Think you’re the only one worried about sales tax compliance? According to our third annual Sales Tax Market Survey you’re not.
“Our company is highly acquisitive and this results in lack of consistency when it comes to billing, accounting and reporting,” said one survey respondent.
“Increasingly, I am finding the people who ‘know’ the products and classified them for tax coding purposes long before I arrived do not understand the importance of the little details that can make a huge difference in taxes,” said another. “[We have] difficulty with our tax team having extremely limited knowledge of the products and the product teams not caring enough to take the time to properly classify.”
Added a third respondent: “We need help now.”
Fewer than half of the respondents to our survey were “very satisfied” with their company’s current approach to managing sales tax. Why?
Beyond constantly evolving nexus details related to sales tax (itself a major concern of respondents), what are the major barriers to companies meeting their compliance obligation?
1. Too much staff time needed. More than a third (38%) of respondents were among companies struggling with a “lack of bandwidth.”
More than half of respondents (58%) use internal resources or their existing accounting system to try to manage their compliance obligations. Almost two out of three (66%) rely on internal resources to remit sales tax payments to jurisdictions and three out of four use internal resources to manage communications with jurisdictions.
Finding qualified staff is an enduring concern that continues to challenge all businesses You must ask hard questions about what your staff can handle: How many staffers will it take to handle your current and future sales tax obligations? What resources will they need? What will be their reaction to the new workload?
2. Inadequate understanding of sales tax complexities. Again, most companies (57%) use internal resources to calculate the amount of sales tax to add to their invoices. Companies struggle to keep up with the ever-changing tax rules across state, county and city jurisdictions including states like Alaska, Illinois, Colorado and others with locally administered taxes. With Missouri completing the list this year, every state with a sales tax now enforces economic nexus.
3. Manual, cumbersome processes. Combined with consuming too much staff time and lacking “the right processes in place” (27%), companies can’t easily keep up with the dynamic sales tax environment.
Consider one of the lynchpins of a compliance operation: the tax calendar. Reporting sales tax and the amount of information required on each return varies with jurisdictions. It’s critical to maintain an accurate tax calendar that reflects where your business is registered for sales tax purposes, the filing frequency of each return, the e-file login credentials and other information. This can change too as the tax calendar is not a static item.
More than two out of three (68%) businesses’ growth plans involve expanding across state lines over the next 12 months – increasing their sales tax obligations. Companies reported worries especially related to keeping up with changing nexus rules, understanding the taxability of their products/services and being audited.
All three are plausible – and possible. Overcoming these barriers to compliance is a good first step.
For more responses or further details on the survey data, download our eBook Third Annual Sales Tax Trends Report.
Don’t let sales tax compliance overwhelm you. Rely on sales tax experts to maintain your compliance. Contact TaxConnex to learn what it means when sales tax is all on us.