Moderated by Srishti, Digital Transformation Consultant at Hyperbots
Srishti: Hello, everyone! My name is Srishti Rajp, and I am a digital transformation consultant at Hyperbots. Today, I’m delighted to have Shaun Walker as my guest. Thank you so much, Shaun, for taking out the time today.
Shaun Walker: Absolutely, thanks for having me.
Srishti: Of course, so a little bit about Shaun. He is a Sox compliance manager at Norfolk, Southern, and today we will be discussing Connecticut sales and use tax compliance. Whenever you’re ready, we can get started. On to the first question: Could you provide an overview of Connecticut sales, tax, and use tax rates? How do these rates differ across goods and services?
Shaun Walker: Yeah. Connecticut has a base state tax rate of 6.35%. But there’s some variation. For general merchandise, 6.35% is the expected rate. Luxury goods, such as jewelry over $5,000 or cars over $50,000, are taxed at a higher rate of 7.75%. Prepared foods, like restaurant meals, are taxed at 7.35%.
Srishti: Makes sense. Are there any exemptions to this?
Shaun Walker: Some items like prescription drugs and medical equipment are exempt. This structure simplifies tax applications but requires specific knowledge of tax categories and exemptions.
Srishti: I see. Now to the next question: What are some challenges or complexities that Connecticut businesses face due to state sales tax rules, given the lack of local variations?
Shaun Walker: For example, with luxury and prepared goods, you have to differentiate between standard and higher tax items, such as applying the 7.75% rate for luxury goods and the 7.35% rate for prepared food. It requires precise categorization. Service taxation adds complexity as certain services, like maintenance repairs and digital services, are taxable. Also, exemptions require accurate classification—for instance, food for home consumption is exempt, while prepared food for immediate consumption is not.
Srishti: Understood. How frequently do Connecticut sales tax rates or rules change? How can businesses stay updated?
Shaun Walker: They’ve been relatively stable, but changes do occur, particularly for specific goods or services. Connecticut recently expanded tax applicability to certain digital and remote services. Businesses often need to track updates in legislation that may impact specific categories. The Connecticut Department of Revenue Services (DRS) is the main source for updates, and many businesses use tax compliance tools that provide real-time alerts.
Srishti: I see. What are some of the primary resources available to businesses to stay informed about sales and use tax changes in Connecticut?
Shaun Walker: There are three main resources:
Srishti: Understood. What challenges do companies face when managing compliance with Connecticut sales and use taxes? Could you share some examples?
Shaun Walker: One challenge is handling multiple tax rates. For example, selling a car over $50,000 incurs a 7.75% tax rate, while other items are taxed at the base rate of 6.35%. Applying tax to certain services, like digital products, can be complex. Lastly, managing exemptions, such as prescription drugs, requires accurate tracking for proper reporting.
Srishti: That’s interesting. Since AI is such a big buzzword today, how can artificial intelligence help businesses manage sales and use tax compliance more efficiently, especially within Connecticut’s unique tax categories and exemptions?
Shaun Walker: AI can automate rate applications, determine taxability, and manage exemptions. For instance, Hyperbots AI automates the categorization and application of Connecticut’s tax rates, helping businesses streamline compliance and minimize errors.
Srishti: Makes sense. How can AI support companies during audits for sales and use tax compliance in Connecticut?
Shaun Walker: AI helps with efficient document retrieval by categorizing and retrieving records by transaction type. It also aids in error detection and correction by analyzing past transactions for misclassified goods or services, allowing businesses to address issues before audits.
Srishti: That’s really helpful. What do you see as the future role of AI in handling Connecticut sales and use tax compliance?
Shaun Walker: AI will likely expand beyond compliance to provide deeper insights and planning capabilities. Predictive analytics can forecast the impact of tax changes on revenue. Real-time compliance dashboards and proactive alerts about regulatory changes will become standard. Hyperbots, for example, offer real-time compliance, predictive analytics, and proactive insights for better financial planning.
Srishti: Thank you so much for sharing your insights, Shaun. This was extremely helpful. That brings us to the end of today’s discussion. Big thanks to our viewers! I’ll see you around. Have a good one. Bye-bye.
Shaun Walker: All right, see you later.
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 thrilled to have Shaun Walker as my guest. Hey, Shaun, how are you doing today?
Shaun Walker: Doing good. How are you?
Kate: I’m doing great. Thank you so much for joining us today. So a little bit about Shaun, he’s the Sox compliance manager at Northrock Southern, and today we will be discussing managing sales and use taxes from sellers’ and buyers’ perspectives. So let’s jump right in.
Shaun Walker: Okay.
Kate: So, coming to the first question, could you give us an overview of the types of sales and use taxes that businesses need to consider in the United States?
Shaun Walker: Certainly. So there’s several types of sales and use taxes, and they vary by jurisdiction. At the broadest level, you have the state sales tax, which is set by each state. Many states allow county and city sales tax to add to the state rate. In some areas, there are transit taxes to fund public transportation. There are special purpose taxes for projects, and there are district taxes for supporting schools or other initiatives. Certain products like alcohol or tobacco are subject to excise tax. There have also been decisions about how to collect remote sales tax. And then there’s the use tax for items bought out of state but used in-state. The last one would be a digital sales tax that applies to online services like software and media subscriptions.
Kate: Okay, understood. Moving on from a seller’s perspective, how should a business determine whether they have a legal obligation or nexus to collect sales tax?
Shaun Walker: Well, nexus can be complex because it’s based on physical and economic presence. Physical presence can mean having a warehouse, office, or employees in a state, while economic presence involves reaching a specific level of sales in a state. Most states set a threshold, often $100,000 in sales or 200 transactions annually, which creates economic nexus.
Kate: Makes sense. So, Shaun, once a seller has determined nexus, how do they handle the collection and remittance of sales taxes?
Shaun Walker: Once a seller has nexus, they must register in each relevant state or local jurisdiction. They need to apply the correct tax rate to sales, which can vary within states due to local add-ons. There’s also automated tax software like Avalara or TaxJar that helps sellers keep rates accurate.
Kate: I understand. So for buyers, when does use tax come into play, and how should they handle it?
Shaun Walker: Use tax applies when a buyer purchases goods from an out-of-state seller who didn’t collect sales tax. It’s the buyer’s responsibility to report and remit the use tax in their home state. This often occurs when a business buys from a small out-of-state vendor or an online seller without nexus in the buyer’s state.
Kate: Makes sense. So, coming to the next question, what are some common mistakes businesses make when managing sales and use taxes? And how can they avoid them?
Shaun Walker: Common mistakes include failing to correctly determine nexus, underestimating the complexity of multi-jurisdictional tax rates, and not keeping exemption certificates. Businesses can avoid these pitfalls by regularly reviewing nexus in each jurisdiction, using tax software for rate accuracy, and maintaining exemption documentation. Frequent audits also help catch errors early.
Kate: That is a very interesting point. Coming to an even more interesting question, how can AI play a role in improving the management of sales and use of taxes for businesses?
Shaun Walker: AI can streamline the sales and use tax process in several ways. AI tools can automatically determine tax rates based on location, identify nexus patterns through sales data analysis, and flag transactions with potential tax discrepancies. AI also simplifies audits by quickly scanning transaction records and identifying anomalies, ensuring compliance with regional tax codes.
Kate: I completely agree with you. So how should businesses handle sales tax exemptions, and what documentation is required to support these exemptions?
Shaun Walker: Businesses need to collect exemption certificates for any sales-tax-exempt transactions. Buyers, like resellers or nonprofits, provide these certificates to show eligibility. Sellers should keep these documents on file to ensure they’re current and complete. Some states require renewals periodically, so it’s important to validate these certificates for legitimacy.
Kate: I couldn’t agree more with you, Shawn, on this. We have reached almost the end of our discussion today. Finally, from a buyer’s perspective, what should companies consider when purchasing from out-of-state or foreign sellers to ensure compliance with sales and use tax laws?
Shaun Walker: Buyers should confirm whether the seller will collect the sales tax, as some out-of-state or foreign vendors may not. If the sales tax isn’t collected, the buyer must record the purchase and remit use tax to their state. For larger or recurring purchases, it may be worthwhile to establish a formal process to track use tax obligations and ensure all necessary taxes are paid correctly.
Kate: That is a very unique point. I totally agree with you, Shawn.
With that, we have come to an end to today’s discussion on managing sales and using taxes from sellers’ and buyers’ perspectives. Thank you so much, Shaun, for joining us today and sharing your insights, and a big thanks to our listeners as well.
Kate: I’ll see you around. Have a great day ahead.
Shaun Walker: Alright, take care!
Kate: Yeah, bye.
Shaun Walker: Bye.
Moderated by Srishti, Financial Technology Advisor at Hyperbots
Srishti: Hello, everyone! My name is Rishi Rajvir, and I’m a Fintech advisor here at Hyperbots today. I’m delighted to have John Silverstein as my guest. Thank you so much, John, for taking out the time today for our viewers. John is the VP of FP&A at Extreme Reach, and today we will be discussing New Jersey State sales tax and use tax as well as how businesses can stay compliant with these evolving requirements. So shall we get started, John?
John Silverstein: Yeah, let’s get started.
Srishti: Perfect. To get started, can you give us an overview of New Jersey sales tax and use tax rules, particularly regarding which goods and services are taxable and which are exempt?
John Silverstein: Yeah. In New Jersey, most things, particularly tangible personal property, are subject to sales tax—electronics, clothing over $110, and furniture. Certain items are exempt, though, such as groceries, prescription drugs, and medical devices. Similar to other states, New Jersey also imposes a use tax on goods purchased outside the state that are brought back to New Jersey. Many services are exempt, but some, like repairs, maintenance, and certain professional services, can be taxable as well. For example, plumbing repair services are taxable, while labor on a new construction job is not.
Srishti: Understood. And how does New Jersey’s sales tax rate vary across different jurisdictions?
John Silverstein: New Jersey’s sales tax is currently 6.625% and is relatively uniform across the state. However, certain urban areas like Camden, Jersey City, and Newark apply additional local taxes in enterprise zones or specific regional tax incentives. These are typically capped at 6.625% for most purchases. In contrast, certain counties may implement tax exemptions for specific industries, like manufacturing or research, to encourage growth in those sectors.
Srishti: I see. That’s very interesting. Can you share your insights on how frequently these sales and use tax rates change? And what factors contribute to these changes?
John Silverstein: Sales tax rates in New Jersey have been generally stable over many years. They adjust them less frequently than other states, making it easier to keep up with changes. The last major change occurred in 2018 when the rate went up to 6.625%. Changes typically stem from state budget adjustments, legislative actions, or new programs and tax reforms. Additionally, use tax rates are often aligned with sales tax rates. Businesses must monitor rules around out-of-state purchases, which is a unique challenge in New Jersey. Changes can also arise from state agreements or court decisions, like the Wayfair ruling, which altered how remote sales are taxed.
Srishti: That definitely makes sense. On to the next question—what are some of the challenges businesses face in keeping up with New Jersey’s sales and use tax regulations?
John Silverstein: One of the main challenges in New Jersey is ensuring that they correctly apply the state’s sales and use tax to both in-state and out-of-state transactions. With the increased complexity of online sales and cross-border commerce—especially with New Jersey’s proximity to New York and Pennsylvania—it can get tricky. Businesses need to track which goods are taxable, which are exempt, and which require use tax reporting. Keeping up with exemptions for different industries, like manufacturing or nonprofits, or specific zones like urban enterprise zones, can create confusion. The digital landscape adds further complexity, as New Jersey also taxes digital products like software and cloud services.
Srishti: Understood. Where can companies find reliable, up-to-date information on New Jersey sales tax and use tax rates?
John Silverstein: The primary source is the New Jersey Division of Taxation website, which provides accurate and up-to-date sales tax and use tax information. It includes tax rate tables, guides, details on specific exemptions, and examples to help businesses. Third-party resources like Hyperbots, Avalara, and AvaTax also provide real-time updates by monitoring these sites for tax law changes. These tools help automate compliance processes and integrate into ERP systems, making it easier to stay updated and apply correct rates.
Srishti: That is really helpful. Can you share an example of how a business might use these resources to stay compliant with New Jersey sales tax and use tax rules?
John Silverstein: Sure. For instance, an e-commerce company selling products in New Jersey and other states can use Hyperbots or Avalara to automatically calculate the correct sales tax based on the customer’s location. If the customer is in New Jersey, the system applies the 6.625% sales tax rate. If the business ships the product to New Jersey from a neighboring state, it ensures the correct use tax is applied as well. These tools can also track specific tax exemptions, preventing mistakes like charging sales tax on groceries or prescription drugs.
Srishti: I see. Given your experience, how can AI help companies stay on top of sales tax and use tax changes in New Jersey?
John Silverstein: AI is incredibly helpful and already providing huge benefits. It applies sales and use tax rates accurately with tools like Hyperbots or Avalara. AI automatically monitors rate changes at state and local levels, flags new rules or modifications, and updates systems immediately. It checks tax authority updates and learns over time, improving its understanding of specific transactions. This reduces human error and ensures proper categorizations of taxable products.
Srishti: Perfect and for the last question, are there any specific AI tools or features you would recommend for managing sales tax and using tax compliance in New Jersey?
John Silverstein: I highly recommend tools like Hyperbots or Avalara. These integrate with ERP systems, ensuring compliance without the added cost of manual oversight. They provide real-time updates, automatic application of rates, and seamless integration into your ERP. AI tools with features like jurisdiction mapping, exemption handling, and automated tax calculation streamline compliance and ensure accuracy across transactions.
Srishti: That’s amazing. This has been really helpful. Thank you so much, John, for providing valuable insights on managing sales tax and use tax in New Jersey and the role AI is playing in simplifying compliance. And to our viewers, thank you for staying with us. That’s all we have for today. Thank you so much. Goodbye, and see you next time!
John Silverstein: Alright. Thank you.
Moderated by Kate, Financial Technology Consultant at Hyperbots
Kate: Good morning, everyone. My name is Kate, and I’m a financial technology advisor here at Hyperbots. Today, I’m delighted to have Claudia Mejia as my guest. Hello, Claudia! How are you doing?
Claudia Mejia: Hi, Kate, how are you? Nice to see you.
Kate: I’m doing great, nice to see you too. Claudia is the managing director at Ikigai Edge Consulting. Today, we will be discussing handling tax liability for undercharged sales tax invoices. So, coming to the first question, what should a company’s first step be if a vendor charges less tax than required on an invoice?
Claudia Mejia: The first step will be to determine who is responsible for paying the tax. In most cases, it’s the vendor who is responsible, and therefore, ideally, you should contact the vendor and inform them about the undercharge and ask for the invoice to be corrected. That’s the cleanest way to handle those kinds of errors and ensure compliance. For example, if you receive an invoice that’s supposed to have a 7% tax rate but is issued with 5%, you would call the vendor and advise them to review and correct the invoice. That’s probably the cleanest approach.
Kate: Understood. Moving on, why is it usually best to ask the vendor to issue a corrected invoice rather than paying the deficit directly to the state?
Claudia Mejia: That ensures the vendor handles the tax obligations correctly and maintains accuracy. It also makes it easier for auditors to follow these transactions. If an invoice is incorrect from a tax point of view, the corrective action is to call the vendor and ensure it is amended. This way, both parties have accurate information for tax obligations.
Kate: So, if the vendor is unwilling or unable to issue a corrected invoice, what should the company do next?
Claudia Mejia: The company should self-assess the difference of the undercharge and pay the tax directly to the state as a use tax. This mechanism allows the buyer to fulfill their tax obligations and ensure their records align with legal and tax requirements.
Kate: That does make a lot of sense. Could you explain what use tax is and why it might be necessary in cases of undercharged sales tax?
Claudia Mejia: Like we mentioned, the vendor is usually responsible for collecting and remitting the tax to the state. However, if the vendor cannot or will not issue a corrected invoice, the buyer has the ability to pay the tax directly to the state. Use tax is essentially a tax paid by the buyer directly to the state when the vendor fails to collect the appropriate tax. For example, if I’m a buyer in New York and purchase supplies out of state where no tax or insufficient tax is collected, I can remit the correct tax amount directly to the State of New York.
Kate: I understand. Moving on, why is it important to document communication with the vendor and use any tax payments made to the state?
Claudia Mejia: The most important aspect of financial records is ensuring compliance. Proper documentation helps during audits and provides a clear record of transactions. By documenting communication with the vendor and any payments made to the state, you proactively work to ensure compliance. This also keeps your books and cash flow clean, resulting in sound financial transactions.
Kate: I agree completely, Claudia. We have reached almost the end of our discussion today. The last question is, what is the best long-term approach if undercharging becomes a recurring issue with the vendor?
Claudia Mejia: Being proactive is key. Regularly review invoices to ensure compliance with state tax rates. If undercharging is identified, follow the processes: contact the vendor and request a corrected invoice. If that’s not possible, self-assess and pay the use tax directly. Having a robust process ensures these errors are identified and addressed promptly. Ultimately, this approach helps maintain compliance with the state and ensures accurate financial records, creating a cycle of control and accountability.
Kate: You’re right, and that is a really interesting point. Thank you so much, Claudia, for your time and insights, and a big thanks to our listeners. I’ll see you next time. Have a great day.
Claudia Mejia: You too!
Moderated by Kate, Financial Technology Consultant at Hyperbots
Kate: Everyone. My name is Kate, and I am a financial technology advisor here at Hyperbots. Today I’m thrilled to have Kelly O’Neill with me. Hey, Kelly, how are you doing today?
Kelly: Doing wonderful.
Kate: That’s great to hear. A little bit about Kelly—she’s the Chief Executive Officer at KM One Ventures. Today, we will be discussing Colorado sales and use tax compliance. So let’s jump right in. Coming to the first question, could you provide an overview of Colorado state sales and use tax rates? How do these rates differ across goods and services?
Kelly: Absolutely. Colorado has a base state sales tax rate of 2.9%, which is one of the lower state rates. But local jurisdictions—cities, counties, and special districts—can impose additional rates if they choose to. This can lead to significantly varied combined rates across the state. For example, general merchandise would be a 2.9% state rate plus additional rates based on local taxation, resulting in a combined rate that can exceed 11% in some areas. Food and groceries are generally exempt from sales tax, though some local jurisdictions may impose a tax on those items. Some items, such as prescription drugs and medical devices, are exempt. Colorado’s decentralized tax system requires businesses to apply the correct combined rate for each sales location based on both state and local rules.
Kate: Understood. Moving on, could you discuss some of the jurisdictions in Colorado with notably high or low sales tax rates? How does this affect businesses?
Kelly: Colorado’s local jurisdictions create a patchwork of different rates. Highest rates are found in some cities, such as Winter Park or Glenwood Springs, which have combined rates exceeding 11%. Lower rates are in unincorporated areas and towns that may have rates closer to the 2.9% state rate without any additional local tax. This variability affects businesses by requiring them to apply different rates based on where each sale occurs. Companies in high-tax areas may face customer resistance to higher prices, while businesses in lower-tax regions might have an advantage with more competitive pricing.
Kate: That makes sense. How often do Colorado sales tax rates change? How do businesses keep up with these updates?
Kelly: The Colorado state rate is pretty stable, but local rates can change frequently—often yearly or even more frequently if cities pass new tax measures. Some localities also implement seasonal rates in tourist-heavy areas, such as those with ski resorts. Businesses typically monitor rate changes through the Colorado Department of Revenue, which provides updated rate tables, or they use third-party tax compliance tools to stay current. For companies operating across multiple jurisdictions, automated solutions are crucial to ensure they are using the latest rates accurately.
Kate: What are some of the primary resources available to businesses to stay informed about sales and use tax changes in Colorado?
Kelly: Helpful resources include the Colorado Department of Revenue, the primary source for state and local tax guidelines and forms. Sales tax rate lookup tools provided by the CDOR allow businesses to look up rates by address or zip code. Additionally, third-party compliance software, such as Avalara or TaxJar, offers real-time updates and comprehensive rate information across all Colorado jurisdictions, making it easier for businesses to apply the correct rate. What challenges do companies face when managing compliance with Colorado sales and use tax rules? Could you share some examples? The main challenges include jurisdictional complexity. Colorado has home-rule cities that administer their taxes independently. For example, a company with sales in Denver, which has its own tax administration, must manage a process different from that in state-administered areas. Frequent rate changes also pose challenges, especially in tourist-heavy areas with seasonal rates. Determining taxable items adds complexity—groceries, for example, may be exempt at the state level but taxable at the local level. Businesses must remain vigilant to apply the correct rates and taxability, particularly if they operate statewide.
Kate: How can artificial intelligence help businesses manage sales and use tax compliance more efficiently, especially with Colorado’s complex local tax structure?
Kelly: AI can simplify compliance in several ways. Automated rate updates ensure that the latest rates for each jurisdiction are applied. AI tools can also determine the exact sales tax rate by customer location, ensuring accurate application across Colorado’s home-rule cities and state-administered areas. AI can handle exemptions, such as food items that are exempt at the state level but taxable locally. For example, Hyperbots AI offers a solution that automates local rate adjustments across Colorado’s jurisdictions, reducing errors and administrative costs for compliance.
Kate: How can AI support companies during audits for sales and use tax compliance in Colorado?
Kelly: AI simplifies audit preparation by managing and organizing documentation efficiently. It can retrieve invoices, sales records, and tax rate documentation by jurisdiction, streamlining the audit process. AI also detects and corrects errors, allowing companies to address issues proactively. Hyperbots AI can prepare compliance reports and organize records by location, which is especially helpful in Colorado, where home-rule cities require highly organized tax records by jurisdiction.
Kate: What do you see as the future role of AI in handling Colorado sales and use tax compliance?
Kelly: AI will likely move beyond compliance into areas like predictive analysis. For example, AI could forecast how tax rate changes across Colorado’s home-rule cities might impact revenue, helping companies plan for rate shifts. Real-time compliance monitoring could provide live dashboards with tax liability insights across different jurisdictions. Proactive compliance alerts could notify companies of pending rates or legislative changes, enabling them to adjust in advance. Hyperbots AI is advancing in this area, offering solutions that provide real-time compliance and predictive analytics, helping Colorado businesses manage complex tax rules and anticipate changes.
Kate: Thank you so much, Kelly, for sharing your insights. It was a really fruitful discussion and a big thanks to our listeners for tuning in.
Kelly: Thank you!