Being compliant is surprisingly cheaper than non-compliance so investing in getting ahead of state and local tax compliance has real benefits. Here’s 10 of them to convince management to maintain a culture around a clean tax profile.
You are on the internet. Guess what – that was paid for by the government. You didn’t create the internet infrastructure – that was a military thing and access was subsidized by taxes.
Taxes have also paid for pandemic relief, roads to drive on, a military at the ready, schools to educate kids, and more, all of which comes from our collective pockets. We all benefit from a strong judicial system, licensed professionals, building codes, investor protections and more government functions.
Yet businesses shoulder the bulk of compliance requirements as vendors. It’s not like businesses can get out of this civic duty, nor should they want to; taxes are part and parcel of “doing business.”
For businesses, the cost of tax compliance typically includes a sales tax automation platform as well as hiring both a tax advisor like TaxOps and internal resources to manage the processes. Unfortunately, few CPAs learn about sales taxes in school and thus, like most complicated items, specialization is necessary. Dentists do not do braces as well as root canals. Why should your CPA be any different?
Sales taxes are a cost of doing business, especially in today’s digital economy yet a cost many businesses choose not to make until tax trouble forces the issue. Any cost/benefit analysis will show that being compliant is cheaper than allowing a business to fall into non-compliance.
So, getting ahead of state and local tax compliance has real benefits. Here’s the top ten reasons why.
- Creating a process around who your business is, what you are selling, and understanding the various state and local jurisdictions where you are selling reduces problem issues that could cost big bucks to clean up.
- When a business is compliant, you control the narrative with the government, potentially saving you millions of dollars in remediation fees.
- By demonstrating commitment to compliance through, for example, a repeatable process, document storage, data including a system of record for capturing relevant information like transaction details, exemption certificates, and more, proves to governments that a business is serious about compliance and reduces fallout should cracks be identified.
- This documentation trail can be an asset in answering sales tax audit questions, saving potentially tens of thousands of dollars in time, penalties, interest and tax owed for each state a business sells into when the audit trail is cold. Multiply that savings by 45 states and the District of Columbia where your business is registered and your business is audit-ready with answers.
- An audit-ready state of operations relieves pressure on staff, who have books to close and records to maintain every month and eliminates extra work chasing their tail to find information and answer audit questions at the transaction level of detail required. Being “audit-ready” makes it easy for internal staff (even with turnover) to demonstrate the taxability of a product assessed in Texas vs Vermont and any place else in the United States.
- When businesses aren’t up to speed on state and local tax, they risk an escrow item when they go to sell, creating risk for investors and lowering cash on the purchase price. Getting state and local tax right proves a company on the selling block has their act together and knows what they are doing, potentially increasing investor confidence, and in the end, the purchase price.
- The costs of remediation to catch-up can be costly, especially when non-compliance dates back years. Upfront, it might cost between $35 to $100 dollars a month to file a sales tax return. In remediation, these costs balloon into the tens of thousands of dollars to fix past wrongs and stop the clock on look backs, which depending on the state, may be indefinite if there has never been a filing.
- Having a tax process in place legitimizes your business, while having a tax advisor makes your tax problems the problem of your advisor. That tax advisor is your ally, advocate and reference point. Government agencies recognize when you have gone the extra mile to get compliance in order and factor that in when tax issues inevitably arise.
- Tax compliance is part of being a responsible company where employees want to work and customers want to buy. It is a culture that creates pride in place, which in today’s tight labor market, should not be undervalued.
- Falling behind on tax issues can close your doors. Just this reality impacts many businesses each year as countless companies across the country find themselves noncompliant and under the audit ax. What a waste of a great idea, vision and purpose when a company loses its way on tax technicalities.
So, protect your business with state and local tax compliance. If tax is not your day-to-day job, hire the right professionals to help keep your business ahead of tax issues and clean up past faults with repeatable processes and a tax advocate at your back. Give us a call today at TaxOps.
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