Are Multi-State Tax Calculations Slowing Your Business Down?

Taxes and fees placed on top of the sales price for fuel and lubricants provide funding for city, state, and federal programs in addition to particular community needs.  Yet, the sheer number of taxes that may apply to a product and the different calculation methods create a complex puzzle to achieve compliance.  If you’ve ever wondered what stressors your accounting team is working under, take a look at how taxes apply to our industry:

  1. Multi-state tax calculationsTypes of taxes.  In general, two types of taxes may apply to the sale of petroleum:  excise taxes and sales taxes.  Excise taxes are taxes imposed on various goods, services, and activities, including petroleum products.  These taxes may be imposed on the manufacturer, retailer, or consumer based on the specific tax.  On the other hand, sales taxes are taxes levied on the sale of goods and services and are usually calculated as a percentage of the purchase price and collected by the seller.  Other local, city, state, and federal taxes and fees may also apply to the sale of fuel, such as the Federal Oil Spill Tax, state-level underground storage tank taxes, etc.
  2. Application to products.  All other factors remaining the same, two products sold by the same distributor to the same business, may be subject to different taxes.  For example, one state may exempt pure biofuels from sales tax while blended fuels are subject to sales and excise taxes.  Or, a state may apply excise tax to lubricants sold within the state but not when that product is sold to neighboring states.
  3. Jurisdiction.  In some states, sales taxes are based on the point of sale, while others calculate the tax on the place of destination.  Some states have special purpose tax districts where local fees or extra taxes must be applied–so specific that two businesses across the street from each other could have different rules for sales and excise taxes.
  4. Order of calculation.  Some jurisdictions require excise tax to be calculated first, and then sales tax to be applied to that total–effectively a tax on top of a tax.  Other jurisdictions require them to be calculated on the product’s price individually and added together at the end.  One sale that includes multiple products could very likely have some taxes apply to select products and not others.

If you feel slightly dizzy from reading this information, you now have an understanding of how your accounting team feels by the time they clock out in the evening.  Multi-state tax calculations are a complex web of detailed rules and policies that must be adhered to in every sale.

What is the best way to manage the multi-state tax calculations complexity?

Modern Enterprise Resource Planning (ERP) software solutions can do the hard work for you.  Today’s best software solutions will easily handle Federal, state, local, sales, and excise taxes.  Plus, an integrated system will also calculate customer pricing based on the client or product and integrate rack pricing and freight calculations in the mix.  Regardless of your customers’ locations or the products they purchase, an ERP solution will ensure accurate invoicing every time and simplified tax reporting that meets tax regulation requirements.

WEnd Consulting can help you find the right ERP solution for your business.  We work with petroleum companies throughout the country to connect them with the right solutions for their business needs.  Our staff will work with you to conduct a business process review, evaluate options for functionality and pricing, help you negotiate a solid contract, and provide you with resources and support through implementation.

Better yet, eliminate the multi-state taxation headache by outsourcing your accounting function.  WEnd Consulting has an internal team of accounting professionals with petroleum industry expertise.  We eliminate errors that come with many other outsourced programs by working within your software platform to conduct the work.  Our team will ensure your accounting work is accurate and meets all the complex taxation rules for your locations.

Give our team at WEnd Consulting a call today, and let’s get started!

Reader Interactions

Leave a Reply

Your email address will not be published. Required fields are marked *