Findings from the third annual Sales Tax Market Survey indicate that a perfect storm is brewing for financial leaders in the new year. Companies still struggle to navigate workforce shortages and retention of internal expertise, yet they remain highly dependent on in-house resources to perform many of the vital functions related to sales tax. Their resources are stretched thin, and bandwidth is reported to be the top barrier for success.
Companies also struggle to keep up with the ever-changing tax rules across state, county, and city jurisdictions, while they also continue to expand their businesses online and across states.
And finally, global economic uncertainty is wreaking havoc on long-term planning, resulting in hiring freezes, threats of lay-offs, and a decline in consumer and corporate spending. The idea of doing more with less is being taken to a whole new level, and the future doesn’t show any signs of this reversing.
This report provides an in-depth analysis of the findings from this year’s research study of more than 100 financial leaders in hopes of highlighting the current state of the industry and helping to motivate leaders to explore new opportunities for improvement in the coming year.
- Overall, financial leaders remain relatively unhappy with their company’s approach to managing sales tax, with 52% reporting to be less than fully satisfied. While this shows a slight improvement from last year’s 60%, it is still critically low for such an important component of every company’s business. When asked about the primary reason they were not satisfied, respondents most often cited manual and cumbersome processes and lack of internal resources and knowledge about sales tax complexities.
- When it comes to audits, the research indicates that audit activity is stabilizing, with 67% reporting that audit volumes remained the same. This is relatively consistent with last year, as 62% said activity remained the same. The difference this year is the expectation of increased audits: only 23% expect audits to be more frequent, which is nearly half of what was reported last year (49%). The disruptions audits create in the business can be enormous, and that’s likely why audits remained one of the top three concerns among financial leaders for the third year in a row despite audit activity not rising to the previously expected level.
- Despite today’s tumultuous business environment, 68% of businesses’ growth plans involve expanding across state lines over the next 12 months, and thereby increasing their sales tax obligation. Though it remains high, this is down slightly year-over-year.
- When evaluating a company’s approach to managing the primary sales tax functions, the research shows that more companies appear to be taking on responsibilities internally, even though leaders reported their primary barriers to success are a lack of time/resources and internal knowledge. As sales tax complexities increase, these resources become further overwhelmed, putting companies at additional risk.
- Concerns about the future also remain the same, with little movement over the past several years:
- Keeping up with changing nexus rules in each state
- Understanding taxability of my products/services
- Being audited
When looking at variants by industry, the software and construction industries are most concerned about keeping up with changing nexus results in each state. In the coming year, being audited tops the worries of retail/ecommerce respondents. Perhaps this is due to the continued expansion of online sales. Manufacturers are equally concerned about keeping up with changing nexus rules and understanding the taxability of their products and services.
For more responses or further details on this data download our eBook – Third Annual Sales Tax Trends Report.