Temps and Tax Returns - Think Twice

Recently, I attended the Association of Consumer Vehicle Lessors (ACVL) annual conference in New Orleans, where many of the country’s leading vehicle lessors met to discuss numerous business topics, including tax.

One discussion in particular, a panel on sales and use tax returns outsourcing, really got me thinking.

They were discussing the hiring of temporary staff to manage sales & use tax returns. Given my own particular focus on outsourcing, I admittedly have a bias against the “hiring of temps” approach. However, I recognize that many tax executives will consider this option, and when these situations arise, I believe the consideration to use temporary personnel should be carefully deliberated.  

One way to achieve this is to consider the “Three Cs” –confidence, continuity, and cost. Questions that tax executives across all industries should contemplate when thinking about hiring temporary staff to handle sales & use tax returns include:

• Confidence: How much sales and use tax expertise does each temp possess? How much confidence will you have in the returns they prepare? To what degree will full-time managers need to supervise the temps and check their work? Who will be accountable for approving the work that the temps perform?
• Continuity: What is the average turnover rate of temporary staff? How long will the company retain the knowledge and the on-the-job skills and expertise that the temps gain? And how will any disruption related to this knowledge transfer affect overall tax risk?
• Cost: If reduced confidence and staff turnover interrupt your compliance process, then ultimately these two issues could negate the top-line cost savings from hiring temps. For example, when initially calculating the cost of temps, are you including “soft” costs, such as hiring, training, supervision, and turnover? It is also important to consider the differences in temporary payroll, temporary employee tax withholding, as well as temporary employee taxes overall.

Addressing these questions may or may not steer a tax department toward an outsourcing provider with tax-experienced staff. What’s important is that the decisions concerning the handling of compliance – like the ACVL discussion – should be made with careful consideration.

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.