Unsure where you owe sales or use tax or dealing with legacy compliance pain?
Check Your ExposurePlain English definitions of common sales tax and use tax terms used in compliance software. Designed for founders, finance leaders, advisors, and operators at growing, mid market, and enterprise businesses.
These definitions are for education and planning purposes only and are not legal or tax advice.
This glossary reflects terminology as used within the TaxMap sales tax compliance software platform.
Sales tax rules vary by jurisdiction, but the core concepts are consistent. Use this glossary to understand terminology as it appears in compliance software, exposure analysis, and filing workflows.
A review conducted by a tax authority to verify whether a business has properly collected and remitted taxes. Audits often uncover sales tax or use tax exposure that accumulated over time.
The ongoing process of meeting registration, filing, remittance, and reporting obligations across jurisdictions.
A sales tax obligation created when a business exceeds a state’s revenue or transaction thresholds, even without physical presence. Economic nexus is now the most common trigger for multi state compliance obligations.
The process of determining applicable sales and use tax jurisdictions based on a physical address rather than ZIP code, city name, or county label.
A condition where city names, ZIP codes, or mailing addresses do not align with actual taxing district boundaries, leading to incorrect rate application.
Potential sales tax and use tax liability resulting from uncollected or unpaid obligations. Exposure can include tax, penalties, and interest. Exposure does not automatically mean tax is owed, but it does require review and prioritization.
The process of evaluating transaction and purchase data to determine where sales tax and use tax obligations may exist, including jurisdiction determination, sourcing rules, district applicability, and historical periods.
The process of submitting sales tax or use tax returns to a tax authority for a specific filing period. Filing obligations follow registration and should be evaluated after exposure analysis.
The frequency with which tax returns must be filed, such as monthly, quarterly, or annually. Filing frequency depends on jurisdiction rules and business volume.
A geographic area with its own tax authority and rules. Jurisdictions include states, counties, cities, and special tax districts.
A legally defined local taxing authority that applies additional sales or use tax within specific geographic boundaries. Special tax districts often overlap cities and counties and are a common source of rate miscalculation.
An older generation sales tax compliance system built primarily for calculation and filing, often characterized by rigid workflows, slow performance, and limited exposure visibility.
A platform that facilitates sales on behalf of third party sellers and may be responsible for collecting and remitting sales tax in certain jurisdictions. Marketplace rules vary by state and do not always eliminate seller obligations.
The process of moving from a legacy tax platform to a modern sales tax compliance software system without disrupting ongoing operations.
A business structure involving multiple legal entities that may each have separate tax obligations.
The connection between a business and a jurisdiction that creates a tax obligation. Nexus can be physical or economic and determines whether registration and filing are required.
The date on which a business crosses a threshold or establishes presence that creates a tax obligation. Trigger dates are important for determining the start of exposure periods.
A tax obligation created by physical presence in a jurisdiction. Examples include offices, employees, inventory, warehouses, or in person business activity.
The process of enrolling with a tax authority to collect and remit sales tax or use tax after determining that nexus exists. Registration does not eliminate historical exposure.
The act of sending collected taxes to the appropriate tax authority.
A tax imposed on the sale of taxable goods or services. Sales tax is typically collected from the customer at the point of sale by the seller.
The total sales tax rate that applies to a transaction after combining state, county, city, and special purpose district taxes based on the delivery or use location.
The obligation to collect and remit sales tax in a jurisdiction based on physical presence or economic activity.
Software used to identify sales tax and use tax exposure, determine obligations, and support filing and compliance workflows.
Whether a specific product or service is subject to tax under a jurisdiction’s rules. Taxability varies widely by state and by product or service type.
A revenue or transaction limit that, once exceeded, triggers economic nexus. Thresholds vary by jurisdiction and may change over time.
A tax owed by the buyer when sales tax was not collected at the time of purchase. Use tax commonly applies to out of state vendors, software, services, and untaxed purchases.
Potential liability created by untaxed purchases where the buyer is responsible for remitting tax.
A program that allows businesses to proactively disclose tax exposure to a jurisdiction, often resulting in reduced penalties or limited lookback periods.
The TaxMap compliance software platform applies these definitions directly to your transaction data and shows where exposure may exist before filing decisions are made.
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