MLM Sales Tax Calculations: Here’s the Best Way to Stay Out of Trouble

Back to News February 21, 2019

MLM Sales Tax Calculations: Here’s the Best Way to Stay Out of Trouble

It’s easy to forget about it. It’s easy to put it off until the last minute. It’s easy to fall behind and think nobody will catch you.

So, consider this your warning: staying on top of MLM sales tax calculations is serious business. So serious, in fact, that if you let it slide, you could land in jail.

We hope you’ll take a few minutes to read this article all the way through—and even more importantly, to follow our recommendations for making sure you’re in compliance.

Why Calculating Sales Tax Is Such a Pain

Calculating MLM sales tax is, unfortunately, one of the most complex parts of running your business. Why? A lot of it has to do with the very nature of the internet.

Sure, the internet has been a boon for the direct selling industry overall. Instead of calling or visiting people in your network and filling out paper forms every time you want to place an order, you and your downline can now take orders online and have products drop-shipped to your houses.

But from the very beginning of ecommerce, the question has lingered: “Shouldn’t we be paying tax on all this stuff we’re buying and selling?”

City and state governments took a while to implement laws and establish judicial oversight for ecommerce. But they’ve caught up, and today we’re all responsible for knowing what they expect of us.

There are now comprehensive tax laws covering a broad spectrum of products and jurisdictions. The new and ever-evolving requirements of MLM sales tax calculation are incredibly complex—often imposing multiple rules and conditions for similar products even within a single ZIP code.

Adding to the complexity, some states require individual sales reps to report sales tax, while others allow the direct selling company to do that for them. And consider this: based on what your distributors are selling, where they’re selling it, and what states their customers live in, they (or you) could be on the hook for complying with a whole host of different sales tax laws.

These laws establish both financial and criminal penalties for those who don’t comply. Saying you didn’t understand these incredibly complex laws will be no defense.

This leaves you with two options. You can add tax professionals to your staff to keep up with rates, rules, and laws that can change at any point throughout the year.

Or, you can use an automated tax compliance solution that’s integrated with your ecommerce system. This approach will free your staff from having to keep up with ever-changing laws and give you more time to focus on growing your business.

An Integrated Solution for MLM Sales Tax Calculation

If you’re still reading this article, we’re guessing you didn’t run off to interview tax professionals. We’re also guessing you’re open to using an automated system to help you stay on top of MLM sales tax.

Since its first release, Thatcher’s Prowess direct sales platform has offered built-in integrations to proven cloud-based sales tax providers such as Avalara and Squire. This helps ensure that the appropriate calculations happen with every transaction.

These tax calculation services virtually eliminate incorrect values and calculations by automatically updating to the latest tax regulations to help ensure that you’re compliant with the law. And because they’re integrated with your business platform, there’s virtually no chance you’ll ever let sales tax calculations fall through the cracks.

Thanks to the integration between Prowess and these cloud-based providers, you can:

• Reduce your legal and financial risk.
• Streamline your implementations that include sales tax integration services.
• Create comprehensive ecommerce solutions for your enterprise.
• Migrate your legacy environment to a compliant platform with more capabilities.

Don’t let MLM sales tax calculations tie up your staff, give you headaches—and maybe even land you in legal trouble. Ask us about our integrated solution for calculating sales tax.


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