Moderated by Kate, Financial Technology Advisor at Hyperbots
Kate: Hello, everyone. My name is Kate, and I’m a financial technology advisor here at Hyperbots. Today I’m absolutely thrilled to have the amazing Claudia Mejia with us. Hello, Claudia! How are you doing today?
Claudia Mejia: Hi Kate, nice to see you again.
Kate: Yeah, nice to meet you. It’s so wonderful to have you here. For those tuning in, Claudia is the managing director at Ikigai Edge Consulting. Today we are diving into a crucial topic, handling overcharged sales tax invoices. Let’s get started. So, Claudia, let me ask you the first question. What should a company’s first step be if a vendor has overcharged sales tax on an invoice?
Claudia Mejia: Well, the first step is to contact the vendor. Obviously, we want to have a really good relationship with vendors and ensure they have proper tax controls and follow tax regulations. That said, you contact the vendor, ask for a new invoice, and ensure the correct tax amount is applied. It’s essential that the taxes align with state and local regulations. You never want to underpay or overpay; you just want to pay what is right according to the state regulations. If you’ve been overcharged by whatever percentage, you simply request a reissued invoice.
Kate: That makes sense. Moving on, why is it best to ask the vendor to issue a corrected invoice rather than paying the overcharged tax amount?
Claudia Mejia: Well, you never want to overpay tax, right? It also creates a lot of administrative burden when trying to get a refund from the state or cleaning up those transactions. The cleaner way is to have accurate books on both sides, ensuring there’s no unnecessary cash flow leaving the company. It’s just important to have accurate records and follow regulations.
Kate: I completely agree with you on this. So, if the vendor is unable or unwilling to issue a corrected invoice, what options does the company have?
Claudia Mejia: The company can pay the invoice and then file a refund or credit with the state tax authority. Obviously, that’s not ideal. It involves administrative work and a lot of follow-ups to get the credit. You can get a refund if the state permits, but it’s a process you’d ideally want to avoid.
Kate: Understood. Coming to the next question, could you explain why overcharged sales tax might require state-level intervention if the vendor doesn’t correct the invoice?
Claudia Mejia: The state has the authority to issue a response. If the vendor doesn’t issue a new invoice, the buyer can request a refund directly from the state. The state can also intervene and respond to the vendor if needed. For the state to process refunds, documentation must be very well-presented, showing evidence of the overcharge.
Kate: That was very insightful. So, Claudia, why is it important to keep records of communication with the vendor and any refund requests made to the state?
Claudia Mejia: Well, as we’ve discussed before, it’s crucial to maintain clean records and transactions for audit and compliance purposes. Ideally, you’re proactive about addressing overcharges or undercharges. Documentation is key to making a case with the state if the issue isn’t resolved through the vendor. Having thorough records makes it much easier during audits, showing that you’ve been proactive in handling these processes.
Kate: I understand. We’ve reached almost the end of our discussion today. The last question is: What is the best long-term approach if overcharging becomes a recurring issue with a vendor?
Claudia Mejia: You always want to maintain a good relationship with your vendors. Communication is key. If a vendor has overcharged you multiple times, you need to understand what’s happening. Are their tax rates not updated in their systems? What controls do they have in place? You can have an honest and constructive conversation to address the issue. However, if the problem persists and solutions aren’t forthcoming, as a buyer, you may need to consider switching vendors. Recurring issues create administrative burdens, so it’s essential that vendors follow tax regulations and compliance requirements.
Kate: That’s a very interesting point. I agree with you on that. Thank you so much, Claudia, for joining us and sharing your insights, and a big thanks to all our listeners. I’ll see you soon. Have a great day ahead.
Claudia Mejia: Thank you, Kate. Nice to see you.
Kate: Nice to see you.
Moderated by Kate, Financial Technology Consultant at Hyperbots
Kate: Hello, everyone! Good morning. My name is Kate, and I’m a financial technology advisor here at Hyperbots. Today, I’m thrilled to have John with me. Hey, John, how are you doing today?
John Silverstein: Great, thanks for having me again.
Kate: Thank you for joining us. So, a little bit about John—he’s the Vice President of Finance Process and Accounting at XR Extreme Reach. Today, John and I will be discussing the nuances of New York State’s sales tax system and how businesses can keep up with the complexities of compliance. Let’s get started. So, coming to the first question, can you provide an overview of New York State sales tax rules, particularly regarding which goods and services are taxable, and which are exempt?
John Silverstein: Yeah, in New York State most things are taxable for personal goods, including electronics, clothing above $110, and home goods. Essential items, however, are not, such as unprepared foods. Prescription medications are exempt. Services are generally exempt, though there are exceptions to that as well. For example, admission to entertainment events and some repair services are taxable. Utilities, like electricity, are taxed differently across jurisdictions.
Kate: Understood. So how does New York State’s sales tax rate vary across different jurisdictions?
John Silverstein: Yeah. New York sales tax has a base tax rate of 4%. However, local jurisdictions add additional rates, which leads to significant variation across the state. For example, New York City has a combined rate of 8.875%, while other areas, such as Nassau County, have rates around 8.625%. These local adjustments mean that companies across the state with a presence need to be especially diligent in tracking local rates and what they would have to charge if they were in multiple jurisdictions.
Kate: I agree. So how frequently do these sales tax rates change in New York State, and what factors contribute to these changes?
John Silverstein: Yeah, so the sales tax rates in New York can change every quarter. That’s often—many other states only make annual adjustments, or it’s not as frequent. However, New York allows for changes every quarter, especially when local governments adjust the rates to meet revenue needs or when special district taxes are implemented. The State Department of Taxation and Finance oversees these updates, but the local jurisdictions have flexibility in setting their own rates, especially in the urban areas where there’s higher demand for public services.
Kate: That does make a lot of sense. Moving on, what are some of the biggest challenges for businesses trying to keep up with these fluctuating sales tax rates?
John Silverstein: The biggest challenge is the complexity created by having over 70 counties, cities, and school districts with all their own tax rates. Companies with multiple New York locations or an e-commerce presence have to continually monitor and apply these changes accurately. This can quickly become a manual and error-prone process, particularly for businesses processing a large number of transactions. And the key point there, too—it’s not just your presence in retail, it’s also e-commerce, where you’re selling in customer locations.
Kate: Wow! That sounds like quite a task. So where do companies find reliable information on New York State sales tax rates and any recent changes?
John Silverstein: Yeah, similar to most states, the New York State Department of Taxation is the primary source for sales tax rates and regular updates. It also has a sales tax web file tool with a downloadable list of the tax rates by jurisdiction.
There are other resources, too, that include tax compliance platforms like Hyperbots and Avalara’s AvaTax. They automate these tax calculations and track the updates across jurisdictions in real-time.
Kate: I understand. Could you maybe give an example of how a business might use these resources to stay compliant?
John Silverstein: Sure. Suppose a retail company operates across New York and sells both online and in-store products. Hyperbots and Avalara can automatically apply the correct sales tax rates for each sale, whether it’s in Manhattan or Buffalo. These tools continuously sync with the state’s databases, so if New York City adjusts its rates, the tools automatically reflect that change, minimizing your risk of under- or over-collecting sales tax.
Kate: That’s insightful. The next question: How can AI help companies stay updated and compliant with sales tax regulations, especially given the variability in New York’s local rates?
John Silverstein: AI can give you some peace of mind in this because it can have a significant role in tracking, updating, and implementing these sales tax rates. With AI-powered tools like Hyperbots, companies can monitor the Department of Taxation and Finance for updates. They can receive alerts when rate changes are detected. The AI system can even apply the correct tax rates based on customer zip codes, which ensures accurate compliance across New York’s many jurisdictions, not just at the state level.
Kate: That makes a lot of sense. So we have reached almost the end of our discussion today. The last question for today: Are there any specific AI tools or features you’d recommend for managing sales tax compliance in New York?
John Silverstein: Yeah. Hyperbots and Avalara’s AvaTax are both excellent choices. There are, of course, other tools out there. Real-time rate calculations and tracking are critical. You need to invest in these so you’re not trying to do it manually, where you run the risk of errors. It’s generally not worth it, particularly if you have any sort of volume in these jurisdictions. These platforms integrate with ERP systems, so it’s automatic. You can file your taxes and reports directly.
So you don’t have to deal with the administrative burden of hiring people to manage it. AI can also track and calculate rates and help companies focus on their operations instead of worrying about which rate should be applied to the invoice.
Kate: I couldn’t agree more with you, John, on this. Thank you so much, John, for sharing these valuable insights into managing New York’s sales tax requirements and how AI is transforming the compliance landscape. Thank you so much for joining us today.
John Silverstein: No problem. Have a great day.
Kate: Have a great day.
Moderated by Kate, Financial Technology Consultant at Hyperbots
Kate: Hello, everyone! Good morning. My name is Kate, and I’m a financial technology advisor here at Hyperbots. Today, I’m thrilled to have John with me. Hey, John, how are you doing today?
John Silverstein: Great, thanks for having me.
Kate: Thank you for joining us. A little bit about John—he’s the Vice President of Finance Processes and Accounting at XR Extreme Reach. Today we will be discussing Pennsylvania’s sales tax system. So let’s jump right in. Coming to the first question, is the fundamental question: what makes Pennsylvania’s sales tax system unique, and how does it impact businesses operating in the state?
John Silverstein: Pennsylvania is unique in that it allows jurisdictions to have different tax rates. Pennsylvania has a 6% statewide sales tax rate. For example, Philadelphia has a total tax rate of 8%, which can add complexity for businesses in multiple cities or counties within Pennsylvania. This means companies need to track not just at the state level but also the local taxes in metropolitan areas.
Kate: That’s an interesting point. Are there notable goods or services that are exempt from sales tax in Pennsylvania?
John Silverstein: Many goods and services are exempt. Clothing and footwear are exempt from sales tax across the state. Prescription drugs and certain medical devices are also exempt. However, digital products like ebooks or music are taxable in Pennsylvania, which surprises some businesses. It varies, so we must continue to review tax regulations by jurisdiction.
Kate: Yeah, I understand. Could you explain some of the challenges businesses face in keeping track of these exemptions and tax rates, especially if they operate in multiple locations?
John Silverstein: The biggest challenge is understanding exemptions. For example, food is generally exempt from sales tax, but prepared foods like takeout, restaurant meals, and some frozen meals are taxable. With multiple local jurisdictions applying different rates, businesses often struggle to stay compliant. In cities like Philadelphia, the tax rate could be 8%, while rural areas might only have a 6% rate. It varies by municipality.
Kate: I see. That brings us to the frequency of tax rate changes. How often do sales tax rates or exemptions change, and how do businesses stay updated?
John Silverstein: Sales tax rates in Pennsylvania don’t change frequently, but municipalities can adjust their rates more often. Philadelphia occasionally revises its local taxes. Companies must constantly monitor the State’s Department of Revenue and local tax authorities for updates. For example, if there is a rate change in Philadelphia, businesses need to adjust their systems immediately.
Kate: I understand. How does AI help businesses stay compliant with these frequently changing tax laws?
John Silverstein: AI can automate tax calculations and updates to tax tables, ensuring compliance with changes or adjustments. For example, if there’s a tax exemption update in Philadelphia, AI ensures the correct rate is applied based on the customer’s location. It also tracks regulation changes, notifying businesses of updates. AI can automatically apply new rates to transactions, eliminating the need for manual updates.
Kate: That’s very insightful. Could you provide an example where AI has helped streamline sales tax compliance for a company?
John Silverstein: One example is a retail business operating in both Philadelphia and Pittsburgh. The company had to track two different local tax rates—8% in Philadelphia and 7% in Pittsburgh. With an AI-powered sales tax system, the company no longer needed to manually calculate taxes for each transaction. AI automatically applied the correct rates for each location and adjusted for any tax rule changes.
Kate: Impressive. Now, with all the different rules in Pennsylvania, how can a business ensure it remains compliant, especially when it comes to exemptions?
John Silverstein: Keeping accurate records is key. AI can help identify exempt products, such as food versus prepared meals, ensuring proper application of exemptions. AI can also detect misclassifications in product categories, ensuring businesses don’t miss applicable exemptions. Additionally, AI helps keep item lists clean and updated with exemption status changes, such as during tax holidays for back-to-school items.
Kate: I totally agree with you, John. We’ve almost reached the end of our discussion today. Last question: what advice would you offer to businesses struggling to navigate Pennsylvania’s complex sales tax rules?
John Silverstein: My advice is to invest in a sales tax automation solution that incorporates AI. This reduces manual errors and helps businesses stay compliant. Relying solely on standard tax tables from software like QuickBooks may not account for jurisdiction-specific rates and changes. Staying informed through the Pennsylvania Department of Revenue’s website and using AI tools to monitor changes can significantly improve efficiency.
Kate: Very insightful. Thank you so much, John, for joining us and sharing your valuable insights today. It’s been a pleasure.
John Silverstein: No problem. Thanks for having me again.
Kate: Thank you.
