I had a sales call this week with a very experienced CFO for a group of start-up technology companies.   Over the course of the last couple of years, this CFO became aware of sales tax responsibilities for some of his companies and had begun building processes to identify prior period exposure and to manage the prospective sales tax compliance process. 

He had already engaged a firm to do a nexus review of his companies, so he was starting at the right step in the process.  Though he still has to determine the prior period exposure, he also recognizes that he needs to begin thinking about the process necessary for charging his customers sales tax and paying the taxes. In his research for this process, he found sales tax technology companies that will provide a tax calculation engine that includes taxability decisions and tax rates.   

After giving me this history of his problem and anticipated solutions, he asks what is the difference between what your firm provides and what the technology companies provide?  This was a great question and really clarified for me how the market place views sales tax. 

Basically, he was attempting to solve his sales tax problems with technology only.  This certainly makes sense from his perspective, but it is not accurate.   I had to explain the many elements of sales tax compliance that require professional services as a necessary supplement to the good technology solutions. 

The professional services include:

  • Implementation of the technology,

  • Maintenance of the business assumptions and rules applied by the technology,

  • Updates to the technology because of changes in business activities and

  • Management of the output from the technology – specifically tax data. 

Because the CFO had no experience with sales tax compliance, he did not understand he needed a ‘head count’ – or portion thereof – to oversee the prospective sales tax compliance process.

I value the technology.  It is a critical component of any sales tax compliance process.  As you can expect, I also value the professional services that must be part of the process as well.  Please don’t let anyone sell you a ‘technology only’ process unless you are fully aware of the potential holes and risk to the business.   By the way…I was successful getting the CFO to understand…no deal yet though!

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Robert Dumas

Written by Robert Dumas

Accountant, consultant and entrepreneur, Robert Dumas began his public accounting career on the tax staff at Arthur Young & Co., followed by a brief stint at Grant Thornton. In 1998, Robert founded Tax Partners, which became the largest sales tax compliance service bureau in the country, and later sold it to Thomson Corporation. Robert founded TaxConnex in 2011 on the principle that the sales tax industry needed more than automation to truly help clients, thus building within TaxConnex a proprietary platform and network of sales tax experts to truly take sales tax off client’s plates.