Push Button Sales Tax Compliance?

ERP and sales tax automation firms are quick to point out their “push button” ease of use. They sell the easy button solution and many taxpayers are happy to buy it. Until they realize it’s not so easy.

We’ve lost clients in the past – not related to our service at all – but based on the belief that they can fully automate the sales tax process with the push of a button. Sometimes these decisions get made a level or two above the people that are left filing the sales tax returns and managing through the exceptions. We’ve had some of these same clients come back to us after they realize that sales tax compliance is rarely compatible with a “push button” system.

I have seen many very smart CFO’s, CPAs and accounting professionals want to believe that all sales tax problems can be solved with technology. I was one of these people (except for maybe the smart part)! From 1998 to 2005 I tried to build and maintain a ‘one-size fits all’ compliance solution for sales tax preparation, filing and remittance and ran into numerous challenges that were impossible to fix with more automation. In fact, each layer of new automation added complexity and risk rather than efficiency.

I understand the appeal of finding a comprehensive sales tax solution. However, I also understand the cost and risk.  Let me try to make my case with an analogy that most CPA’s and accounting professionals will understand.

What if an ERP vendor told you that they had a comprehensive income tax module that completed your Form 1120 and all its related forms and attachments? Would you let your accounting staff give this ‘push button’ Form 1120 to an officer for signature?   I think every CPA at least would agree that they would not rely solely on an ERP’s income tax module for preparation of income tax returns.

Not all income tax returns are the same and not all sales tax returns are the same – especially with regard to risk and complexity. There is no fool-proof automation for income tax and there isn’t for sales tax either. Please be careful in relying too much on the promises of sales tax automation and compliance. It is never ‘push button’ or as easy as some folks can make it sound.