Sales Tax Compliance: Automated Returns or Service Provider?

This time of year, everybody’s mind is on income tax preparation. And for many accountants and CPA firms, this time of year means extra-long hours and more time spent managing clients’ finances.

The fact is, when it comes to many companies’ federal and state income tax returns, they don’t rely on an automated income tax return. They turn to experts. Either those that they’ve hired internally or the trusted CPA firm they’ve utilized for years.

Why should sales tax be any different? Many companies are enamored by an automated sales tax returns approach. The reality is your sales tax returns can create hefty penalties and fees for your business if not done correctly. Why are so many people still relying on simple return prep software when sales tax compliance requires a personal touch to be done correctly?

Just one piece to the process

Companies that lack internal sales tax expertise often look to shift the sales tax compliance process to an outside provider. However, in believing that return preparation and filing is the only piece of the sales tax compliance process, companies can easily fall prey to the “sales and marketing” pitch of automated sales tax returns.

Recognizing that filing the return and remitting the payment is only part of the process. Don’t forget about these other necessary aspects of maintaining sales tax compliance:

• Monitoring your sales tax obligation. This includes understanding your ongoing nexus footprint (it’s not always static) and determining the taxability of your products and services when states are continually adjusting their laws.
• Managing a tax calendar. Again, this is not a static process. Due dates, filing and payment requirements can all change throughout the year.
• Monitoring and responding to notices. States and jurisdictions send notices fairly regularly. These can be paper notices that are mailed to you or issued within each state’s e-file system If you don’t respond to these notices in a timely fashion, you could face penalties and fees.
• Registering in new states and jurisdictions. If you hope to see your business grow, you have to expect your nexus obligations to grow with it. An automate returns solution will not help you make the decision whether to register or not.

Who do you want on your side?

If comparing a service provider to an automated returns solution, you have to recognize this is not an apples-to-apples comparison. How much of the sales tax compliance process is still left for you to do on your own? What happens when you have additional questions or circumstances change, such as an acquisition or an unexpected audit? Do you have someone you can reliably go to with questions and receive help? How long will it take to get a response? Did you sign-up to be your own sales tax manager?

In addition to support access, you also have to think about the quality of the people answering your questions. As mentioned above, sales tax is complex and there are a lot of moving pieces.

Many automated returns solutions rely on outsourced or off-shore support to fill in the gaps and address the non-returns related aspects of sales tax compliance. How easy is it to reach someone directly on the phone across the globe or schedule a conference call at a convenient time for you?

An automated returns solution pushes all of the decision making back to you. A compliance service provider goes hand in hand with guidance and expertise as part of the service. Make sure you have a partner who can truly remove the burden of sales tax compliance for your business.

TaxConnex is built on a network of sales tax experts, focused on providing a service to our clients. By working with TaxConnex you gain an outsourced sales tax department, not just an automated returns solution. We not only manage all of the pieces of your compliance process mentioned in this blog, but we also manage your risk and liability as well. If we make a mistake, that’s on us, not you.

Get in touch to learn more about our sales tax outsourcing services and how we can alleviate the burden of juggling sales tax.