Sales Tax Outsourcing Perspectives

Each day I hear a new tale of a sales tax outsourcing solution that hasn't worked as anticipated.  Invariably, what's happened is that the company has viewed the sales tax outsourcing service as a commodity and purchased the lowest cost option.  This week, I met with a company that previously bought based on price and received exactly what they purchased.  The outsourced provider did a good job with what they were hired to do - prepare and remit the sales tax returns.

But the company eventually discovered there were many "compliance" activities they were still responsible for...pulling the data, reconciling the data, initiating sales tax registrations, managing sales tax renewals, managing the credit process, preparing amended returns, managing refund claims, answering tax technical questions, etc.

What I’ve seen over the years is the commoditizing of sales and use tax compliance.  When I first entered the market back in 2001 there were very few companies that provided the service.  The goal was to become efficient, reduce costs, and provide a low cost offering – operational efficiency was the buzz word.  This factory-like service works well for businesses that plan to retain in-house sales and use tax expertise to manage the “compliance” activities that often slip through the cracks as described above.

The problem is that this factory-like efficiency doesn’t work for every company.  The company I met with earlier in the week needed a service that would manage all aspects of sales and use tax compliance – not just the preparation and filing components.  It took them over two years to discover this and decide to make a change.  This time, they will not be buying strictly on price.