Practice management software that tracks sales tax: what accounting firms should look for

Why sales tax is different from other recurring work

A business client with sales in several states can have a monthly return in one state, a quarterly return in another and an annual return in a third. Each has its own due date, its own figures and its own rules. Multiply that by every sales tax client and the calendar fills up quickly.

Many firms track this in a spreadsheet beside their practice management software, because the practice software focuses on workflow, client portals and billing. The spreadsheet works until a new staff member takes over, a client opens a new state account or a filing is quietly missed.

What sales tax tracking should cover

• Every filing, by client and state. State accounts, filing frequencies and due dates for each client, with recurring filings created automatically.
• A clear stage for each filing. For example: Waiting for Client, Ready to Prepare, Preparing, Ready for Review, Client Approved, Ready to File, Filed and Completed.
• A workpaper. Gross, exempt and non-taxable sales, tax calculated against tax collected, use tax, credits and the net payment due, with a review against the prior period.
• Jurisdiction detail. A breakdown by local jurisdiction where the state requires it.
• Exemption and resale certificates. Each certificate with its expiration status, so expired ones do not surprise you in an audit.
• Economic nexus. Each state’s threshold, the client’s activity there and whether the client is registered, so you can see a client approaching a threshold before it crosses it.
• Notices. Agency notices with response dates, linked to the client.

For a vendor-by-vendor view, see how BytesHood, TaxDome, Canopy, Karbon, Financial Cents and QuickBooks Online Accountant handle client sales tax.

Why it should live with the rest of your practice

When sales tax sits in its own tool, the same business is entered again, staff cannot see that the client also has an open notice or a payroll issue, and billing for the work happens somewhere else. When sales tax uses the same client record as returns, payroll tax, billing and the client portal, everyone works from one picture of the client.

What tracking software does not do

Tracking software organizes the work; it does not file returns or remit tax. Your firm still files and pays through each state’s own system, or through a filing service you choose. Be wary of any tool that blurs that line without saying who is responsible for the filing.