How to account for multiple sales tax registrations within one company entity?

Accounting for multiple sales tax registrations 

Companies that operate in multiple countries or jurisdictions may be required to collect and report sales tax to multiple tax authorities, each with its own laws, rates, exemptions, and credits. Thus accounting for multiple sales tax registrations within one company entity can be a complex and challenging task. There are two types of multiple tax registrations:

• Sales tax or VAT registrations in multiple countries
• Multiple sales tax registrations within one country

Sales tax or VAT registrations in multiple countries

This can include complying with different tax laws and filing tax returns for each agency. It can also involve managing different tax rates, exemptions, and credits for each agency.

For example, an e-commerce seller with customers in two or more countries may be subject to multiple tax registrations. Amazon and other marketplaces are now acting as facilitators for taxes, but apart from Amazon sales, you may receive tax credit in the form of bills from Amazon with reverse charge or VAT paid on import and so on, which you may have to report yourself.

And a worldwide business may have to comply with different tax laws and regulations in each country where it operates.

If you sell products or services to customers in multiple countries in Europe, Asia or Africa, you may be required to register for VAT in each country where you have customers and to collect and remit VAT to the relevant tax authority. The VAT registration threshold and the VAT rate can vary from country to country, so it is important to be familiar with the VAT requirements in each country where you have customers.

In the European Union (EU), there are various VAT registration requirements for e-commerce sellers based on the location of the seller and the location of the customer. For example, if you are an e-commerce seller located outside of the EU but you sell products to customers located within the EU, you may be required to register for VAT in each EU country where you have customers.

Additionally, the EU introduced a new VAT system known as the “Mini One Stop Shop” (MOSS), which allows e-commerce sellers to register for VAT in one EU country and to report and pay VAT for sales made to customers located in other EU countries through a single online portal.

It is important to note that the VAT requirements for e-commerce sellers can be complex and can change frequently, so it is important to seek professional advice from a tax expert or accountant to ensure compliance.

Multiple sales tax registrations within one country 

In some countries, local tax regulations may require businesses to collect more than one tax on sales.

For example, in Canada, the Québec Sales Tax (QST) is collected only in the province of Québec, and in the United States, each state has its own tax registration. This can make it difficult for companies to stay compliant with all the different tax laws and regulations. Let’s have a closer look at indirect taxes in Canada and the USA.

In Canada, there are several different types of indirect taxes, including the Québec Sales Tax (QST), the Provincial Sales Tax (PST), the Harmonized Sales Tax (HST), and the Goods and Services Tax (GST). The thresholds for QST, PST, HST, GST in Canada vary depending on the province or territory.

In Quebec, the QST is a value-added tax that is collected on most goods and services purchased in the province. The QST rate is 9.975% and there is no threshold for this tax. All businesses operating in Quebec, regardless of size or sales, are required to collect and remit QST.

In British Columbia, the PST is a tax that is collected on most goods and services purchased in the province. The PST rate is 7% and there is no threshold for this tax. All businesses operating in British Columbia, regardless of size or sales, are required to collect and remit PST.

In the rest of Canada, the HST is a combination of the GST and the PST. The HST rate varies depending on the province and the rate can be found on the Canada Revenue Agency’s website. The threshold for HST varies from province to province, but generally, if a business makes over $30,000 in taxable sales in a year, it must register for HST and collect and remit the tax on its sales.

The GST is a federal tax that is collected on most goods and services purchased in Canada. The GST rate is 5% and there is no threshold for this tax. All businesses operating in Canada, regardless of size or sales, are required to collect and remit GST if they make taxable supplies.

It is important to note that these thresholds and tax rates can change periodically and it is always best to check with the relevant tax authorities to confirm the most up-to-date information.

In the United States, the threshold for sales tax varies from state to state and is determined by each individual state government. A sales tax threshold, also known as a sales tax exemption or de minimis rule, is the minimum amount of sales that a business must make before it is required to collect and remit sales tax to the state.

For example, in some states, the threshold is set at $100,000, meaning that businesses that make less than $100,000 in sales per year are exempt from collecting sales tax. In other states, the threshold may be set at a lower amount or there may not be a threshold at all. In such states, all businesses, regardless of the amount of sales they make, are required to collect and remit sales tax.

It is important for businesses to understand the sales tax requirements in the states where they operate, including the threshold for sales tax, to ensure that they are in compliance with all applicable sales tax laws and regulations.

Multiple tax agency accounting

Multiple tax agency accounting refers to the process of collecting and reporting sales tax to multiple tax authorities in different jurisdictions or countries. This can include complying with different tax laws and filing tax returns for each agency. It can also involve managing different tax rates, exemptions, and credits for each agency.

For companies registered in many countries for indirect taxes like sales tax, VAT, GST, HST, QST, this can mean reporting such tax collections and obligations in their balance sheet. Furthermore, these companies have to collect sales tax in accordance with local requirements and invoice their clients with the right tax rate. And last but not least, they have to report collected tax to each tax agency where they have registration and pay it.

It is a complex process and usually companies may need to hire a tax professional or accountant to ensure compliance. The problem was that there was no such online accounting software that could track all of it. Up until now.

Fiskl has a unique tax management feature to help companies deal with multiple tax collections and report them accurately in financial statements and tax reports. The software allows users to track their balance with each tax agency in reporting currency.

With Fiskl, each tax agency has its own account in the currency assigned by the user as well as any linked tax rates. This allows companies to easily manage financial transactions in different currencies and to accurately track tax collections and payments. Also, for companies that need to display multiple tax IDs on a single invoice, Fiskl has an easy way to set it up from the Tax management area.

In conclusion, accounting for multiple tax registrations within one company entity can be a complex and challenging task. However, with the right tools and resources, companies can stay compliant with all the different tax laws and regulations.

Fiskl’s unique tax management tool offers advanced features such as multicurrency support and multiple tax agencies, making it easy for companies to track their tax collections and payments and ensure global tax compliance.