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Over the years, I've had numerous conversations with tax and accounting professionals that recount that call or visit from their CFO, President, or other senior executive from their firm with questions regarding a lien, or a store being shut down due to an unresolved sales tax notice.

Notice activity is often a measure of quality with a vendor.  Was the return filed timely?  Was the payment received?  Was the return prepared properly?  Any of these issues could lead to a notice.

Sales tax notices have a significant impact.  They represent risk to you and your vendor.  They impact your reputation with the jurisdiction in question - often making it difficult to receive favorable treatment when there is a real issue.  They create rework for your vendor as well.  You end up investing time tracking the notice and looking over the shoulder of your vendor.

With the major consequences associate with notices, why do so many vendors focus on notice management rather than notice prevention?  The large, factory-driven outsourcing vendors will assume a certain amount of breakage in their monthly process.  This breakage results in notice activity.  As a result, their focus is on tracking and resolving the notice.

When looking at sales tax outsourcing options, look at the notice activity of the vendor.  Is their focus on resolution or prevention?  What percentage of their returns filed result in a notice?  How long does it take to clear a notice once it's received?  These will be good metrics to help you evaluate the right option for you.

Brian Greer

Written by Brian Greer