State and local tax is constantly evolving, and sales tax compliance is more complex than ever.
That’s where Daryl Jendras, managing director of business services member SALT Cap (PPAI 882320), a promo-focused tax consulting firm, comes in.
“My goal is to make sales tax compliance feel less like a burden and more like a smart business strategy,” Jendras says. “The better you understand it, the more you can maximize profits and minimize sales tax liability.”
A tax professional with over three decades of experience, Jendras knows how confusing taxes can be for distributors and suppliers, so he and his firm aim to make the process smoother. In this Q&A with PPAI Media, Jendras offers tax advice for promo firms.
PPAI Media: Why is understanding sales tax so important for promo firms?
Daryl Jendras: Because sales tax can make or break your business. Many promo firms get caught up in sales, sourcing and creativity, but if you are not handling sales tax correctly, it may lead to substantial financial and legal headaches. With sales tax laws that vary from state to state, especially around nexus and drop shipments, it is essential to stay informed so you do not end up with surprise sales tax liabilities that will eat away at the company’s profits.
One look at the most popular Facebook group for industry professionals, “Promotional Products Professionals,” shows how often sales tax issues arise. Distributors are constantly asking questions that their usual certified public accountant cannot answer.
Daryl Jendras
Managing Director, SALT Cap
PPAI Media: Can you share some examples?
Jendras: Here are just a few:
- “I’m looking for some advice on collecting and paying sales tax for sales outside my state. I have a customer with locations in several states, and I’m going to set up a showroom on my Sage website to use TaxJar, but I’m not sure how to go about paying and what rules the states have. My accountant doesn’t have experience with e-commerce. What should I do?”
- “Any shares on sales tax best practices? The laws are getting more complex, with reps in different states, vendors with conflicting policies, and fulfillment challenges. Is anyone using a third party? Or any suggestions?”
- “Our customer in another state (Washington) is demanding to be charged sales tax. Yes, I know, there’s plenty of info about it online, but has anyone found a simple answer to this? Reading pages and pages of info about taxes doesn’t fit my schedule today.”
These are real concerns from real promo professionals who are struggling to get clear answers. Having a dedicated sales tax expert in the promo space, like SALT Cap, can help businesses avoid costly mistakes and stay compliant.
PPAI Media: What about state and local taxes?
Jendras: The promo industry is unique because we often deal with multi-state transactions, different fulfillment methods and complex tax rules. If you ship products across state lines or use third-party decorators, you may owe taxes in states you had not even considered. Knowing how to navigate these rules helps businesses stay compliant and avoid unexpected penalties.
Many CPAs and general accountants do not specialize in sales tax, and that is where a lot of promo firms run into trouble. Questions about nexus, drop shipments, taxability of credit card surcharges and supplier tax policies often go unanswered because traditional accounting firms focus on income tax rather than sales tax compliance. Having the right expert in your corner can make all the difference.
PPAI Media: What are some best practices firms can use regarding taxes?
Jendras: A few key things:
- Understand basic sales tax nexus rules: If you are selling in multiple states, you need to know when you are required to register, charge and collect sales tax from the customer and remit the sales tax collected to the state.
- Exemption certificates: Issuing exemption certificates to vendors, receiving exemption certificates or non-profit exemption certificates from your customers (are they complete and accurate?).
- Keeping complete sales documentation to support the monthly transactions: Good documentation makes sales tax reporting and potential audits much easier and limits risk and exposure.
- Work with an expert: State and local tax rules are complex and generally vary by state. Having a sales tax professional in your corner can save you a lot of headaches and time that could be used to focus on your business.
PPAI Media: Why is it necessary for companies to be “audit-ready?”
Jendras: A sales tax audit, or sales tax notice, can happen when you least expect it, and it can be a nightmare if you are not prepared. Being audit-ready means keeping detailed records, knowing where the company has sales tax nexus and having proper documentation for all transactions. If a state tax agency comes knocking, you want to be able to confidently provide what they need instead of scrambling to fix errors.
One major reason suppliers have been pushing back on sales tax exemptions is because they have been audited. Distributors who are not prepared often find themselves in a tough spot, either overpaying sales tax they do not owe (leading to double taxation) or dealing with sales tax compliance issues. Having clear documentation and a well-defined sales tax process helps mitigate these situations altogether.
PPAI Media: What can you tell me about the taxability of drop-shipments?
Jendras: Drop shipments add a whole new layer of complexity to sales tax compliance. Who is responsible for the tax if a supplier ships directly to your customer? The answer depends on which state the sale occurs, where the product is shipped to and whether the resale certificate (home state or destination state) are in place.
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Many promo firms assume their supplier handles sales tax correctly, but that is not always the case. Understanding drop shipment tax rules can help avoid potential sales tax liability.
Some suppliers require resale certificates states where the distributor does not have nexus, while others suppliers do not charge sales tax because they do not have sales tax nexus in those in those states. This leaves the distributor to figure out if they are liable for the sales tax on the purchase for resale. It is important to have a solid grasp of drop-shipment sales tax to ensure you are applying the correct sales tax rules for each transaction.
PPAI Media: What can professionals at an advanced career level learn?
Jendras: At this stage, you may be managing a team, running a business, or making strategic decisions that affect your company’s bottom line. Understanding sales tax at a higher level helps with sales tax planning, reducing sales tax audit risks and ensuring compliance across different jurisdictions. You might also evaluate automation tools, outsourcing sales tax compliance, or creating internal policies to streamline sales tax management.
Even seasoned professionals who have been in the industry for years can find themselves dealing with new sales tax challenges as laws change and enforcement becomes stricter. Staying informed allows you to protect your business from unexpected sales tax liabilities and position yourself as a knowledgeable leader in the industry.
