’d like to work with.
A little background on AccurateTax. AccurateTax was started by Peter Petracco and Susan Petracco who many of you may know through NetBlazon. They are long-term both Miva advocates and in the Miva Merchant community. So they built Accurate Tax – how long has it been now, Pete?
Peter: Accurate Tax has actually been out since early 2009, now.
Rick: So for the last year and a half, we’ve seen AccurateTax in use on some of the higher end Miva Merchant stores that have had some sales tax compliance issues. They’ve really made it dead simple for the Miva Merchant customer to get address-based sales tax, down to the street address. It takes into account, county, city, and local. If there’s a complex sales tax problem, they can help you solve it.
We’ve personally used it on some of the big sites we’ve been building, and when the opportunity came up to bring this information to our customer base, especially in this current economy where taxation is becoming more and more important, we want to make sure you guys have all the tools to stay competitive and compete with the enterprise level players in the market without having to start spending enterprise level money to do so.
So I’ll be here at the end of the call to take questions with everyone else, and for now, I’m going to turn it back to Pete.
Peter: Great. Thank you, Rick.
Rick’s right. As far as AccurateTax goes, the solution has been around for about a year and a half, but NetBlazon has been a longtime partner and proponent of the Miva Merchant platform. So it’s definitely my honor and privilege to be able to bring you this information today.
I know many of the attendees we asked the question, “What are you hoping to get out of this,” and many folks are looking for some educational information about what’s going on here. So from an agenda standpoint, I just want to let you know what we’re going to be talking about today.
Primarily, I think based on the needs of the education; I switched this up a little and said that we’re going to spend a little time doing a little Sales Tax 101. So if some of this is old hat for you, then consider yourseld lucky that you know what’s going on. And if it’s good information then by all means, please let us know at some point, that we’re hitting the right things that you’re interested in.
Both from a Sales Tax 101 standpoint and what you guys are dealing with out there, obviously the issues across the various places where you have businesses is going to be different. But we’re going to try and hit the high marks and if anybody does have specific questions, either at the end of this presentation or subsequent to that, you can contact us and we’re happy to talk through it with you.
Also, I want to spend a little time, obviously, talking about what Accurate Tax is and the TaxTool products, how the solutions came about, what our background and experience is, and how we think the software as a service model, is going to be much more beneficial to you and your company’s bottom line.
Then I’m going to give a little demo walkthrough of what the system does and then we’ll have a Q&A at the end.
So from a Sales Tax 101 primer, the first thing that we really want to focus on is obviously, what is a nexus? Everybody hopefully knows what this term is, but for those who might not, a nexus translates to what the state and taxing authorities will consider to be your physical locations, and this is basically where you’re expected to collect and remit sales tax for. The definition, unfortunately, of what a nexus is, is somewhat in play, in a variety of states.
For example, California has instituted a law and rule that basically says if you have a drop ship relationship with someone in the State of California – in other words, they have a warehouse and they do shipments out of that warehouse to California customers – then the State of California considers you to have a nexus in that state.
A lot of people think they know: Okay, well this is where my home office is, so I’ve got a nexus in this particular state. But there are a lot of unfortunate rules out there that you have to contend with to try and understand to make sure that you’ve got the right set of information and you’re collecting the right taxes.
Another issue that many people may or may not be aware of is the issue of sourcing. Sourcing rules essentially dictate how a state defines how your products and services are sourced. In many cases, the term “sourcing,” will have one of a few connotations. An origin-based sourcing rule will essentially say that, “Wherever your nexus point is, is where your sales tax should be collected from.” In some cases, certain states have this rule, and it seems on the surface to be fairly easy for sales tax collection.
Other states have what they refer to as a “destination-based” sourcing rule. The State of Washington is one of these such states and essentially what that means is wherever you’re located in the state as a seller, the state doesn’t care. What they care about is collecting sales tax for where you are actually shipping the products to. Obviously, depending on the size of your state, the number of people, the number of zip codes and locations that are within a particular state, this can become very problematic.
Then, of course, you have the third type, which is kind of a hybrid or combination of these approaches. Texas would be an example of this where you have a certain amount of sales tax that’s supposed to be collected, based on the origin. And then another certain amount of use tax, which is the other form of tax that’s supposed to be collected for these types of transactions, is based on the destination.
That also brings us to another definition, which would hopefully help clarify some things. The difference between sales tax and use tax. We get this asked a lot. Traditionally, the sales tax is what the retailer or the seller is supposed to collect. The use tax is also what the customer or the purchaser is supposed to be paying. It’s kind of a misnomer; a lot of people think that Internet sales are in and of themselves tax free. That’s really not true.
What is supposed to happen is that if I don’t have a nexus in that particular state and I sell it to the customer, that just means that I’m not collecting the sales tax and remitting it to that state, but that purchaser is actually expected to file.
Many states – and we’ll get into this in just a few minutes – are getting much more aggressive about trying to track down the use tax deficiencies that they’re seeing right now, and that’s one of the reasons why you’re seeing a lot more models that are moving towards a destination-based sourcing solution.
So moving now into the next part of our Sales Tax 101 Guide, here. The issue of sales tax authorities and jurisdictions. This is really kind of where the rubber hits the road for a lot of people when it comes to sales tax calculation and trying to determine exactly what your responsibilities are as a seller.
First and foremost right out of the gate, we have over 14,000 different tax and authorities in the U.S. today. That’s 14,000 different people who are trying to come up with rules to tell you how you’re supposed to be collecting sales and use tax for them, and then of course, remitting it to them. In many cases, the states will have, at a minimum, a state and county level jurisdiction. But also, some states will have further breakdowns. So you can get into situations where it’s either cities, or they go even lower, more nebulous, where you have metro areas, or even some states have what they refer to as “Special Jurisdiction Taxes.”
These types of taxes, unfortunately, don’t really provide for a nice neat boundary line, if you will. So using a 5-digit zip code solution becomes problematic to try to collect in many of these states. Another key issue for a lot of these states is a lack of uniformity. Whether it’s the sourcing rule that we’ve already talked about, or even something as simple as what we all consider to be a rounding rule, which is if you reach five, then you round it up and if it’s not five then you round it down.
The State of Florida, where AccurateTax is based, happens to be a state where they’ve come up with a grand way, all on their own for doing rounding rules. I’m not really sure why they did that, but that’s one of the reasons why, I guess, the state legislatures have jobs.
The other issue around uniformity is product taxability. You may sell product “x” and you have a nexus in New York and you have a nexus in California. It’s a taxable item in New York and it’s a non-taxable item in California. So knowing not just what you’re selling, but what the actual expectations are for a particular state is really what the bigger issue is for folks that are looking for just a solution that will work for them.
Secondary to that is things around sales tax holidays. Some states will have them and some states won’t. Some states have them, but they’re only on particular items. The issue of item exclusions, whether it be during a holiday period or a non-holiday period.
The state of New York is a great example for this where apparel items that are from a threshold standpoint are unit priced at $110 or less, don’t have to be taxed. But if it’s over $110, then they do have to be taxed. These are just some of the standout rules that kind of drive people crazy when they’re trying to simply set up their store and make it work for them.
Flip over to what the state legislatures and the budgets are doing in the economy today and you’re seeing a lot more people that are looking for the delinquencies in this particular filing case. I mean it’s plain to all of us when our state budgets are shrinking and the state legislatures are cutting. They’re looking for ways that they can actually create more revenue, more sales tax, and actually the application or the correct application of even their own state tax laws becomes much more of a necessity rather than a nice-to-have. Like I said previously, the idea of a five-digit (zip code) based tax solution, unfortunately just is not sufficient enough, in many cases, to provide the best sales tax rates.
So what are the states doing today? Well, some of the states are going their own way, but other states are actually kind of joining forces. The Streamline Sales Tax Project is an example of this. It’s primarily a group of 23 states right now, who have essentially created a set of guidelines, rules for how to collect the information that collects sales tax, report it, and obviously to remit it to the various states.
A little known fact about the group of 23, which are actually the member state and conforming members; the concept of SSTP has actually been accepted in principle by as many as 41 states, plus the District of Columbia. For the states that are not actually member states in SSTP, they’re considered advisory non-conforming members. In other words, they’ve accepted at least some portion or maybe even a majority of what SSTP is trying to accomplish, but they have a few things that they’re still working to try and figure out or try and change.
As far as sales tax compliance goes, this is one avenue where the retailer or the seller can actually defray some of the concern over the audit issue, if you’re using a Certified Service Provider. A volunteer seller under the SSTP agreement is expected to collect tax for all of the 23 states. What that means essentially is if you have nexus in a state that is or isn’t an SSTP state, SSTP won’t care if it’s a non-SSTP state. But if you’re going to participate in their program, then you’re expected to collect tax for all of those states.
So this is really for, like Rick was saying earlier, where we’ve had an alignment of the larger Miva customers who maybe already have two or three nexuses, or maybe even a handful or more, across some of these states and it just kind of makes sense for them to look into a certified solution.
Right now, there are four current CSP’s that are authorized by SSTP to provide you this service. Two more are being added this month, and I’m actually happy to announce, for purposes of this call that AccurateTax is going to be one of those new people that are getting added this month. What this actually translates to for the customers then, is an understanding that if you use a CSP and the services provided by a CSP, in the volunteer states, then whatever services you’re using are provided to you for free. So that’s kind of a no-brainer for customers who are looking for that solution. And like I said, it also defrays the issue of an audit.
I will qualify that it doesn’t mean that you don’t ultimately have the liabilityif an audit should prove that there is a deficiency of something that should’ve been collected, but you’re not the one who has to go through the examination. The examination is done with the CSP and the states in question.
Just an example, there’s a lot of things that are coming down the pike. This DMA graphic, I think really pictorially represents what you’re seeing here. If you think about where SSTP is today, the green and the purple states represent people that are already conforming members, and who are essentially expecting volunteer sellers to be collecting tax across all of these states.
As I said earlier, the 41+ states would represent the green, the purple, and now the orange. So if you start looking at that, and you take out the few states like in the case of Alaska, Montana, and Oregon that are not collecting a state sales tax; in the case of Alaska, they actually have a local sales tax, but they don’t have a state sales tax, so that’s another little hook for people, in that regard.
It really leaves just a few states – not even five at that point – who are not in some way, shape or form, looking to streamline their process for sales tax collection.
My own personal opinion about where this is going from a SSTP standpoint, is that there’s three or four kind of “big fish” that they would probably really love to see come onboard. And that would probably be, in no particular order, California, Texas, Florida, and New York. One of the advisory non-conforming states there that we’ll talk about just a little bit later is Georgia. Georgia is going to be joining the SSTP ranks a little bit later this year, as well.
So more and more states are looking for ways to streamline their own processes and make it easier for them to essentially collect the tax that they’re looking for, and this is probably whether it ends up being federally mandated or not. This is something that many of the states, I think, are going to start gravitating towards.
So what is the future going to hold? Well, we kind of already hit some of these things. But I want to go back for just a second and reiterate some of them. First and foremost, the issue is that we’re seeing the legislatures in many states getting much more creative with their taxation laws and regulations.
Recently the Amazon tax issue with the State of New York got a lot of press. A lot of folks were trying to see how that was going to flesh out and once it finally did, and the State of New York came out on top, we starting seeing other states like Rhode Island, North Carolina, and few others that started putting in their own version of the affiliate tax that is associate with this.
The affiliate tax, in this regard for those that aren’t familiar, essentially identifies that you have a person, an affiliate in this case, who is representing your company as a salesperson and as such, you have a nexus in that state, you should be collecting sales tax. The problem is the way that some of these laws are set up is that it says, “Well if the affiliate collects less than $10,000 in a given year then you don’t have to pay it.” Well the problem with that is none of us can kind of look into our personal balls and see if that particular affiliate is going to have less than 10 grand in a particular year, so you might as well start collecting for all of it is kind of the theory.
As far as other states that are looking at trying to do something similar to this, Colorado is creating their own version. And I will say for anybody who is on the call from Colorado, my sympathy goes out to you because Colorado is probably one of the most difficult states out there as far as the different types of rules that they’ve put together.
California already had a first bite at this apple and it was vetoed by the Governor. But the legislature is actively trying to implement another affiliate tax law in this regard. Hawaii and few others have actually tried and vetoed, and are kind of in a holding pattern.
This all leads to the idea by many people in the industry that some type of “mainstreet fair tax” law is going to ultimately come out of Congress. Whether we’re going to see that in an election year like this, I highly doubt it. That’s my personal opinion, but the flipside is that after the election it might just be something that the Congress wants to take up and it’s definitely a possibility.
Many people would perceive that the likely model that they would base this off of is going to be the SSTP process, since those are already in place and working for almost half of the states in the union already. And then like we said, many more states seem to be joining and signing up for the SSTP process.
Georgia is coming on later this year. Wisconsin just joined last year and we already listed and saw the slide of the folks that are advisory non-conforming members. So those are folks that, in principle at least, agree with much of what’s in there, if not all, and are probably actively working themselves to try and resolve those issues.
So at the end of all this, I know everybody is afraid. It seems like as a small business owner, somebody standing up there and saying across the entire nation these 14,000 taxing authorities, you have to figure out how to collect tax for all those folks. We expect you to pay it to everybody and we don’t care how much time, effort, or money that ends up taking.
None of the retailers that are out there are looking to make money off of sales tax. We don’t want to end up at the end of the year having the state come back and say, “Oh yea, by the way, there was a 2% sales tax addition that you missed out on that you should’ve picked up in January. So you owe us for all of the sales for this year.” It kind of has a way to cut into the end of year profits that we’re all hoping to try to make. So from that perspective, we understand at AccurateTax that folks are really just trying to look for some peace of mind as far as the sales tax life cycle, if you will.
Just briefly, I know Rick already commented on this, but I want to kind of give everybody a little bit of a background about how NetBlazon and AccurateTax came together.
NetBlazon has been developing sales tax module solutions in the Miva world for about eight years now. Primarily, the one that most people are going to know about is going to be the Zip Based Sales Tax module. You either use it yourself or you know stores that are out there using it.
Back in July 2008, when Washington State became an SSTP state, we had a lot of our customers come back to us and say, “I need to have a Zip Plus 4 jurisdictional boundary solution. So we started taking a look at it and one of the things that we realized very quickly, was that the Zip to Zip Plus 4 conversion was going to be creating orders of magnitude of more data for many of the states that might be involved in this type of solution. That also led us to the next question, which was, who if any of us, knows our zip plus 4? I know I never knew any of mine before I actually started this service.
So the concern is that number one, if I need a Zip Plus 4 solution and I’m not really going to be able to expect my customers to know what their zip plus 4’s are so how do I actually figure that out. There was never really an integrated address validation or scrubbing service. I know some folks use the postal service validation, but the postal service has their own sketchy rules of how you’re not supposed to use a validated address for other reasons, so that was always a concern that we really didn’t have a standalone address validation service in the Miva space and that was why we created that as part of the solution, as well.
Realizing how large the data sets were going to be for the Zip Plus 4 databases, and then also, that the original module the zip based module that we had already created, didn’t do some of the more specific things that the states had as far as their rules. And then we really didn’t have any kind of integrated reporting and jurisdictional breakdown or tracking for how you are supposed to be remitting your information.
We really realized, at that time, that we needed a separate solution kind of away from the standalone module capability that we had previously created, and that’s how Accurate Tax became a solution for us.
So the bottom line at this point is what is Accurate Tax, what are the TaxTools, and how do you use them. TaxTools in and of itself is a software-as-a-service solution, like I said previously, primarily used for customers who are looking to address whatever their address validation Zip Plus 4 needs are, and then obviously, to calculate the sales and use tax rates that they need. This obviously is pertinent for shopping cart solutions, because our contention is that there’s no reason not to have that as a thin client module that resides on the customer’s system and calls out to our servers to get the response.
But the concern is that if you’re not already using that solution in front of your customer during checkout then how are you going to sync up the rate information later on. So to be sure, we wanted to have something that was out there on the front lines that was providing this service. But we also understood that you’re going to have backend systems, whether they be accounting systems or ERP systems that may need some level of integration with that as well, so we included that as part of what TaxTools can provide.
Additionally, we created a custom API for individuals who may have something that we haven’t even conceived of that they need to integrate with. We have a number of customers that use it for their own custom order quote systems and other services that they might need. And then primarily, where does the data come from? The address information that we use is the same type of information that the postal service uses.
Our algorithm for scrubbing addresses, I’ll make the argument that it is as least as good as what the postal service does, and in many cases, we’re actually able to scrub addresses that they kind of give up on. And then the sales and use tax rate information comes directly from the states. It all goes into the service that ultimately is the backend service provided to the thin clients that would reside on your e-commerce stores, at that point.
So then the next question I guess that many folks might ask is why would you use it? Well the first issue is that the Zip Plus 4 rates and boundaries are just incredibly large compared to the statewide data or even the 5 digit boundaries. There’s really no existing sales tax holiday or item exclusion capability and those in and of themselves vary widely across different states.
So we realized that depending on the number of nexuses that you have and what you’re dealing with, the more of this information that we can make manageable to you, the easier it will be for you to be compliant, and obviously not end up getting audited and having any kind of penalties associated with your overall store operations.
So what’s included in the service? Well the updates and the boundaries is obviously something that we take care of for you. Every month our information is updated and we, not just do the update, but we QC (quality control) the information to make sure that we’ve got a good set of data. The setup is not something on the client side that you’re charged for. There’s also an address validation screen that we setup for you. In many cases, it’s done fairly quickly, so you can do it yourself, obviously, but we can do it for you. And like I said, there’s no charge for that.
Module updates are free and customers – and this is probably one of the most important things for a lot of customers, especially when they start out small, is that you can address your usage up or down. So if you get to your holiday season and you know that you’re going to be having more orders that you care about, then obviously you can adjust up and then after the season’s over, if you want to go back down you have that option, as well.
Our contention is that the service should be there for you and it should be available based on what your needs are and not necessarily that we’re trying to make “x” amount from you in a given month.
The last thing, as far as things to consider, as far as using the service is that any new user that wants to sign up for the service can try it out for free. We give you a certain set of free calls and you can set up the module, get it going and try it out. If you like it, great, and then you can sign up for a billable account and if you don’t, no harm, no foul.
The one other thing that I didn’t put in here, but I’d be happy to offer for anybody who has recently bought the 5-digit module, who kind of realizes, “Well maybe I shouldn’t have done that and I’d like to get the other service,” we’re happy to talk to you about trying to credit you back at least some portion of that so you can use the service and try that out as well.
So who’s benefiting from using the Sales Tax Solution? Well there’s three primary groups that we’ve put these customers into. In the SMB world, these are really people who have sales under 5 million dollars a year. They’re probably looking for something that is going to provide them just some level of actually calculated rate information. Maybe they don’t have either multiple nexuses, or the need for the enterprise type solution that would encompass a lot more of the feature sets with sales tax rules, and item exclusions and sales tax holidays.
We definitely see that this is something, not just that you can increase your usage organically, but that it helps you with your compliance issues. And even many of the reports that you can get from a backend sales tax reporting standpoint from our system you can use directly with your reporting and remittance capabilities.
And then the Enterprise customer, these are obviously the larger folks that Rick was talking about earlier. These folks may have multiple nexus points or they do a lot more in sales. They’re obviously expecting a higher transaction usage. Maybe they’ve got multiple integration points. The sales tax rules and the need to be on top of those is more of a requirement for these folks, and they’re primarily looking for more of a complete solution rather than just a sales tax calculator.
Then also we’ve got customers who they’re either managing consultants or accounting firms who are looking for the integration capability to go back in after the fact and confirm that rates that were provided for a given customer, for a given time period were actually what they were supposed to be. So we keep not only the current information but also historical information that you can query based on time periods, if the need is there.
So which solution do you need? Primarily we’ve got four different variations, if you will. The first, out of the gate here is the Address Scrubber. We realize that not having an independent service for the Miva platform was an issue. What we ended up with was some customers who actually were in single rate states, meaning that they had a sales tax rate that was the same thing across the board, across the state. But what they wanted was the ability to scrub the shipping addresses because they realized that they were getting hit up with a lot of address correction fees.
One customer in particular was doing about 1,500 orders a month and realized they could actually translate a lot of capital that was going out towards address correction fees to cover the cost, and this solution basically paid for itself very quickly for them. In fact, I recently was talking with them and they said that the only time that they have any issues anymore are with their phone orders, because they don’t even have a phone order interface for their system that goes against Miva, so they can’t use our address scrubbing for that purpose. And those are really the only ones that they end up having an issue with these days.
The basic version is kind of provided and we don’t expect many folks that will need this, but we provide it kind of to have a complete solution set. The basic version assumes that if you’re trying to get Zip Plus 4 rates and you’re not using our address scrubbing capability that you have some other provided address scrubbing. So we are working under the assumption that the Zip Plus 4 zip code is coming to us before the sales tax rate is calculated.
The issue there is that, and this becomes a due diligence issue, that probably would have a much longer conversation in and of itself. But if you are trying to do your due diligence to get the Zip Plus 4 and you’re using a service that is certified and for whatever reason, the address can’t be scrubbed, the fallback position in many of these states is that you can at that point use the regular five digit zip code. So the issue is one of doing your due diligence to prove that you were trying to get the Zip Plus 4, and for whatever reason you couldn’t.
Again, in the SSTP world that becomes an issue that the auditors deal with the CSP’s on. You would have to deal with that yourself with the state and God only knows how much effort they’d be willing to put out there to try to collect the $500 or so that you owe them. But like we said, the way states are these days, they’re spending a lot more time trying to find every little nickel and dime that they can.
The next solution is the Advanced solution. This kind of merges both the Basic and the Address Scrubbing capabilities. This is also a solution that supports multiple nexuses and it gives you much more detailed information on the backend as far as activity reporting and reports of the rates that have been provided so you can use those in a reporting scenario.
And then the last solution is the Enterprise version. This builds on top of the Advanced solution. It includes everything else, if you will. In this case for the Miva Merchant platform, that is including the breakdown of product and tax class types that right now are not part of the base solution. That’s actually something that the Enterprise Solution does provide. And then support on the backend for custom tax, sales tax, and item exclusions is also available to you.
So if you happen to be an apparel seller in the State of New York, and you’re using the Miva Merchant platform, right out of the gate, the Enterprise Solution is the right way to go. This is also if you are an SSTP seller, the only solution that you have available to you because it does all of the services provided in the sales tax life cycle; both the calculation, the collection, the remittance, and reporting that goes to the state. That all happens through this system. So it becomes essentially your accounting interface with those particular states.
So now I want to kind of take a moment and show you all the TaxTools in action. What I’ve done is set this up as a series of screenshots, because the way things are in the world of demos, everything would crash and then how would I look. So what I want to try to do is use the slides that I used for a presentation that I did for the SSTP folks back in August. Time permitting, at the end of this, if you still have interest and people want, I’m happy to show you both – this is going to be the Advanced Solution, but I’ll show you the Enterprise Solution, as well.
It’s not that we don’t want to show you a demo, but I just want to kind of at least make sure that we get through the information for the folks that may have other commitments today.
So the site that we used here is the WonderBrains toy site. This is a site that Susan and I used to own. We sold it last year, and I’m not going to even lie to you about how happy I am that I’m not in the retail toy business any longer. But the bottom line is at the time of this particular demonstration, we still owned it so we were using it and using the product as well as demoing it to the folks at SSTP.
Real quick, just to throw a product in the basket, like normal. Continue to the checkout page, and the folks that I was meeting with at SSTP for this meeting actually were at a government building in Minnesota. Their address was 600 Robert Lane North, so that was why I chose that address.
This basically shows that once you’ve got the shipping address information, the original information that was put in here was 600 Robert Lane North, Minneapolis, Minnesota 55101. The system then scrubbed it and it came back with the actual preferred display of that – Robert Street, ST, N for North, and then obviously the fact that it’s in the City of St. Paul and not Minneapolis, is a non-trivial step for the solution. Obviously, the key issue that we care about at this point is we now have the Zip Plus 4 address for this particular customer.
So then I backed up for a second. I just wanted to kind of show them some of the different things that the solution can do from an address verification and validation standpoint. I left the address in there, I changed the city, but then I also changed the zip code to a different one. Well unbeknownst to me, basically what it did was it came back with multiple addresses. Well, the solution will do that. If it can’t discern the one address that it should use, it will bring back a series of addresses for the user to select.
I was using a government building as the address, and as you can probably guess, government buildings sometimes have multiple Zip Plus 4’s because they have states and then they have Federal, and they have other locales that need their own addresses. So the issue here is that while this is still Robert Street – and you can see one of the zip codes is 55146, but then the other one is 55101. So the hope is that the customer is going to say, “Well yeah I ended up mistyping 55111 and it should’ve been 55101, and that’s why I’m going to select that one.”
Primarily after this, the key issue here was, okay now you’ve got the information, the sales tax calculation is completed. In the State of Minnesota, the product includes shipping, if it’s a separate line item. So the 7.625% sales tax was applied and I got the thumbs-up from the Minnesota State Representative who was there that we actually had calculated that correctly. He apparently was on the spot, because he didn’t even know what the right sales tax was at that time, so he kind of took it for granted that I knew what it was, which was kind of funny to all the people in the room.
The flipside here is now I’m going to show you the backend. This is the Advanced Service and if y’all stick around afterwards for the Enterprise Service, you can see the backend for that as well. But the Advanced and the Enterprise Service start out with this basic screen. If you’ve got a license key and we have an associated checksum on the backend – we do that for security purposes – that’s tied with the domain that we’re receiving the information request from, so that any calls that are being associated with your account are actually tied to the license key and checksum.
There’s just a few settings that you have. Whether it’s the shipping and handling, including the handling fee or whether you want address validation performed on all shipping addresses or just the addresses that you’re charging sales tax in, you have those options. Then in this case, since the user is using the Advanced Solution, you can go ahead and select multiple nexus points. If you’re using the Basic Solution, you have to only select one, is the option that you have there.
That’s basically it for the Advanced client side support for this. There’s also a page that you have that gets setup, like I said, and styled for your store. That was the address screen itself that I previously showed here. You can do just about anything you want with this. The information that you get back from us is fairly standard, so it can get styled however you like as far as buttons and display purposes.
Then on the backend, the Enterprise Solution itself, the edition that the customers would be using, in this case, for SSTP, which is what I was showing them, basically has a number of different feature sets that it can use.
Number one, it’s got the Verified Data Interface, so if you just want to go and login and check to get some information about a customer. Maybe you’re online with them and you’re giving them a quote, you can login, you can input their information. You see here that the information that you get back is not just the address that gets scrubbed, but it also gives you the tax breakdown. So you’ve got the combined rate for all of the different jurisdictions that are applicable for this particular zip code, and it gives you the breakdown across state, county, city, and metro area, as well.
For the most part, that’s as far as – you know you might have a metro and then another special district, as far as breakdowns go and that’s primarily it as far as the reporting goes on that end. Also on the backend reporting, you would have the capability to basically see how much usage you’ve got going on. So how often people are coming into the store, what your daily and weekly usage is. You can track, and our system will also allow you to set up for notifications so that as you approach your high watermark, you can either upgrade or at least realize that you’re going to, at some point, reach an overage point.
Then lastly, in the Enterprise Edition, as I was saying, there’s a commit process at the end, so that all the transactions that are happening on your store flow back through to the system, so that you can actually then report and remit to the states. These transactions track not just the locale of where things were sent to, but also the information, the items themselves, and the taxability SKUs that the states have assigned for a particular item. Those SKUs then translate to what the tax is should be collected and the final reporting then gets passed over to the state such as Washington and others.
I know everybody’s saying, “Okay fine, you’ve talked about what the solution can do and we know how sales tax compliance issues are. You’ve given us the flavors, but how is it packaged and priced?”
Primarily, like I said earlier, it’s a software service solution, so the seller signs up and they select what their desired package and monthly usage might be. If you’ve got a single state – you know, California is your nexus – you can look back over the last few months and just see and get an idea of how many transactions within the state you’ve had to get some kind of idea of what your monthly usage might be for that. The idea then becomes when we talk about monthly calls, the question we often get is, “Well what’s a call and how is that defined?”
A call, in the case of, and if you go back to the demo that we had just kind of walked through, a call is defined as any discreet XML post that goes out from the client system to our server. So the address call to get the scrubbed address is one call, and then the sales tax request is a subsequent call. So if you are a basic user, you might sign up for a 30-Call Package, which means the Basic user who only has access to sales tax rates, has 30 sales tax calls. A customer who signs up for an Advanced 30-Call Package, will get 30 address calls and 30 sales tax calls.
So basically, whatever level you’re at, we’re trying to make sure that you’re getting the right usage for what your expectations are. We do, however, charge overages. If you are on the 30-Call Package and you end up going over for the month, there is an overage fee of 50% over the premium for your per call rate. Which means, in the case of the 30-Call Package, it’s 20 cents per call. And so any calls that you might have for that given month, that are overages, would be billed at 30 cents, which is 10 cents over the base rate – 20 plus 10 is 30, in that case.
That’s basically all I had as far as information to share with you today. I’ve gotten a few questions about the different states and what they’re trying to do for taxation on the internet and the different states that are part of SSTP. You can to go www.streamlinedsalestax.org and the 23 states are listed there. I’d like to say that I’ve got them all in my head, but unfortunately, I don’t. If you’d like me to give you a list, you can just send me an e-mail and I’m happy to share that with you.
If anybody has any other questions, I’m here. You can post them and if it’s something about Miva in particular, Rick can handle it. If it’s something for me, then I’m happy to handle it. Rick, are you still there?
Rick: Yeah, I’m here Pete. I’m just on mute so I don’t interrupt you.
Peter: Okay, good enough. We’ve got one question here.
Q: We’re in Oregon. What should be doing in Oregon?
Peter: You’re lucky. Oregon does not have any sales tax. You should probably not move, is what you should do. The short answer is that if SSTP becomes more of a federally mandated solution, you’re going to see something happen in Oregon.
I can’t know for sure today what that might be, but the sounding board for what it looks like is going to happen is the state will become responsible for at least some portion of sales tax that should be collected. Whether Oregon chooses to eat that and make that a tax somewhere else, or if they actually would say, “Okay, we’re going to have a half-percent tax that gets collected and remitted to the Federal government or the other states. It’s six of one, half a dozen of the other, at this point. We really don’t know.
Q: In Washington, we want to go over pricing.
Peter: Yes, the pricing, I’m happy to share that with you. You can go to our website. I probably should’ve put a link here and I apologize for not doing that. www.accuratetax.com/products/pricing/ is the link. The Basic and Advanced pricing is out there. The Enterprise pricing, is a little bit higher and the reason for that is while the Basic and Advanced solutions are call-based, the Enterprise solution is transaction based or completed transaction based, so you don’t really run into the same situation where you might be getting charged more for the call usage. But in the case of the Enterprise Solution, you’re only getting charged for the committed transactions.
Q: What is California’s policy currently?
Peter: Oh wow, how much time do you have? California is kind of nebulous. But primarily, you’re going to be expected to define what your nexus points are and they’re going to want you to essentially define where you are; what they refer to as “engaged in business.” The various districts that you might be in, then dictate what type of district taxes you should be collecting there.
In many cases, you can also in the State of California, sign up to be a Volunteer Use Tax Collector. In that case, you’re really kind of treating the State of California, truly as a destination based sales tax model. Which honestly, it’s a much easier way to handle the information and the sales tax remittance capabilities. But as far as what the individual California policies are, like I said, they’re taking another bite at the affiliate tax apple right now, so some of those things are in flux and we’re just going to have to kind of wait and see how that flushes out.
Q. Operating out of New Jersey. Do we need tax at a more granular level than just the state?
Peter: In New Jersey, no. New Jersey is a one-state rate. They are also, however, an SSTP state. So if you were interested in signing up for becoming a volunteer seller in the SSTP world, then yes, you’d be expected to collect for them, as well as for the other states, as well.
That’s the issue is that right now, there seems to be a push for that and ironically enough, it’s not coming from people like AccurateTax, it’s coming from the state legislatures who are looking for ways that they can at least set up an infrastructure that will garner some assurance that they’re going to get some amount of money on a consistent basis into their coffers, based on sales tax. Obviously, being an out-of-state retailer and you not being a constituent of theirs, they’re much more likely and interested in trying to collect sales tax from you.
Let’s see, what else do we have here?
Q: Total cost for the module and usage.
Peter: Basically, what it’s going to come down to is our minimum package is the 30-Call Package. So if you only have two sales a month, you still have to sign up for the 30-Call Package. If you’re using multiple states as your nexus point, then you’re going to have to use the Advanced Solution. So the 30-Call Package is $12 a month for that. My take on it is, I always tell people if it’s going to cost you a couple of lattes to make sure that you’re not going to get audited this year, nor every month, that’s probably a good way to not waste money at Starbucks.
I’m a victim of Starbucks, so I can’t truly say that without some chagrin, but the reality is, is that the issue that a lot of folks suffer from is they think that this is going to end up being expensive when it’s really just a byproduct of whatever organic sales you’re having on your site, as well.
Q: For the other states, but only if we have a nexus there.
Peter: That’s kind of like a half a question and I’m not sure how to answer that. The issue of what defines a nexus, like I said, it’s going to be different for different states. Many of the states right now are changing what that definition is. If you’re using a drop shipper in California, then California wants you to start collecting sales tax. The issue right now is when is the State of California going to start coming after you?
We all heard that California is suffering. Their state budget shortfalls are incredible, so I think you’re likely to see, especially in some of these larger states who maybe have relied on their own infrastructure for quite some time; if one or two of them ends up joining SSTP then it’s probably going to end up being something that many other states are kind of going to just fall in line.
Q: SSTP one rate for New Jersey.
Peter: And then, yes, you would have to submit to the other states as well. No, you would have to submit to those states because you’re signing up and agreeing to be a volunteer seller in those states. And as a volunteer seller, you’re basically saying that you will collect a sales tax on sales that occur in those regions.
The flipside, and this is the great part about states that have even a single rate, they still want you to report. They want you to report on the various jurisdictions that you’ve collected for, because in many cases, the way that the earmark the money is based on where the sales have come from in their own jurisdiction.
If a state has a 7% sales tax, they might say the state is going to take 4% and the other three gets broken down across county, city, and metro area and that’s why they want that reporting information. And that becomes the issue, because you’re living in a single rate state and you’re like, “Well how do I know? I don’t want to track that information?” But that’s the expectation that a lot of the states have at this point is that you’re going to be giving them that information so they don’t have to worry about it.
Q: Sales tax exemptions
Yes, on the SSTP side, the Enterprise System does take care of the sales tax exemptions. If you’re using the Basic or Advance side; however, sales tax exemptions aren’t included in that solution but Miva has other third-party module solutions we work with and are compatible with in that regard, so it’s not an issue if you use the Basic or the Advanced Solution there either.
Let’s see. These are coming in very fast now.
Q: In Alabama, on a rare occasion, one supplier will drop ship for me from a California warehouse. Does that mean we have to collect, so on and so forth?
Peter: Yes. The short answer, and what I’m going to do is kind of break off from this. For those folks that are still on, I’ll go ahead and bring up my little example here.
This is one of our customers’ sites. BRESCO is a restaurant equipment dealer. They have a number of different products that they sell that are delivered out of warehouses across the country. As a result, this customer needs a solution and the Enterprise Solution is what they’ve gone with. They need a solution that will allow them to essentially translate all of this information very quickly in the checkout process.
So they’re using the Enterprise Solution and if you remember earlier I said this looks a lot like the other information here. So this looks just like the other screen that we showed previously in that you can assign different states that are your focal points. You also have the added ability, at this point, to start setting up product tax codes, both for taxability on the products themselves as well as for shipping.
The reason behind that is if a sale occurs in Florida, this seller wants the sales tax to be collected. The issue here, and I’ve got a product in my basket and I’ll show you just very quickly, you also have the ability in this case to override a product’s tax class. So we can come over here and I can show you what the override looks like.
It’s very similar to the other screen. You just essentially select which state you want. You’re going to get the category and sub-category selected and in this case, it’s Taxable Goods. So the customer has this setup to be overridden.
The ultimate reason for this is that the customer is supposed to collect in the all the states that I just showed you. That’s where they have nexus points. So if they sell to somebody in those states, he’s supposed to collect the sales tax here.
The issue is, since that product happens to be serviced out of California, if they sell to somebody in California in that case, the sales tax needs to be collected for that particular user.
So, I’ve still got the product in the basket. This was that product that we were just looking at and I’ve set this up with my Susan Petracco account, which is just a test account here. The address that I used is – I would’ve used Miva, Rick, but I didn’t have it in time so I went ahead and used San Diego Zoo’s address: 2920 Zoo Drive is the address in Pasadena, California 92101. And then I’ll just put in my initials here.
The reality is unfortunately, while I thought it was in Pasadena, it’s actually in San Diego. So the system is smart enough to say, “While you think you should be in Pasadena, you actually should be over here in San Diego.”
So I use that address and I basically come in here and I’m going to let you all go ahead and do the math yourselves, if you want. But I’ll just show you when we come through, this calculation goes through and it says, “Okay, well the sales tax for San Diego is whatever this percentage is,” and I’m actually going to show you here in a second, if I can come back to the usage here. It’s 8.75. So the sales tax amount that we return was $8.34. And so that’s for collection in the State of California, in this particular regard.
If I back up for a second and I change this to an address, let’s say in Florida, because that is one of the addresses that I’m supposed to be collecting in. Let’s say, North Courtenay Parkway. This is where the AccurateTax office is, so we’ll put this in real quick. We’ve got that in there. It’s going to give me the four digit zip code there, as well and I’ll use that. Come in here and for some reason I don’t have shipping setup.
This is why you don’t do live demos [laughter]. Anyways, if I had my shipping setup properly, I would be able to show you what the sales tax rate is. But unfortunately, I do not have that, and I apologize for that little mix-up. You were right Rick, you never do a live demo.
At any rate, that is essentially the way that the Enterprise System goes together in that you basically have the capability to do both products tax classing on a storewide basis or on an individual product basis. And again, in the case of the product here, there’s no limitation where I could be saying, “Well it’s supposed to be serviced out of California,” but I could also say, for whatever reason, if I want to override it, then it’s supposed to be serviced out of a different location.
If I pick up another dealer in Minnesota, for instance, and I want to service it out of there, then I can set that up and we can set the tax code override for this particular customer. All that information ultimately is displayed back here on the backend.
The only other thing that I’ll show you on the backend here, for purposes of reporting is just a couple of things. The order information can get displayed, and you can see what that information looks like via the backend query system. These are all the orders that essentially get connected or get associated with your store and then you can actually do end-to-end reporting with the states. So the tax reporting information is available to you and you have information that you can then provide to the states with the online remittance capability that we have, as well.
So the flipside of this is that you then have breakdowns on order reports where you can generate reports based on orders, or reports based on the jurisdictions. And if you’ve got a state like in the State of New York where they don’t care about your orders, they just care about the amount that was collected and then ultimately, the different jurisdictions that were included in that. You can then use the jurisdictional reports, file that online with them, and you’re off and running.
I’ve had a few more questions here. And here’s a good question.
Q: If SSTP adds an additional burden then why do it?
Peter: The reason for that is primarily because you have multiple nexuses in those areas and/or you’re kind of looking at the writing on the walls and you realize that this is what’s coming down. We actually have a few customers who are using it who don’t have nexus in those states, but realize that they have either from the drop ship capabilities that we’ve talked about, or because they’re concerned about the overall tax burden that might get picked up at some point, that they’ve decided that they want to sign up for that reason.
My advice is not – you know I don’t have fruit salad behind my name at the end; I’m not going to be your tax accountant. I’m going to be giving you the right system that can give you all the right information for you. At the end of the day, you know, my recommendation is always to talk to your tax expert and we’re certainly willing to work with them.
We’ve had conversations with accountants before who, in all honesty, thought they had the right information. We’ve had conversations where we kind of moved them in the right direction. We’ve shown them the regulations that we look at and usually it ends up being that we were right; there’s only one situation, I think, that was in Colorado that we had to agree to disagree.
The accountant thought they had the right number of regions that was supposed to be collected but then our system couldn’t do that because one of the regions he was wanting to collect tax in was across the state, it wasn’t anywhere never Denver. That’s just kind of the nature of the beast sometimes.
But for the most part, SSTP is a personal decision that I think customers need to decide that they’re either going to take advantage of or not. The issue for using this solution, in regards to SSTP is that it costs you nothing. So if you’re going to use my service at all, then you’re going to pay for it. But if you’re an SSTP customer then it’s not going to cost you a thing to use it.
Q: In North Carolina, if it ships from North Carolina and ships to New York, who gets the tax?
Peter: The only person who has a concern about that is if you’re in North Carolina, you have nexus in North Carolina. If you do not have Nexus in the State of New York, then you can ship to New York with no harm, no foul. There’s no rule that whether you’re in New York or North Carolina, that you’re supposed to be collecting tax based on that particular burden.
The flipside of that is it always ends up being a situation where the customer, if you have an affiliate in the State of New York, then you start getting into the issue of well that person is technically considered a sales rep for you and you are supposed to collect sales tax. In that case, you could simply have New York and North Carolina set up at nexus points for you in our system and do it that way.
I’m trying to go through the questions folks. I know I might be missing you. If I do, I apologize but please feel free to contact me back at the office. You can e-mail me directly at firstname.lastname@example.org or you can call us at 866-400-2444. We’re here to help you, and if you’re interested in signing up, like I said, everybody gets a free trial and we’re happy to get that setup for you.
Other than that, I appreciate your taking the time today to talk to us, and learn a little bit about the sales tax compliance issues that are out there. If there’s anything else we can do to help you, please feel free to contact us. Rick, do you have anything else?
Rick: Yeah, just a couple of final words. Everyone, the same thing goes and I try to sign off all of our things with that, which is, we’re here to help. A lot of people, for whatever reason, because of tech support they get from other companies. We answer our phones, we’re nice; if you ever have a problem with a store, usually one of the first good steps is to call us. I always forget our 866 number but it’s on the front page of our site. Otherwise you can call us at 858-490-2570 and we’re here 7am to 7pm Monday through Friday. Although that should be going 7 days a week here maybe next month.