Sales tax on clothing and apparel dives into the deep dark caverns of product taxability, an area of complexity so arcane that even the most intrepid sales tax expert can fall behind. Luckily, there are four truths that can provide insight into effective sales tax management.
First Truth: You cannot be a tax expert in every state.
45 states have sales tax (not to mention if you ship outside the US!) Do you have the time or people to be an expert and keep up on how they change?
Second Truth: You do not know which clothing and apparel items are tax-exempt until you know which clothing and apparel items are tax-exempt.
Product taxability and exemptions change frequently. Sometimes it is planned, sometimes it is due to changes in regulations or jurisdictions.
Third Truth: Sales tax holidays change more frequently than skirt lengths.
It is always a holiday somewhere, or so it seems. Tax holidays come and go, sometimes to stimulate more shopping, sometimes supporting local merchants. Do you know what changes when?
Fourth truth: Content is king.
Whether you are a clothing and apparel retailer, manufacturer or distributor, managing product taxability as your business grows and as your product catalog changes is impossible. When it comes to sales tax compliance, access to product taxability content, like access to quality materials, is critical.
Managing sales tax is just a cost of doing business and you need to do it right or you can expose your business to audit risks. So, what are your options? You can try to do it on your own, you can hire your own tax team to try to handle it, you can pay a bunch of third party accountants to manage it, or you can automate it with a company that offers a solution that marries compliance with technology. Whatever you do, you cannot bury your head in the sand and think it will go away.
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