5 Questions to Ask Yourself Before Distributing Sales Tax Obligations to Other Team Members After Losing a Key Employee

Losing an important member of your finance team can leave a big hole in many business processes, especially if most of your accounting functions are managed in-house. But what happens when you lose the person managing your sales tax obligations? For most businesses in this scenario – there are three options: 

• Re-hire for the position  

• Distribute tasks among other members of the team 

• Outsource  

In this blog, we’ll look at the potential to distribute tasks to current team members.  

Often, budget doesn’t allow to immediately replace a lost employee. Especially when it’s the result of layoffs. Distributing the additional tasks across current staff is an option, but this can come at the cost of overworked employees or a ball dropped on current processes. You must ensure you have the right expertise and bandwidth within your current team before reallocating sales tax processes.  An unexpected audit, missed filing or notice not responded to timely can create a financial surprise that could have been avoided.  

Ask yourself the following questions before you go down this route:

• How many employees will it take to handle your current and future sales-tax obligations?  

• Does your current staff have time and bandwidth to tackle a new project as complicated as tax compliance across all of the jurisdictions in which you have sales?  

• What is the opportunity cost of shifting employees away from other potentially more valuable tasks to manage a compliance obligation? 

• What resources or tools will they need to handle this new responsibility?  

• What will be their reaction to the new workload – and your potential cost of employees leaving down the road?

If you have the bandwidth and expertise within your team already, this is the most cost-effective route, but ensuring proper documentation is key from the employees managing the process as you don’t want to be in a similar situation later if someone else happens to leave.  

The following areas at minimum should be included in your documentation:  

• Data Management:  Include a list of source reports for monthly sales & use taxes, what systems the reports are generated from, who is responsible for generating the reports, where the reports are stored, and when they are available each month.  Also include a description of what information from each report is used and how.  
• Tax Calendar: Maintain a listing of all tax returns that are filed for each company, who is responsible for filing the returns, account IDs, filing frequencies, due dates, login credentials, payment methods, and reporting methods.  

• Return Specific Instructions:  Document all return specific requirements such as manual adjustments, prepayment calculation methods, and credit reporting.  
• Document Management: List all documentation and backup workpapers that are stored for each return and where they are located.  
• Reconciliation Procedures: List all G/L accounts that are impacted by the compliance process and the specific reconciliation procedures for each account.  
• Exemption Certificates: Maintaining current, valid exemption certificates (if this is part of your process) is critical in managing your overall sales tax risk. Ensure you have a process to gather, validate and store your exemption certificates so they can be found in case of an audit. 

If you’ve recently found yourself in a situation of trying to fill a lost employee that manages your sales tax obligations but your current team doesn’t have the bandwidth, outsourcing may be your answer? Get in touch with TaxConnex to learn more.

This is an except from our eBook – read more of what we have to say on this topic, including how to hire someone new and steps toward outsourcing – download it now!