Five Middle-Market Tax Technology Problems That Need Fixes

The primary technology challenges that tax leaders in mid-sized companies contend with today include access to real-time data flows, advancing AI adoption beyond efficiency plays, and tax-IT misalignment, according to the 2026 BDO Tax Strategist Survey report. As we know, this is nothing new.  

The same tax technology hurdles figure prominently in Vertex’s recent survey of 1,050 senior IT, finance, and tax leaders across manufacturing, retail, technology, healthcare, financial services, professional services, legal, and others in the U.S., UK, and Europe. BDO’s Tax Strategist Survey respondents include chief tax officers, senior tax leaders, CFOs, and tax directors across industries in primarily middle-market, U.S.-based companies. 

Survey Convergence

The fact that both surveys closely align on these and other technology-related findings suggests that master data management, systems integration, and cross-functional collaboration qualify as top priorities within most indirect tax groups. The following BDO survey findings are particularly instructive:

1. Tax technology spending is rising: Good news for those hoping to upgrade their tax technology stacks: 79% of respondents expect to increase tax technology investment in the next 12 months, up from 67% a year earlier. Additionally, more than half of respondents (51%) expect to increase tax-technology spending by more than 10%.
2. The tax-technology alignment gap requires attention: Only 43% of tax leaders report that they are “highly collaborative” with IT, and only one-third of tax respondents indicate that they have highly collaborative relationships with procurement teams. The latter misalignment can degrade use tax compliance while the tax-IT gap creates several potential problems, including suboptimal tax automation investment decisions and a range of data quality and access issues. Nearly a third (31%) of Vertex survey respondents say that poor collaboration with IT leads to data challenges.
3. Fragmented data and technology infrastructure undermines automation investments: Fewer than two thirds of tax groups have automated data exchange across most systems, and only 19% of those achieve real time, fully integrated data flows. As BDO notes, “Compared to tax teams at larger enterprises, middle market tax functions historically have been behind the curve on technology adoption… That baseline has not changed.” The main reasons initiatives fall short are weak data processes and poor interoperability, issues that a stronger single source of tax data truth and better governance directly resolve.
4. AI adoption continues to target efficiency gains: While most BDO survey respondents use AI in their tax functions, most deployments focus on accelerating existing workflows rather than strengthening strategic tax planning activities. Less than one in five tax groups use AI to perform complex scenario analyses.
5. Talent investments elevate tax technology ROI: The portion of tax groups that increased their investments in upskilling and training programs rose to 74% this year, compared to 58% a year earlier. Similarly, more tax functions increased investments in recruiting, hiring, and retaining talent this year (63%) compared to the previous year (55%). The BDO report links tax automation ROI to team readiness, which can be enhanced by hiring and developing the skills needed to use and optimize new tools.   

More Than a Back-Office Problem

This more nuanced talent-technology link often gets lost in reports of AI-driven staffing reductions. By the same token, tax-IT misalignment is often dismissed as a back-office glitch rather than an enterprise risk that suppresses returns on technology investments. In addition to addressing tax talent needs and improving cross-functional collaboration, BDO’s report concludes that organizations “must invest in the tools, integrations, and data infrastructure to give tax — and the broader enterprise — real visibility into tax liability, risk, and opportunity.”