Every few days a new flurry of news is published dealing with the difficult economic woes of states and local government, how they are forced to look for new sources of revenue, but without increasing taxes.
In recent years governments have come to grips that sales tax is just this source. With their lax enforcement to date, sales and use tax is an underutilized revenue source that governments sorely need to support their operations. In recent years state and local governments have shifted their focus to this area, increasing enforcement, audits and collections. They are experiencing quick and immediate results in increased sales tax revenue. Tennessee Republican Governor Bill Haslam spelled this out reflecting the governing sentiment — “This discussion isn’t about raising taxes or adding new taxes. This is about states having the flexibility and the authority to collect taxes that are already owed.”
Sales and use tax come in many flavors, with many points of impact. The business owner must:
• Track the tax rates and tax rules. This means sifting through the government paperwork, reading through lengthy notices received from the state and local governments, trying to figure out which is relevant, what they mean and what is the impact on my business.
• Update the POS system any time that a rule or rate changes. This means logging into the admin sections of the system, and figuring out which areas are impacted by the rule and rate changes, which buckets need to be changed and how.
o Praying, that the changes I made are correct, and that I didn’t miss a digit, a decimal point, or applied an exemption to an otherwise taxable service.
• Collecting at the end of the month all of the information regarding sales revenue and tax collections, breaking it up and figuring out how to populate the information into the tax return. These are just some of the issues that lead to returns being rejected. Once a return is rejected, the sales tax authority will automatically apply fines and penalties, even if the return was originally filed in a timely manner. Even a miscalculation of a few cents could result in hefty fines and penalties.
• Repeating this never ending cycle each and every month.
Fortunately for the business owner, there are tools that can automate this entire process. Sales tax outsourcing is a recommended method for removing the burden from the business owner and overcoming pitfalls associated with sales taxes. Just like most business owners outsource payroll and payroll taxes, over the next few years many will revert to outsourcing sales tax compliance.
Automated sales and use tax services are turning sales tax compliance to a simple process, similar to how payroll processing was transformed 20 years ago. Business owners who outsource their sales tax compliance immediately gain time that they can apply to more productive tasks. Most small business owners did not start the business to spend their time on complying with tax rules, completing and filing tax returns. Employees did not join the business for these purposes as well. By outsourcing these burdensome, mundane tasks, the business owner is not only freeing up time to focus on the business, but also removing a highly dissatisfying task from their repertoire.
Outsourcing sales tax compliance, such as the services offered by Exactor which is fully integrated into the Millennium system, allows the business owner to benefit from the talent and expertise of professionals who are expert in the nuances of sales taxes, use taxes, reporting and remitting to the appropriate agencies. They receive the benefit of these services which, until recently, were relegated to large Fortune 500 Companies only. Exactor’s module provides a method and system that fully automates the entire process for sales and use tax compliance, addressing each of the compliance needs outlined above.
Outsourcing sales tax also means that the business owner does not need to interact with the state and local governments when receiving notices and assessments. Unfortunately, in recent years, many business owners are coming across an ever increasing flurry of notifications and assessments that are generated automatically by the state computer systems. The state and local authorities have programmed their systems to generate assessments, including fines and penalties, in an automatic manner. Often these assessments are generated in error. Business owners must dedicate much time to calling the state and the local governments, being kept on hold for extended time, and when finally getting through — dealing with an uncooperative bureaucracy to resolving the assessment. Many business owners take the easy way out – and simply write a check to cover the assessment even though it has no basis. An outsourcing company, such as Exactor, assumes this task. “Just having Exactor take care of these assessments, and deal with the states , is worth their rate in gold” say Exactor customers.
Any decision on outsourcing should factor a thorough cost analysis. It is very difficult for the small business owner to put a value on their time. It is therefore difficult to truly assess the cost savings in time alone. However in addition to the time savings, there are tangible expenses associated with sales tax compliance. How much do the checks I use to pay the state cost?; how much does the bank charge me for each check that is cashed by the state against my account?; how much does it cost to mail the return?; how much do I pay a book-keeper / accountant to help with my filing efforts?; how much time is spent on the phone with the tax agencies?; how much do I pay in fines and penalties? Then they should compare these costs, combined with the difficulties and pitfalls outlined throughout this newsletter, with the overall cost of an outsourced sales tax solution.
For more information on this great service please go to http://www.exactor.com/