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The Naked Truth About Sales Tax in the Apparel Industry

Posted by jtolman to Partner Updates on March 26th, 2014

Sales tax on clothing and apparel dives into the deep dark caverns of product taxability, an area of complexity so arcane, even the most intrepid sales tax expert can fall behind. Luckily, Avalara has shared these four truths that provide insight into effective sales tax management:

  • First truth: You can’t 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 don’t 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’s planned, sometimes due to changes in regulations or jurisdictions.
  • Third Truth: Sales tax holidays change more frequently than skirt lengths. It’s 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’re 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’ll 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 and handle it. You can pay a bunch of 3rd 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.

Want more information? Download Avalara’s newest whitepaper, “From Corsets to Choir Robes: Sales Tax Compliance in the Apparel Industry,” to learn more.

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