Accounting Software

Article Dean Dorton

Drop shipping can be a big boon for online sellers, especially small businesses that don’t have the funds or space to stock up on and store inventory. With drop shipping, sellers can take orders from customers for an item and then turn around and order that item from a supplier, which then ships it to the customers. The seller doesn’t have to handle the physical item at all, the customer gets his or her order, and everyone’s happy.

In many ways, this is a win-win, but using drop shipping can create complexity when it comes to sales tax.

Know your nexus

As with any sales tax situation, the first step is knowing where you have nexus or a relationship with a certain jurisdiction that requires you to collect sales taxes. In general, if you have nexus in a state, you will be responsible for collecting the right rate of sales tax for that state on any sales to customers within that state. That applies whether you are using drop shipping or delivering in some other way.

What if you don’t have nexus, but your supplier does?

Drop shipping can be tricky precisely because it’s not only the seller’s nexus that comes into play but, potentially, the supplier’s or shipper’s nexus as well. As the seller, you are generally only obligated to collect sales taxes on the sale when the seller lacks nexus, including California, Connecticut, Florida, Hawaii, and others. In turn, the supplier’s obligation could require you as the seller to either pay sales tax to the supplier or to come up with an exemption certificate so that you don’t have to pay tax.

Exemption certificates

In most states, sales taxes are only levied on retail sales, not wholesale transactions. In this case, even if your supplier has nexus, the supplier will not have to collect sales tax on the transaction with you as long as the supplier can present valid resale exemption certificate from you, the seller.

However, even if the sale between you and the supplier is exempt, if you don’t provide the supplier with a valid resale exemption certificate, that transaction can be considered a retail rather than a wholesale sale and could legally obligate the supplier to charge you sales tax on the transaction.

Resale exemption certificate procedures are individual to each state. Many states will accept an out-of-state resale certificate, multijurisdictional form or alternate documentation in a drop-shipping situation.

However, in the states that don’t accept these, the seller may have to deal with some unexpected requirements. For example, in California and other states that have stricter requirements for resale certificates, a seller may have to register with the state in order to provide a valid exemption certificate. By registering in order to get a certificate, the seller would now be obligated to collect sales taxes from customers in that state even though the seller previously did not have nexus.

Creating nexus with drop shipping

In some states, the use of a drop shipper in the same state as the customer by an out-of-state retailer can create nexus for the seller. States, where this may be an issue, include California, New York, Texas, and Florida.

Getting it right

Drop shipping can be a successful solution for sellers, but it can also add new layers of sales tax complexity. One way for businesses to make the most out of drop shipping and other innovative solutions is sales tax automation software such as Avalara AvaTax. AvaTax’s accuracy is 100% guaranteed, so you can be sure that you’re getting sales tax right no matter how your products are getting delivered.

For more on the rules for online retailers around drop shipping, download the whitepaper – Shipping and Not Handling Sales Tax.

Article Dean Dorton

 
Repost from Avalara: Dealing with sales tax can be a ghoulish task, especially if you do business in multiple states. The rates and rules vary widely by state and it can be frighteningly difficult to know how to calculate and apply them correctly. Take Halloween, for example. Who doesn’t love to dress up in costume, carve pumpkins and indulge in seasonal sweets? But figuring out if and when to apply sales tax to these getups and goodies is far from a treat.

Pumpkins

There’s something magical about transforming garden-variety gourds into grinned jack-o’-lanterns. But be aware: not all pumpkins are created equal. In some states like New Jersey, Pennsylvania, and Washington, taxability depends on if your pumpkin is tricked-out or treat-worthy. Pumpkins to be used for decoration ( painted, varnished or carved) are taxed while pumpkins used for food ( like pie) are tax-exempt. Massachusetts is a little more lenient; the decorating needs to have already happened to tax to apply. Pumpkins sold in their raw state are exempt, even if you carve or paint them after purchase. In Iowa, all pumpkins used to be taxed, head to the pumpkin patch. Pumpkins are exempt only when sold by the person or corporation that planted, cultivated, and harvested them, and the seller must provide proof of origin for buyers to get the exemption.

Costumes

Sales tax holidays aren’t just for back to school supplies. In states like Georgia, you can snap up Halloween costumes for the whole family during this tax-free period. But in Texas, the exemption applies only to kids’ costumes. In Vermont, costumes are exempt but costume masks and other accessories aren’t. In Georgia, both costumes and mask are tax-exempt if sold as a set, however, if sold separately, the mask is taxable but costume apparel is exempt.

International borders are trickier. Import taxes can really carve a chunk out of your costume budget in tariffs and duties. In the 1990s, the US Court of International Trade reclassified imported textile garments- including costumes- as “wearing apparel” ( subject to duty) instead of “festive articles” ( duty-free), based on a lawsuit brought ironically by a customer company. The amount of the duty varies by article. For example, a multi-piece Santa suit has different tax rates charged on the trousers, jacket, bread, wig, shoes, gloves even the sack-ranging from zero ( tax-free) up to as much as 32 percent.

Candy

Handling out candy for Halloween? Don’t get tricked into paying more for those treats. Some states, including Washington, North Carolina, Illinois, Colorado, and Connecticut have a lower sales tax rate for items classified as “food” based on having flour as an ingredient. This includes some candy items like Kit Kat and Twix. The flour factor can shows just how nuanced states can get with product taxability and complicated it can be for sellers to get sales tax right. In fact, as an investigation in North Carolina uncovered that retailers were overcharging sales tax on candy that should have been exempted under this rule.

States sales tax regulations can be tricky and it’s no treat trying to figure them out on your own. It’s easy to get caught up in the complex web sales tax rules and rates. You know what else is scary? Trying to manage sales tax without dedicated software to do it for you. Ward off the evils of calculating tax and filing returns by automating sales tax in your ERP, e-commerce or billing system with Avalara AvaTax. For the bigger story on better sales tax management, check out A Tale of Two Accounting Departments.

Article Dean Dorton

Still Using Spreadsheets for Your Accounting? It’s Time to Make a Change

Cloud-ERP-switch-Oct-1-blog.jpgYou are a leader in your company and understand numbers. You know you can gain efficiencies and improve ROI by replacing your current accounting system that relies heavily on spreadsheets with a Cloud ERP.

You’ve read thousands of articles, blogs, whitepapers and advice columns confirming that using Excel spreadsheets to complement your financial accounting software is time-consuming and error-prone.

But, still, you’re not getting any traction with the management team. They’re on the fence. Unconvinced. And you wonder: Why, oh why, do they want to continue to use Excel for finance and accounting functions?

Here are some of the most common objections I’ve heard from people who don’t want to give up their spreadsheets and replace them with an accounting software like Intacct. (And I have an answer and a few facts for each objection… )

“It’s fast and reliable.”

Maybe it’s fast if you’re an expert, but it’s definitely not reliable. Hard drives fail and servers crash. Intacct data in the cloud is protected by encryption, real-time transactional data backup and daily full data backup and is always available (1). Intacct guarantees 99.8% uptime (2).

“With Excel the possibilities are endless.”

Yes, but how much time do you spend creating each report? If you are a fast moving company, then you need reports that update in real time and are available on demand –without spending time to download and combine data entered into a spreadsheet. Intacct reporting gives you the capability to easily create reports, graphs and dashboards using dimensions that are updated constantly with new data, and you can do it all without exporting data to a spreadsheet (3). Use the more than 150 prebuilt accounting or financial reports or build your own customized report within Intacct.

“We already have Excel; it is cost effective.”

Intacct customers average an ROI of over 250% (4). DataXu cut monthly financial consolidations from 20 to 8 days across all entities (5). EZShield is saving a great deal of time on employee expense (6) and WebAssign saved $130,000 in annual salary costs (7). There are many more customer success stories on the Intacct web site.

“Excel is the best tool we have for complex calculations such as revenue recognition”.

Really? Will it handle the complexities that are coming with ASC 606? What happens when the terms change on contracts that have tiered pricing or when contracts are changed to add or drop users? You need an accounting system that will standardize and automate these processes as well as ensure compliance with the new standards. Intacct has a contract and revenue management module that gives you the tools to comply with ASC 606.

I’ve heard many more objections for giving up spreadsheets. For each objection, I always find an Intacct advantage. To name just a few…with Intacct:

you don’t have the risk of handling formulas that could eventually get corrupted.
you always know who made a journal entry or any change.
supporting documents are stored in the system making it easier to answer auditors’ questions.
the system automates your process saving you time.
you have a system that grows as your company grows.

Contact us so we can help you create a solid business case for your company to get an accounting system that will grant you independence from Excel spreadsheets.

Article Dean Dorton

For those companies dealing with international sales and multicurrency management, the multicurrency capability is a necessity. Intacct provides multicurrency in a real-time environment throughout the ERP system. By enabling Multicurrency in Intacct, users can create and process transactions in an unlimited number of currencies. Intacct accounting transactions can be recorded against any currency, and because Intacct is a real-time processing system, financials are automatically converted to base currency for on-demand reporting.

Behind the scenes, Intacct derives its currency information from OANDA – an internationally recognized organization that provides live currency translation. Activity recorded in Accounts Payable and Accounts Receivable can be recorded against any currency, and when payments are recorded, currency adjustments are automatically calculated by Intacct. Cash transfers between bank accounts of differing currencies are also automatically adjusted for differences in exchange rates at the time of transfer.

Intacct’s multicurrency capability is also compliant with GAAP, as well as Sox, GAPP, IFRS, FAS52, FAS141R, and EITF 87-12. With the additional of the IGC (Intacct Global Consolidations) module, Intacct extends the capability of Multicurrency to reporting consolidated financials in base currency for multiple business entities, as well as overall consolidation of a business enterprise whose subsidiaries are operating in differing currencies.

For more information on Intacct Multicurrency module and how it can make your global business operations more efficient, contact us.

Article Dean Dorton

It’s been talked about for many months now and the new FASB guidelines for nonprofit organizations are here – or at least the first phase.
We sat in on the FASB webcast “IN FOCUS: Accounting Standards Update on Not-for-Profit Financial Statements (ASU 2016-14)” and here are the key takeaways from the presentation.

The key objectives recommended by FASB’s NFP Advisory Committee (NAC) are as follows:

• Update, not overhaul, the current model
• Improve net asset classification scheme
• Improve information in financial statements and notes about:

  • Financial performance
  • Cash flows
  • Liquidity

• Better enable NFPs to “tell their financial story”

So, what has changed?

Phase 1 ASU 2016-14 issued in August 2016 has five areas requiring change.

Net Asset Classes – New FASB Guidelines for Nonprofit Organizations

The first area covered is Net Asset Classes, specifically the classification scheme, disclosure of board designated net assets, underwater endowments, and expirations of capital restrictions.

Another net asset classes change requires disclosure of board designated net assets.

“Underwater” Endowments with revised net asset classification and enhanced disclosures and was defined this way:

Revised net asset classification: to be reflected in net assets with donor restrictions rather than in net assets without donor restrictions.

Enhanced disclosures: in addition to aggregate amounts by which funds are underwater (current GAAP), also disclose aggregate of original gift amounts (or level required by donor or law) for such funds, fair value, and any governing board policy, or actions taken, concerning appropriation from such funds.
 

Expiration of Capital Restrictions is the final area impacted by net asset classes requirements. When it comes to gifts of cash restricted for acquisition or construction of PP&E (property, plant, and equipment), in the absence of explicit donor restrictions, NFPs would be required to use the placed-in-service approach (no more implied time restrictions). This is something nonprofit healthcare organizations are already required to do.

Expenses/Investment Return – New FASB Guidelines for Nonprofit Organizations

Expense Reporting

The new guidelines are looking to create better, more consistent information about expenses. Nonprofits are required to report expenses, either on the face of the financial statements or in the notes by Function (currently required in GAAP), Natural classification, and Analysis (disaggregate function by nature).

Nonprofit organizations are required to provide qualitative disclosures about methods used to allocate costs among program and support function. ASU also provides enhanced guidance on allocations from M&G expenses.

Reporting of Investment Return

Net presentation of investment expenses against investment return on the face of the statement of activities:

• Netting limited to external and direct internal expenses
• May report net return in multiple, appropriately labeled lines. For example, from different portfolios, in different net asset classes, or in operation versus non-operating

Disclosure of investment expenses no longer required (if reported, carefully label and don’t include in expense analysis). Also, it is no longer required to disclose investment return components.

Operating Measures – New FASB Guidelines for Nonprofit Organizations

Reinforcing current GAAP requirement about transparency of components of any operating measures presented:

Nonprofit organizations utilizing an operating measure that reflects governing board designations, appropriations, and similar actions (internal transfers) must report these types of internal transfers appropriately disaggregated and described by type (either on the face of the statement of activities or in the notes).

Liquidity/Availability – New FASB Guidelines for Nonprofit Organizations

When it comes to liquidity and availability of resources, nonprofit organizations are required to provide:

Qualitative information on how the organization manages its liquid available resources and its liquidity risk (in the notes).

Quantitative information that communicates the availability of an organization’s financial assets at the balance sheet date to meet cash needs for general expenditures within one year (on the face and/or in the notes).

Statement of Cash Flows – New FASB Guidelines for Nonprofit Organizations

Cash flow statement guidelines will continue to allow a choice between the Direct Method and the Indirect Method in presenting operating cash flows. However, indirect reconciliation is no longer required for Direct Method.

Summary – New FASB Guidelines for Nonprofit Organizations

The effective date for Phase I Accounting Standards Update on Not-for-Profit Financial Statements (ASU 2016-14) will be for organizations with fiscal years beginning after December 15, 2017 (for example calendar year 2018, fiscal year 2018-19) with interim financials the following year.

The rollout of Phase II is still to be determined. Some of the issues under consideration for Phase II include: whether to require a measure of operations; how to define a measure of operations; potential realignment within the statement of cash flows; and segment reporting for nonprofit health care entities.
 

Article Dean Dorton

Jet Express for Excel with Dynamics GP is one of Microsoft’s most up-to-date reporting tools yet. An extension included at no charge with Microsoft Dynamics GP version 9.0 or higher, it gives users the unique ability to create basic reports and business queries directly in Excel. Users are also able to effortlessly update their reports with real-time GP data; resulting in reporting information that is both accurate and timely. Not only is it free for customers, but it’s quite a powerful extension to add to your existing Microsoft Dynamics GP software. Below are a few tips for using Jet Express for Excel with Microsoft Dynamics GP.

“Alert” Parameters

One of the nice features of your Jet Express report is the ability to trigger reports be sent to yourself (or distributed to other team members) based on a set of “alert” criteria that you define. An example of this might be to create an alert when “budgeted results exceed actual” for a particular expense category or account.

Reporting Filters to Show/Hide Data – User Defined Box

When establishing filters for your report, it is important to pay close attention to the user-defined box which appears to the right of your chosen report filter. By checking the box, future users can choose to alter the filter criteria for the report, making the report interactive. However, unchecking the box prevents the user from doing so, and acts to keep that specific reporting filter unchanged with each successive running of the report (remember that while the reporting filter remains unchanged, the associated financial data will always reflect real-time information when the report is “refreshed”)

Jet Function Wizard (Jfx) for the GL – “Budget” parameter

Budgets are associated with a specific year in GP, so when designing your report using the Jet Function Wizard (Jfx) for the GL, be sure that you budget and fiscal years coincide; or the report will return a -0- value for your budget!

Jet Function Wizard (Jfx) for the GL – “Help” Tab

The “Help” tab within the Jet Function Wizard serves to turn the parameters you’ve chosen for your report into an easily understandable sentence structure; enabling you to verify that your chosen parameters will result in your desired report. An example appears below:

Parameters

“Where” = cell
“What” = balance
“Account” = SE6

Help Tab Display

“Retrieve the current balance for a set of accounts”.

In this example, the current balance would be returned for the account number referenced in cell SE6, with the result placed in the cell you have designated.

Using Table Builder for Multi-Table Reports

Using the Jet Express for Excel “Table Builder” design tool, you can link information contained in one or more Dynamics GP tables, filter the information within each table, and then create a new “combined” table for future queries. Once the combined table has been created and the associated query is run, creating an Excel pivot table will display your tabular results in a user-friendly report format.

Automatic Report Formatting

Jet Express allows for some automatic formatting of your report using certain “key” words. Typing the key word “Fit” in row 1 of your report design will ensure that the columns in the report will automatically resize themselves should there be a large amount of data contained within the cell. Placing the key word “Hide” in row 1 of the column you’d like hidden, or in column A of the row you’d like hidden will automatically hide that particular column or row. To hide an entire sheet, enter “+HideSheet” in cell A1 of your worksheet.

Wildcard Filters & Order of Operation

Jet Express supports some commonly used reporting filters such as <, > and =, but also allows for the following wildcard filters:
* *jet* those fields containing the word “jet”
*jet those fields ending with the word “jet”
jet* those fields beginning with the word “jet”
? Mass?y those fields with values such as “Massay” or “Massey”

A specific order of operations can be combined with existing filers as seen in the example below:
30 l (>10&<20) those with field values of 30, OR having field values greater than 10 and less than 20. Jet Express for Excel with Microsoft Dynamics GP is a fabulous reporting tool for Dynamics GP users; combining real-time reporting of GP’s existing financial data with the familiarity of Microsoft Excel to engineer better and more consistent financial reports for all team members. Contact our office to take advantage of this freely available solution!