Why Is Sales Tax Compliance Outsourcing Important for Businesses?

Sales tax is a tax charged on goods and services as a percentage of the price of the item. The amount of tax varies depending on where the sale takes place. Sales tax can be complex, and the rules can vary between countries. Outsourcing sales tax compliance means businesses save time and money by not employing in-house experts, it helps ensure that rules are followed, and it reduces the risk of errors, which can lead to penalties. 

How does sales tax compliance outsourcing work?

Sales tax compliance outsourcing occurs when businesses hire a third-party provider to handle their sales tax reporting and payments. The third-party provider calculates the tax owed on each sale, files the necessary reports, and makes the required payments to the tax authorities. They are responsible for ensuring that the business is always in compliance.

What are the benefits of outsourcing sales tax compliance? 

Outsourcing sales tax compliance offers businesses a range of benefits. It allows them to focus on core operations and removes the costs involved in employing in-house experts. Outsourcing these responsibilities ensures that businesses are always in compliance and minimises the risk of errors. So, by outsourcing sales tax compliance, reporting and payments are accurate and timely which reduces the risk of penalties. Tax authorities conduct audits to ensure that businesses comply with sales tax regulations. Outsourcing sales tax compliance reduces the chances of being audited because it ensures that a business remains compliant. Third-party providers use up-to-date technology to streamline the process which makes it more efficient and less error prone. Businesses can outsource sales tax compliance to match their growth and expansion into new markets. This allows them to scale up their compliance efforts as needed.

The difficulties of managing sales tax compliance in-house.

There are some common challenges that businesses face when managing sales tax compliance in-house. Sales tax regulations are complex and change often which makes it difficult for businesses to keep abreast of the latest rules and remain compliant. Keeping track of sales tax regulations can be a particular challenge for businesses that operate in different countries. Managing sales tax compliance in-house is time-consuming and uses significant resources which diverts time and attention away from other business activities. Businesses face penalties if they make errors when reporting and paying sales tax, so this is safer handled by experts. Managing sales tax compliance in-house can be difficult to scale up as a business grows and expands into new markets. Managing sales tax compliance in-house also increases the risk of audits, which can be time-consuming and costly.

What are the key attributes of a sales tax compliance outsourcing provider? 

The provider should have experience in the business’s specific industry, and of working with businesses of similar size and complexity. They should use a technology platform entirely compatible with the business’s existing systems. They should offer comprehensive sales tax compliance services. They should have a dedicated support team available to answer questions and resolve issues. They should offer a transparent pricing model and competitive pricing.