Sales and use tax returns compliance is a potential candidate for outsourcing. Hiring an expert services provider enables you to hand off the administrative tasks of returns preparation, filing and treasury management, while staying firmly in control of compliance.
Outsourcing enables you to tackle many challenges, including:
- The administrative burden of generating month-end sales and use tax filings.
- Accuracy errors due to manual processes and staff turnover.
- The need to keep up with changing compliance forms, filing requirements and e-file formats.
- Time-consuming, cumbersome management of tax payments by the tax and A/P departments – including numerous check requests and separate payments to individual jurisdictions.
- Ongoing management of notices from all jurisdictions.
- The damaging effects of staff turnover on process efficiency.
- The lack of a central returns repository for audit preparation and archiving.
- The lack of scalability in manual approaches as compliance demands increase because of business growth and changes in legislation.
- The need to assign high-value tax staff to routine administrative tasks like return submission, treasury management, report generation and notice management.
That last point is especially important during challenging economic times, when your people are looking to maximize their contribution to the company’s resilience. Even if you use software to automate the returns generation piece of the compliance process, you may still be tying up crucial expertise on other relatively low-value tasks.
Sales and use tax outsourcing providers vary greatly in the scope of the services they offer. Some handle only returns processing. Others cover the entire returns process but may themselves outsource part of it. Or, they may be unable to deliver an integrated, end-to-end process — leaving buyers to deal with the hassle of multiple points of contact and potential miscommunications that can result in late payments, penalties and other problems resulting from poor control and weak accountability.
Here are four useful scope-focused questions that you should ask any prospective service provider:
- Do you handle all of the facets of returns processing, including preparing and filing returns, funds management and the handling of notices and credits?
- Do you outsource any of the work?
- Will you provide our company with a single point of contact?
- How do you ensure that you perform these components in an integrated manner?
In my next post, I’ll discuss some of the benefits of outsourcing sales and use tax compliance.
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.