Avalara, a leading provider of cloud-based tax compliance automation for businesses of all sizes, announced the availability of Avalara Consumer Use, a new product that helps finance professionals quickly self-assess their consumer use tax obligations and achieve compliance. Referred to by some in the tax industry as low-hanging fruit, consumer use tax presents audit risk for businesses because it’s often mismanaged or overlooked.
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“During times of economic uncertainty, savvy businesses often focus on internal efficiencies, like compliance and savings, to fuel growth on a shoestring budget”
Consumer use tax self-assessment poses risks to companies
Consumer use tax is owed by a buyer when they’re not charged the full amount of sales tax on a purchase, or the item is used in another location or for a different purpose. If the usage or location of an exempt item changes, then the business likely triggers a use tax obligation. For example, when a business purchases an item and places the item in its inventory for resale, the business is not charged sales tax. However, if the business brings the item out of inventory and uses it for its own business, then the business becomes its own customer and is obligated to pay consumer use tax.
Due to the nuanced nature of events that can trigger a use tax obligation, finance professionals must manually self-assess liabilities for their businesses. The self-assessment process is resource-intensive and often prone to errors due to the complexity of tax rules and rates, which can leave businesses at risk of an audit.
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