Sales Tax Horror Stories: Notices

Often as things change in sales tax – and they change often – one constant keeps lurching along. Tax jurisdictions love to send notices, and usually it’s to say “Boo!” and not just “Hi.”

True, notices can simply be a way for tax jurisdictions to get in touch with you and require no fast action on your part. The scary-looking official piece of paper (if it even arrives on paper – many notices are electronic now) might only be informing you of something as routine as use of a new form or a reminder to file or even a credit you might have coming.

And sometimes not. Sometimes the subject of the notice is a lot more grave.

Important part of the process

A recent survey of financial professionals conducted by TaxConnex showed that three out of four respondents rely on internal resources to manage notices but that the task would be a major reason to pursue outsourcing of sales tax functions.

As we said, you might receive a notice for many reasons, not all of which mean trouble: Your filing deadlines could have changed; you may need to send your filings or payments to a new location or in a new format; or you might have a questionable matter or minor error with your previous payment or filing. Notices can also inform you of serious questions, audits or a change in rates or deadlines.

Clearly, notices are a cause for worry. Why are so many businesses managing this in-house when they are comfortable outsourcing other aspects of finance and sales tax? Often, it’s because their sales tax software providers do not offer this as a service.

Monitoring and responding to notices as well as making the corresponding adjustments or taking the prescribed actions is one of the many pieces of your sales tax compliance process. An important one, too, as ignoring a notice can put you and your business in hot water, opening the door to additional penalties and fees – a compliance nightmare.

Question of management

Who’s taking care of this potential problem for you? And what should they doing?

Contact info: Make certain your company name, address, email and phone are current with the state in question.

Monitor different delivery methods: Tax notices can come by snail mail, email, or simply be posted on your taxpayer portal in a state. It is best to receive notices both by email and by mail if the option exists – you cover your bases if a notification gets lost. Tax jurisdictions do make mistakes: You just have to be prepared to prove it.

The person in charge of checking (software providers won’t always get this done for you) and responding to notices must know where to monitor, how to respond and have access to all jurisdictional sites. The time to manage notices can quickly add up, and failure to respond timely or put into practice updates that were sent can lead to costly penalties.

Read the entire notice: Some matters may be minor. Others not. Read the whole thing before you react. Follow instructions or recommendations on the notice.

Once you take the necessary action, be sure to follow up and make sure the issue has been closed. You don’t want penalties to pile up because mail didn’t arrive in time.

Jurisdictions’ notices, believe it or not, don’t have to be frightening.

If you’ve become frustrated with managing sales tax on your own or are looking for a provider that will actually manage the entire process including notices for you, get in touch with us and learn more about The TaxConnex Difference.