I used to think that filing sales tax returns on the due date was a good business decision. After all, why give the jurisdictions their cash early? However, my thinking has shifted over the years. It’s a bit like “Lombardi Time”. The legendary coach was always 15-minutes early for every meeting, event, commitment, etc. If something started at noon, it wasn’t good enough to get there at noon, he was there by 11:45. The extra time was used to gather his thoughts, plan for the meeting, and enter the meeting fully prepared. I feel the same way about filing sales tax returns. It’s not good enough to get them there on the due date. Here’s what I’ve found happens when you file on the due date:
- By creating your workflow around filing on the due date, you remove much of the opportunity to correct an error if you find one prior to the due date. By setting an internal deadline of the 15th for example (instead of the 20th), you have built five additional days into your process to correct an issue if (or should I say when) identified. I guarantee you that you will appreciate this additional time to correct a return error at some point.
- By filing on the due date, your returns are received at the same time every other company’s returns are received. The jurisdictions process these returns and enter them into their system. If they don’t process yours quickly enough, a late filing notice is generated. Not necessarily a big deal, but now everyone has sideways energy applied to resolving and tracking the notice. Filing in advance of the due date eliminates this sideways energy, reduces risk, and enhances your jurisdictional equity.
Point number two is less valid if you file electronically but point number one still applies. And the concept of enhancing your jurisdictional equity applies whether you’re a paper filer or an electronic filer.
Most businesses manage to the jurisdictional imposed due date as a result of competing priorities. Most sales tax outsourcing vendors manage to the jurisdictional imposed due date to maximize their float income by holding your cash a few extra days.
So - next time you think about filing sales tax returns on the due date, think about Lombardi time.
Other recent “Sales Tax Outsourcing” posts by Robert Dumas:
- Outsourcing the Sales Tax Department: 4 Key Factors to Consider
- Sales Tax Outsourcing - You Can't Be Half Committed
- Sales Tax Outsourcing – Walking the Performance Tightrope
- Sales Tax Outsourcing - Cost Reduction Not the Priority
- What Does KPMG Sales Tax Buy Mean to Small – Midmarket?