The not-so-funny complexities of sales tax

In episode one of our three-part “Finance in the Clouds” mini-series, we sat down with George Padilha and Sam Blass of Avalara to discuss the complexities of sales tax. Listen to the full episode here or wherever you get your podcasts.

Tabatha Buessing
Tagged In
3 min read
February 14, 2023

Next time you fancy yourself a bagel in New York, be prepared to dish out a few more cents if you want it sliced.

No, seriously. 

Believe it or not, sliced bagels cost more than unsliced ones in New York state. 

Silly, right? But why?

Oh, you already know, don’t you? That fun little thing called sales tax.

Turns out New York state deems sliced bagels prepared foods, which carries a sales tax. Though this might be no big deal for consumers looking for a quick breakfast, it’s one of many complexities that can wreak havoc on a company’s finance operations if they’re not prepared with the most up-to-date information and innovative technologies.

And that information changes a lot. “There were 32,000 sales tax changes in the last couple of years alone. Being able to keep up with that is really tough,” says George Padilha, Strategic Alliance Manager at Avalara.

Thirty-two thousand. Woof. That’s a lot to learn (I’m out of breath just thinking about it).

Check out this podcast episode to find out how to handle those complexities. For now, let’s take a look at some sales tax facts you can whip out at your next cocktail party.

3 Weird and Wacky Sales Tax (Fun) Facts

Donuts in Texas

If you buy five donuts or less in the state of Texas, it’s taxable. However, if you buy six donuts or more, there’s no sales tax. 

I donut about you, but I don’t see myself having to pay taxes on donuts next time I’m in the Lone Star State. 

Hershey Bars in Indiana

If you buy a Cookies ‘N’ Creme Hershey bar in The Hoosier State, it’s tax-free. However, a regular Hershey bar is taxable.

Here’s why: A Cookies ‘N’ Creme Hershey bar is tax-free because it contains wheat flour, and wheat is a subsidized item in Indiana, which makes it tax-free.

Snow Removal in Ohio vs. Illinois

The sales tax complexities extend beyond products and apply to services, too. In Ohio, getting your snow removed is a taxable service. But just a couple of states over in Illinois, it’s tax-free. 

Confused yet? Me too.

Why is sales tax compliance so important?

The answer might seem obvious, but it’s an important question to ponder, because the consequences of not complying with sales taxes are severe.

In short, complying with sales taxes is vital because there’s no headache for a company quite like a tax headache. 

“If there’s one quickshot to a company that can set everything back rather quickly, it’s a letter in the mail from the tax man,” says Sam Blass, Sales Executive at Avalara. So, to set yourself up for success, Sam notes how it’s important to get in front of tax compliance so you can pave a path that’s void of roadblocks or speed bumps in the future. 

To do so, he says companies need to ensure they’re doing at least these three things:

  • Accurately collecting from the very beginning
  • Passing on a necessary sales tax to the end user 
  • Substantiating a sale with an exemption certificate

“These are all things that can allow you to avoid any of those future headaches when a state comes calling in regards to the sales tax compliance,” says Sam. 

Listen to the podcast episode to learn more

Check out the full podcast episode with Jake, Sam, and George to learn about:

  • The complicated tax law that led New York State to sue Amazon
  • How to manage sales tax complexities 
  • When to start looking into an automation solution for sales tax

And much more…

Quote of the episode

“I don’t find much of it funny because I’m on the frontlines and I deal with a lot of the frustrations of folks that have to navigate the sales tax base. So, funny is not the word I would put—more so frustrating and complex.” – Sam

Listen to the full “Complexities in sales tax” episode here or wherever you get your podcasts.

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