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Reasons to Outsource Your State and Local Tax Compliance

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Managing your sales and use tax and property tax obligations is a necessary evil for most businesses, creating heavy time and expense burdens on internal tax and accounting teams. As complications in managing SALT compliance continue to grow, many businesses have looked to outsourcing these functions. Outsourcing SALT compliance can be quite beneficial for many businesses, relieving them of time-consuming tasks and potentially saving them money as well.

In conjunction with our partners at Invoke Tax Partners, we’ve compiled 5 issues that can be solved by outsourcing your state and local tax compliance.

1. Difficulty Attracting/Retaining the Right Talent. The Great Resignation may be over, but businesses still claim to have difficulty finding qualified talent to manage their sales and use tax and property tax obligations. In a survey conducted by TaxConnex at the end of 2023 of financial professionals, over 62% stated that their organization struggled to attract/retain staff with sales tax expertise. This struggle to attract the right talent has led to many negative outcomes for businesses including:

  • 17% stated an increase in notices or errors related to sales tax  
  • 22% claim to have a growing lack of confidence in audit preparedness 
  • 21% face existing staff frustration/burnout 

Outsourcing solves this issue holistically. By outsourcing to experts in state and local taxes, businesses can gain expertise on critical functions and export additional work, all without adding to their headcount.  

2. Legal liability.Risk and liability fall entirely on corporations when they handle sales tax and property tax compliance in-house. And that could mean the CEO, CFO, Tax Director, or Controller, not just the business. An LLC does not protect the officers and executives from personal responsibility laws related to state and local taxes. 

While it’s common for businesses to want to maintain control over financial processes and procedures, punishments for non-compliance are high risk (again, potentially on the individual,) and can range from assessments, penalties, interest, and liens, to the use of aggressive collection agencies. The risk of considerable damage to one’s business can be lessened or even completely avoided by leveraging an expert who works in sales tax and property tax every day.

3. Difficulty focusing efforts on your core business functions. Outsourcing can sharpen overall efficiency and accuracy while freeing internal resources to focus on other, higher-value tasks. Managing sales tax and property tax takes time, and for most businesses, it’s more than an annual filing like income tax. Instead, filings can be monthly, bi-monthly, quarterly, or bi-annually. Not to mention that filing dates for monthly returns can happen on multiple days

4. Lack of expertise and high cost of invested capital. Having an expert available for questions or concerns without adding extra stress internally can make a huge difference with all the complex changes happening in sales tax and property tax. Outsourcing to an expert allows someone to take a diagnostic look at your current processes and determine best steps forward for your business.  Having someone who knows your options and the best steps to get there will save you time and money in the long run. And this is something you may not get from internal staff depending on their levels of expertise.

Outside providers can also save on expenses of in-house operations such as wages, salaries, health insurance, and office space – at a time when businesses need all the cost savings they can get. 

5. Lack of a centralized internal tax process. Relying on an internal accounting or tax department to keep up with jurisdiction changes, filing requirements, and exemptions is a risky endeavor. Managing filing dates alone takes valuable time and resources from internal personnel. Keeping up with changing laws, statutory guidelines, freeport exemptions, and understanding sales and shipping processes to know where you’re responsible for collecting, takes significant time and expertise. Outsourcing tax processes allows for even more control than that which is possible with an internal team. Centralizing this function to experts who live and breathe sales tax and property tax provides access to experts, assurances compliance, and allows the ability to manage the process through one single point of contact fully engrained in all unique aspects of one’s business and reporting requirements.

How you manage your business’ compliance processes can be a difficult decision. Many businesses like to keep their tax decisions internal, but as state and local tax rulings become more and more complicated and hiring becomes more of an obstacle, a growing number of businesses have chosen to either outsource their tax compliance activities completely or selectively. If the fit is right, outsourcing can offer both quantitative and qualitative benefits, enabling internal teams to focus on more value-added activities, such as business and tax planning, enhanced audit defense, risk management, and other company-defined priorities.  

Get in touch to learn more!

Disclaimer: This story is auto-aggregated by a computer program and has not been created or edited by finopulse.
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