Navigating Sales and Use Tax with Alexis Sidney
Pam Jordan sat down with Alexis Sidney to tackle an often-overlooked, yet critically important topic for business owners: Sales and Use Tax.
Whether you're selling products, services, or both, understanding your tax obligations is essential for staying compliant and protecting your bottom line. In this conversation, Alexis broke down the complexities, highlighted common pitfalls, and shared actionable best practices for businesses of all sizes.
🔍 Key Takeaways
Sales and use tax rules vary significantly by state — there is no one-size-fits-all approach.
Product-based businesses face particularly complex obligations when selling across state lines.
Proper invoice itemization and separating collected sales tax into a dedicated bank account are crucial for compliance.
Nexus thresholds (economic or physical) can trigger out-of-state tax obligations; using software solutions can help manage this.
🏷️ Sales Tax Basics
Sales tax is a state-level tax applied at the point of sale on taxable items. However, not all states — or all products and services — are taxed the same way.
Key points to remember:
Rules differ by state, product type, and location of the transaction.
Some services are taxable depending on the state’s specific regulations.
Nexus means you may owe taxes in another state if you hit certain sales thresholds (either revenue-based or transaction-count based).
🛒 Use Tax Overview
Use tax comes into play when businesses purchase taxable items without paying sales tax — often through out-of-state suppliers or wholesale transactions.
Important notes:
Businesses must self-report use tax in many cases.
Ignoring use tax can lead to audit risks and fines.
⚠️ Common Pitfalls to Avoid
Alexis emphasized several mistakes she sees regularly:
Misunderstanding obligations for product-based vs. service-based businesses.
Improper record-keeping and poor invoice itemization.
Collecting sales tax but failing to remit it to the appropriate state authority.
Not filing returns, even if no sales tax was collected during a period (many states still require a $0 return).
✅ Best Practices for Sales & Use Tax Compliance
Want to stay on the safe side? Alexis recommends:
Research your state’s specific rules — use Department of Revenue websites.
Invest in sales tax software like TaxJar or Avalara for businesses selling in multiple states.
Open a separate bank account for collected sales tax to avoid "accidentally" spending it.
Properly itemize invoices, clearly distinguishing taxable and non-taxable items.
File returns on time, even during periods with no taxable sales.
🔎 Compliance and Audits
Sales tax audits are increasingly aggressive as states seek revenue. An audit can disrupt business operations and lead to major penalties if records are incomplete or inaccurate.
Pro Tip: Good record-keeping is your best defense against an audit.
🚀 Next Steps for Business Owners
If you want to stay compliant and protect your profits:
Research your sales and use tax obligations based on your business type and location.
Consider sales tax automation software if you sell across multiple states.
Separate collected sales tax into a dedicated bank account.
Review your invoicing process to ensure proper tax itemization.
Work with a tax professional to optimize your compliance and strategy.
🎧 Final Thoughts
Sales and use tax compliance may feel overwhelming, but it’s manageable with the right systems and support in place. Alexis Sidney made it clear: being proactive now saves you from expensive problems later.