Sales Tax Software vs. Service Providers: Making the Right Choice for Your Business

Staying on top of your sales tax obligations is crucial to maintaining compliance and avoiding costly penalties. However, navigating the complex world of sales tax filing is a lot for a business to manage without the right expertise.

Fortunately, there are options outside of managing sales tax on your own, but it leaves you with a choice - sales tax software or service provider? Both options offer distinct advantages, but which one is the better choice for your business? In this blog, we will explore the key differences between sales tax software and service providers, weighing their pros and cons to help you make an informed decision that aligns with your unique business needs. Let's dive in and find out which option can streamline your sales tax filing and bring you peace of mind. 

Sales Tax Software:

Pros:  

1. Cost-Effective: Sales tax software typically offers a more affordable solution compared to hiring a service provider, especially for small businesses with limited budgets. 

2. Flexibility and Control: With sales tax software, you have the flexibility to manage and file your sales tax returns on your own terms. You can access the software whenever you need it and maintain control over the entire process. 

3. Time Efficiency: Automated sales tax software can save you time by streamlining calculations, generating reports, and automating filing processes. It reduces manual processes but still allows key internal teams to have access to data and returns process.  

Cons : 

1. Internal Management: Utilizing sales tax software effectively may require a learning curve, especially for businesses without prior experience. Just as much as it is a pro that you have access and ability to manage the software, it’s also a con. It takes time and effort to familiarize yourself with the software's functionalities, make needed updates and ensure the correct information is being uploaded and adhered to as changes occur within your business and with sales tax rules.

2. Limited Expertise: Sales tax software is designed to automate processes, but it may not provide the level of expertise and guidance that a service provider can offer. Software cannot provide personalized advice or handle complex sales tax situations that may arise. 

3. Constant Updates and Maintenance: Sales tax laws and regulations are subject to frequent changes. With sales tax software, it is your responsibility to stay updated and ensure the software remains compliant. This requires continuous monitoring and potential software updates. 

Service Providers:

Pros:  

1. Expertise and Guidance: Service providers specialize in sales tax compliance. They have a deep understanding of tax laws, regulations, and exemptions, offering expert guidance tailored to your specific business needs. They can help you navigate complex situations and provide personalized advice. 

2. Time-Saving: Outsourcing sales tax filing to a service provider frees up your time, allowing you to focus on core business activities. They handle the entire process, from data collection to filing, reducing your administrative burden. 

3. Reduce Risk and Liability – When working with the right service provider, errors made by the provider should fall back to them. Thus, working with a service provider removes the risk and liability of managing sales tax and. In addition, in the event of a sales tax audit, service providers can provide valuable support and representation. They have experience in dealing with auditors, helping you navigate the process smoothly. 

Cons: 

1. Cost: Hiring a service provider for sales tax filing comes with a cost. The fees vary based on the provider, the complexity of your business, and the scope of services required. It may be a more significant investment compared to using sales tax software. 

2. Reliance on Third Party: By outsourcing sales tax filing, you are placing the responsibility on a third party. It is essential to choose a reputable and trustworthy service provider to ensure accuracy and reliability. 

3. Potential Lack of Control: Depending on the service provider, you may have less control over the filing process compared to using sales tax software. With sales tax there are many deadlines and for a service provider to file accurately and on time they may require specific dates and information to be adhered to. It is important to clarify expectations and communication channels to maintain a good working relationship. 
   

Remember, the choice between sales tax software and service providers ultimately depends on your business's specific needs, budget, and level of expertise. It is advisable to evaluate the pros and cons carefully and consider consulting with professionals to make an informed decision.

If you’re looking to completely remove sales tax from your plate, or to move to a provider who can actually provide dedicated support and guidance, look to TaxConnex.  With TaxConnex, all your sales and use tax needs are on us.