Managing sales tax: Are businesses satisfied with the additional effort?

Our third annual survey of financial professionals across accounting, manufacturing, construction, software and technology, retail/eCommerce, telecom and others showed that many industries face sales tax challenges and that financial leaders continue to lean on internal resources to get the job done.

With varying levels of comfort and success: Though showing more confidence than that in previous years’ surveys, more than half (58%) of respondents remain unsatisfied or only somewhat satisfied with the time and effort it takes their company to handle sales tax.

That’s a worrisome sign, given that almost two out of every five of respondent companies (38%) already sell into more than 30 states – a potentially sprawling and complex net of sales tax obligations that will only increase as most companies (68%) plan to hire employees, add customers or otherwise increase the number of states where they’ll need to collect and remit sales tax over the coming year.

More than a third of companies across all industries also report that their sales tax obligations aren’t big enough to warrant outsourcing the function – yet.

Time’s not on their side

Almost three out of every five companies (58%) responding to our survey use internal resources/existing accounting systems to prepare and file sales tax returns, remit payments to tax jurisdictions (68%), calculate sales tax to charge (57%) and communicate with tax jurisdictions (75%).

Yet a third of companies said their processes to handle sales tax and nexus obligations required too much of their staff’s time. Time and resources are the biggest barrier to financial teams’ more easily managing sales tax for more than a third (38%) of companies; more than a quarter (28%) cite lack of internal knowledge or expertise.

Lack of internal resources and gaining sales tax expertise are two of the biggest reasons respondent companies might outsource sales tax functions, followed by reducing costs and risks. (Likely tasks to be outsourced include keeping up with changing nexus rules in each state, understanding the taxability of products and services, managing sales tax audits and timely filing of sales tax returns and remitting of payments.)

What’s keeping them up at night?

Respondents’ biggest overall sales tax worries for this year include keeping up with changing nexus rules in each state, understanding taxability of products and services, charging correct sales tax and audits.

Our survey also found that more than four out of five companies (82%) report that state sales tax audits are not decreasing. Almost a quarter of companies also expect audits to increase in just the next two years.

Clearly companies want to comply with their sale tax obligations. How they’ll manage to do so this year and beyond remains a big question.

Everyone who says they’re simplifying sales tax is leaving the hardest parts – and the liability – up to you. Rely on sales tax experts to maintain your compliance. Contact TaxConnex to learn what it means when sales tax is all on us.