Switching Sales Tax Compliance Outsourcing Firms – Part 2 (of 2)

This is part two of a two part series focused on switching sales tax compliance outsourcing providers.  In Part 1, I discussed some key indicators that it may be time to make a change.  Here’s a recap:

• You spend too much time overseeing and reviewing the work of the service provider

• You see an increase in the notice activity

• There’s no reliable point of contact with the service provider

• There’s no accountability on behalf of the service provider

• A “C”-level executive is contacted by a jurisdiction with bad news

Once you decide to make a change, here’s a simple check list to facilitate the transition:

1. Gather your documentation – This includes a current tax calendar that shows where you are registered, the filing frequency of each return, sales tax id numbers, e-file login credentials, and whether the return is paid via check or electronically (ACH Credit or ACH Debit).

2. Review your contract terms – You should understand the cancellation policy for your current engagement and how much advanced notice you need to provide in order to cancel the engagement.

3. Agree to pricing and T’s and C’s with your new provider – Do this before you cancel service with the current provider. You need to be sure you have a safe “landing spot” before you cancel the engagement.

4. Request documentation from your current provider – This includes a current tax calendar as referenced above, any forms they may have received from jurisdictions, prepayment requirements, and any sales tax credits that may be applicable.

5. Send a cancellation notice – Be specific in your cancellation notice by referencing the date through which you expect them to provide service. You might say that you “expect them to provide service including the June returns filed in the month of July”.  For an example cancellation letter, you can download our guide to switching sales tax outsourcing providers.

6. Secure copies of return images and reports – If your provider hosts images of returns or reports online, be sure to get copies of this information before your login/password is deactivated. If they maintain images separately, they will need to email you this information or save them to a flash drive.

7. Notices from prior periods – You will need copies of any open notices as well as the status/notes associated with these notices. Do your best to get these resolved before the service is completely terminated.  It will be more difficult to get the attention of your former service provider once you leave.

Overall, transitioning your work from one provider to another is not nearly has time consuming or difficult as transitioning the sales tax work from an in-house process to an outsourced process. 

I believe this is true because there is considerable effort initially in developing data formats that are compatible with your service provider, establishing a solid tax calendar, setting up payment/funds transfer procedures, etc.  Once these processes are established and are functional with one provider it is easier