Breaking the Myths of Sales and Use Tax Returns Outsourcing
Understanding the top five outsourcing misconceptions.
April 23, 2009
These challenging economic times make it anything but business as usual for taxpayers and tax authorities alike. Many of the more than 8,000 sales taxing jurisdictions in 46 states are facing revenue shortfalls. Although tax increases may be an option, the past has shown that the usual first course of action is to increase efforts to collect existing taxes. This means that audit activity will likely increase as many companies struggle to preserve their operating capital.
Tax professionals are increasingly under pressure to do more with less. One area that may offer relief, but is often subject to misconceptions, is the outsourcing of sales-and-use tax returns process.
Sales-and-use tax is one of the fastest areas of growth for tax returns outsourcing services and yet, less than 15 percent of corporations currently outsource this service possibly due to misconceptions regarding its value. In a recent AICPA Corporate Taxation Insider survey, which included responses from both AICPA members and Vertex customers, almost half recognized that with sales-and-use tax returns outsourcing, they would have more time to focus on higher value activities.
For every reason considered on why to outsource there are strongly held tax department misconceptions that prevent companies from examining this service. The top five sales and use tax returns outsourcing myths are:
These myths can be debunked by ensuring that your company works with a firm that operates with the right service level agreement and is matched to fit your tax department’s needs.
Outsourcing Companies Do Not Perform As Well As In-House Staff
In the past this may have been the case for many companies. The nuances of particular industries and long tenure of many tax professionals at the companies they work for have made a strong case for in-house returns preparation. Today there are fewer people entering the tax field and almost half of tax departments have significant employee turnover every year. Many outsourcers have industry vertical experience and some can provide people who are more experienced than in-house preparers because of their focus on this business.
Outsourcing Is More Expensive Than Keeping the Function In-house
The obvious question that comes up when considering outsourcing is what is the cost compared to my current expense. The answer depends on how the costs are accounted for and what department or function bears them. Direct costs like personnel and interest/penalties are easy to track, while indirect costs like funds management and accounts payable are not as clear cut. From a total cost perspective, Vertex’s experience recognizes that a company with more than 20 sales-and-use tax returns per month will find that outsourcing is just as or more cost effective as in-house preparation.
Rate this article 5 (excellent) to 1 (poor).
Send your responses here.
Mark Sergas, Services Line Leader at Vertex Inc, is in his 10th year at Vertex. By working directly with more than 300 tax departments, Mark has learned how these departments face unique challenges and ways they can deliver more value to their organizations. Mark has been recognized by the ITSMA for excellence in New Services Development and has a record of fostering the strategies and organizational changes necessary to achieve new and expanded lines of service business. He holds a BS in Logistics and a Master of Information Science from Pennsylvania State University. Mark is a member of the Technology Professional Services Association (TPSA).