Ring In A Stress-Free Tax Season This New Year
Article By David Joseph, co-founder, DAVO by Avalara
After the hustle and fervor of the holiday season dies down, many restaurant owners and managers look ahead to the new year. It’s a natural time to take a breath, assess, and plan. The beginning of the year is an excellent opportunity to look at ways to simplify and improve back-end processes that take up too much of your time and don’t add value to the business.
Sales tax is often one of those pesky, stressful back-end processes that elicits groans from business owners and managers. The good news? With relative ease, you can eliminate the hassle of sales tax. In fact, you may be able to automate the entire process. Ring in the new year by planning now to save yourself time and worry. We have three simple ways to get ready for a stress-free tax season.
3 tips to plan now for tax season
1. Review how your third-party apps are set-up
Third-party apps, such as Grubhub, Ubereats, and Doordash, are complex to manage because each creates an additional revenue stream. It’s important to review how these apps are set-up to not only ensure you have an efficient workflow but also to confirm you’re properly accounting for the revenue and sales tax.
Due to a recent Supreme Court ruling, states are changing laws around who is responsible for collecting and remitting sales tax for 3rd party app orders. In many cases, sales tax was collected by 3rd party apps and remitted to restaurants to file and pay to the state. But now, much of that is changing. Review your contract with each 3rd party app to understand which party is responsible for filing and remitting sales tax. You may be overpaying sales tax if you’re both reporting and paying to the state!
2. Make a plan for deadlines and any missed payments
Make sure you understand your state and locality’s deadlines for sales tax payments throughout the year. Add deadlines to your calendar and make a plan to start the sales tax process before the due date. By planning ahead so that you can file on time and pay in full, you can avoid any penalties and risk. You may even be rewarded! 27 states offer discounts for the amount of sales tax due when it’s filed and paid on-time.
If you’ve fallen behind on sales tax returns or payments, create a plan to catch up. File back sales tax returns – even if you cannot pay right now. Filing the returns shows a good faith effort that may help when negotiating a repayment plan. Having a sales tax system in place also illustrates a good faith effort to repay any back sales tax owed.
3. Create a system to save your sales tax funds
Having the cash on hand to pay the tax liability is a challenge for many restaurant owners. It’s easy to look at what’s available in the bank account and mistake sales tax collected for available funds. But in fact, it’s money collected and owed to the state. By having a system to set aside your sales tax funds, you’re ensuring you can meet your sales tax liability and avoid missed payments.
Depending on your business volume, you should plan to set aside the sales tax funds collected on a daily or weekly basis. Examine your POS reports to look at how much sales tax was collected. Create a separate checking or savings account to put that money aside so you know not to use it for other purposes. Move the sales tax collected over to that account on a very frequent basis.
Simplify Your Sales Tax Process: Automate It
While you can create your own manual sales tax process, you must also remember to follow it daily – if not, weekly. We said there was good news, right? There is a very simple way to automate the entire process through an app on your existing POS system. Set-up takes just a few minutes and then the app will take care of everything else – setting aside the funds, filing the return when it’s due and paying the entire amount due.
With an automated process, you’re guaranteed to pay sales tax on time and in full. No more headaches and stress about deadlines and paperwork. The risk of not having the cash on hand to pay the bill is eliminated. Plus, you may qualify for an on-time payment discount!
Sales tax automation apps, like DAVO Sales Tax, can eliminate the entire complicated, manual process and tasks associated with reporting, filing and paying sales tax. The app seamlessly integrates directly with the most popular POS systems. Set-up takes just a few minutes. If you get stuck or have questions, our highly-rated customer success team can walk you through every step of the process. The app is free to try for the first month. Check “sales tax” off your to-do list for 2023 – and beyond! Learn more at the DAVO website.
As a former restaurant owner, David Joseph is no stranger to the struggles of restaurant sales tax. A self-proclaimed sales tax evangelist, David co-founded DAVO by Avalara, a sales tax automation platform that integrates directly with the point of sale.