In this current climate, your focus is understandably on your personal health and the health of your business. The last thing you want to monitor is how states are adjusting their sales tax filing dates and deferments. Even as states and economies begin opening up, there's no telling when we'll be back to normal, or what the new normal will be.
If you’ve previously outsourced your sales tax compliance process, it’s possible you’ve started to see a new side to your vendor in their inability to keep up with these unprecedented changes. If you were already experiencing issues with your provider before COVID-19, I’m sure your grievances are stacking pretty high these days.
No matter if we’re in a pandemic or not, as the sales tax outsourcing relationship progresses over time, sales and marketing messages give way to the realities of the operational relationship. Changes in ownership, staff or operations can affect provider performance or client needs.
By examining a handful of operational indicators, you can assess whether your provider is still the right fit for your business. If it’s time to change, you can initiate and control the process to find a provider that better meets your needs.
We’ve outlined 7 common indicators that a problem exists within your sales tax outsourcing relationship. Read below to see if it’s time for you to start the search for a new provider.
1. Too Much Time Spent on Oversight
How much time are you spending reviewing the work of your service provider or directing their actions? The software companies that focus on providing technology to automate the tax calculation process often take a “do-it-yourself” (DIY) approach to sales tax compliance where you are responsible for guiding and directing the process. If you fail to tell them your filing frequency has changed from quarterly to monthly, and they file the returns late, that’s on you – not them.
2. Notice Activity
What is your level of notice activity? And how quickly are notices resolved? Another DIY example requires you to login to each state’s e-file site where you are filing sales tax returns to retrieve electronic notices. Once you retrieve these notices, can you expect your current service provider to respond to them in a timely fashion? Notices often have short timeframes in which you are required to respond. It’s not possible to wait 6-8 weeks for your provider to respond. This often becomes another process you have to manage in-house.
3. No Reliable Point of Contact
Do you have a central point of contact that knows, cares and can help with your issues? We’ve heard from some businesses that have outsourced their sales tax process that their service provider does not provide a central point of contact when there’s an issue. Some businesses have described a process where they enter a “trouble ticket” similar to an IT support environment and all communication is done via email – not surprising since many of these vendors are software companies and not service companies. Other businesses have described situations where there’s a new point of contact every 3-6 months or the point of contact is a clerical resource incapable of providing the level of support necessary. Regardless, you should seek a consistent, reliable, and professional point of contact.
4. No Accountability
Who is accountable to you for resolving issues? We see this manifest itself in two varieties:
a. Too many vendors – Some service providers use a third party payment processor and present it as a “best of breed” option. In this situation, one company provides the return preparation and another company provides the payment processing. You should ask yourself how is it advantageous to bifurcate the process? Having two companies involved in providing one service introduces unnecessary risk and increases the likelihood of finger pointing if there is an issue.
b. Too many people – Multiple departments involved in the process is “sold” as segregation of duties to enhance security of the process as well as to create scalability in the process. However, this type of arrangement increases the likelihood of finger pointing when there is an issue and reduces the overall accountability. Who’s in charge? Is it an IT issue, a Treasury issue, or some other department?
5. Your CEO (or Other C-level Executive) is Contacted by Jurisdictions
Has your boss contacted you about a sales tax issue? When the CFO or CEO has been contacted at home or has had their personal assets impeded, it’s past time for change. This is a real situation that we have seen on multiple occasions. Usually, once something gets to this stage, there have been multiple additional red flags along the way – high notice volume, lack of responsiveness on notices, lack of accountability, etc. If this occurs, you may be forced to make a change in order to demonstrate to the C-level that you will not allow this type of event to happen again.
6. Lack of Responsiveness
Many sales tax outsourcing service providers manage the workload of each “return preparer” based on the number of returns they file. The process is completely driven by the returns and there’s minimal time to respond to and address questions. The point of contact can do nothing but file returns through the 20th of each month. After the 20th, there’s just enough time to catch a breath, provide reconciliation reports to the client, and attempt to respond to as many notices as possible prior to the process starting all over again.
7. Lost Confidence
Ultimately the issues outlined above lead to a general lack of confidence in the service provider. Once you reach this point, you’ve lost trust in what the service provider is doing for you and it’s time to make a change.
If you’ve experienced one or more of these issues, then it may be time to evaluate a new outsourcing relationship. Many of the sales tax firms that focus on providing software to calculate the tax for an invoice just aren’t good at providing a service as well (i.e. compliance outsourcing). And accounting firms that aren’t focused on sales tax compliance outsourcing neglect the process, just because they have so much other stuff they are helping you and their other clients manage. Sales tax falls to the way-side.
When it comes to sales tax compliance, it pays to work with sales tax experts whose main focus is on providing a service.
Contact TaxConnex to learn about our services in providing a sales tax compliance service that will take the burden off of you.
Now that you’ve evaluated whether or not you may need to make a switch – check out our eBook – to understand the process to actually make the switch. Download now!