What’s Wrong with Your Sales Tax Outsourcing Service?

In the last 15 years, I have worked with two different sales tax outsourcing service firms. One we built to be a return preparation firm and the other (TaxConnex) we have built as an outsourced sales tax department.

The verbiage may sound subtle but the differences are huge.

In the return preparation business, the focus was on serving large tax payers with large numbers of returns. These tended to be Fortune 500 or 1000 firms. These businesses had a common trait related to their tax and finance departments – specifically, they had a tax department and generally had sales tax expertise in the business. Their goal in finding a sales tax outsourcing firm was to shift the recurring, repetitive, and administrative return preparation activity to somebody else while maintaining sales tax knowledge and expertise internally. Providing a return preparation service was a great way to serve these large businesses and we had great success. Our success led to many competitors entering the market with the same business model – provide good return preparation services at a competitive rate. As the Fortune 1000 market became penetrated, we looked to take the service to the smaller and mid-sized businesses.

This is where the return preparation service model started to break down.

• Do I have sales tax nexus?
• Should I collect and report sales tax?
• What do I do with this audit?

The return preparation model is not suited to address these questions for several reasons.

First, the service provider is totally focused on preparing and filing the returns – especially up until the 20^th due date. As a result, questions are pushed off as long as possible until the last week of the month when everything else (besides the returns) has to be completed. Secondly, most of the individuals that are good at preparing returns are not necessarily tax experts and aren’t equipped to address tax technical issues related to nexus, taxability, or audits.

Even while new service providers continue to enter the market and are focused on creating a faster/cheaper way to do returns (like move the process to India – save that issue for a different blog), we are creating a completely different way to serve the small and mid-sized business.

At TaxConnex we provide an outsourced sales tax solution for small and mid-sized businesses. Rather than focus solely on preparing and filing returns, we want to become the day-to-day sales tax resource for companies with a multi-state sales tax footprint that lack the internal sales tax expertise. Earlier this year, we successfully on-boarded our 100^th outsourcing client.

So what is the difference between return prep outsourcing and outsourcing the sales tax process? Here’s a summary chart:

At TaxConnex, we’ll continue to provide an outsourced sales tax department while our competitors struggle to serve the small and mid-sized businesses with their faulty, return preparation service.

Want to learn more about TaxConnex's outsourcing services...