The U.S. Government Accountability Office has been tracking the effects of added sales tax obligations since most states began to require remote sellers to collect and remit sales tax. They’ve categorized these costs into three groups:
- Software-related costs include the cost of sales tax solutions as well as IT costs and the cost of staff time for training and using the software
- Audit and assessment compliance costs include not only staff time and legal assistance, but also time involved in responding to notices and correspondence from taxing jurisdictions, some of which GAO described as “nuisance notices.” Some states require companies to provide evidence of whether or not they have economic nexus or meet thresholds for sales tax compliance.
- Research and liability costs include determining whether a company has nexus in a state or meets a threshold requirement, as well as keeping up with frequent sales tax regulations and rates changes across multiple jurisdictions. Some companies told GAO researchers that they weren’t confident of their software’s accuracy and felt they had to check information manually.
The GAO pointed out that in the past, businesses typically had growing costs for sales tax compliance when they added new branches and locations. The growth that led to increased sales tax obligations also led to increased sales and income. Now, however, a company might add sales tax obligations with changes in the locations of customers, not the quantity of sales.
What’s the Solution?
The Small Business Administration estimated that sales tax compliance, including all the listed costs, can add up to about 3% of sales. PricewaterhouseCoopers estimated that sales tax compliance takes businesses an average of 33 hours per year. Both these estimates are from the early 21st century, though, before the Wayfair decision. More recent surveys put the costs at nearly $15,000 per month.
From our own clients’ experience, we’ve found that a typical business can expect to save in the neighborhood of $30,000 with one simple change: outsourcing. Sales tax compliance outsourcing means that, instead of diverting your staff from mission-critical tasks that develop your business, you pass sales tax compliance tasks to external experts like the team at Sales Tax DataLINK. With our patented software and our team of highly experienced sales tax experts, we make sure that your company complies with sales tax obligations.
Contact us today to learn more.