7 Benefits of Outsourcing Sales and Use Tax Compliance

In another post, I looked at some of the challenges – the administrative burdens, accuracy errors and process inefficiencies – that are steering companies to consider outsourcing their sales and use tax returns. Here, I’ll consider the flip side: the value you can expect from a best-in-class outsourcing provider. I’ll also zero in on a couple of key selection criteria.

Here are the top seven benefits:

  1. Control: The outsourcing provider should assign a dedicated professional (e.g., a dedicated returns preparer) to your business to deliver one-on-one service and ensure consistency over time.
  2. Process improvement: Streamlining and digitizing the remittance aspect of monthly compliance eliminates the need for individual check requests and mailings.
  3. Enhanced staff value: Outsourcing compliance reduces the time that your people must spend on manual tasks, freeing them up to focus on high-value work.
  4. Centralized transparency: A secure online portal stores all client data files, returns, notices, communications and reports.
  5. Reliability: Via a consistent, predictable month-to-month compliance process, even if your in-house staffing changes.
  6. Enhanced audit preparation: A reliable archive and reporting system supports audit preparation.
  7. Scalability: You can respond to increasing compliance obligations without the need to hire additional in-house staff; you simply send additional data to your outsourcing provider.

If you’re thinking about engaging an outsourcing services provider, these value generators should certainly be on your requirements list. It’s important to dig a little deeper, though, and ask questions about two factors that underpin most of these benefits:

1. Experience. You’ll want to know how long the firm has been providing services, as well as the tax experience of the individual returns preparers. Companies use different data formats and have different needs, and there’s no handy “import data and print return” menu item for outsourcing staffers to click on. Experience is crucial, and if it’s lacking, the result may be increased notices and audit penalties for incorrect returns. Useful experience-focused questions to ask prospective outsourcers include:

  • How long has your firm conducted sales and use tax returns outsourcing?
  • How much, and what type, of tax experience do the individuals on the returns team have?
  • What is your current rate of staff turnover?
  • Do your returns preparers have the skills necessary to manage the data in an effective and efficient manner?

2. Communications. Clarity and responsiveness are critical. Written and verbal communication skills should be excellent. Additionally, the outsourcer should also be able to point to a record of timely communications responses – to client companies as well as to all of the tax jurisdictions it works with on behalf of its clients. Useful communications-focused questions include:

  •  Will you assign a resource – a dedicated account executive, for example – to our company?
  •  What is your record of responding to taxing jurisdictions swiftly?
  •  Are there any factors that might hinder your ability to communicate with us quickly and clearly?
  •  What types of reports do you provide? How often do you provide them? Can you share examples?
  •  There are several other selection criteria to consider as well, as I will highlight in my next post.

Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.

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