IDEA: Before granting credit to a new customer, check to see if they are registered in the state of their address.

When you set up a new customer, you normally will send them a credit application asking for bank and trade references.  One extra step you should take is to visit the state attorney general’s office website of the state where they are headquartered.  Google “Texas corporation search” or “Louisiana corporation search” (substitute your state) and ensure the company is legally registered.  Most of the time the company will be listed and match up with the data provided to you.  If the company is not listed, ask what their legal name is and the address they used to register to do business in your state.  It may be legally under a different name or he may not have an office in the state.  You can decide to grant the new company credit or not, but ask if there is a reason they are not registered in the state especially if they have an office there.

Another precaution to take is to make sure they give your company a sales tax exemption certificate or otherwise, you must charge them sales tax. If they are exempt they will provide it.

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