I’ve talked with a number of you over the previous six weeks about outsourcing your sales tax compliance work. With a new filing year starting February 1 with the January returns filed in February, time is running out. With the pending holidays there’s about six work weeks left to initiate a transition of service. The beginning of the year tends to be the best opportunity to transition as most tax liabilities have been cleared and filed with the annual returns due in January.
Generally speaking, you should plan about thirty days for a successful transition. Here are some transition items to consider:
- Setting up a tax calendar including tax id numbers, filing frequency, and payment methodology – Most companies have this information, but it may not be in one spot so it could take some time to pull this together.
- Mapping your data into the outsourced providers system – Depending on your data and your provider this could be an easy process or could require an IT investment and add to your transition timing.
- Setting up the payment process – If your outsourcing provider will be managing the payments on your behalf, the electronic payment process will need to be transition to your new provider. This is a fairly simple process but needs to be initiated in advance of the first remittance.
- Conducting a parallel test to ensure accuracy – I generally recommend a parallel test where your provider will run your data through a complete month and prepare returns based on that data. The results of the test can be compared to returns that you prepared and discrepancies identified and resolved.
- Signing Limited Powers of Attorney – Your outsourcing provider will need a limited power of attorney if they will be responding to jurisdictional inquiries (otherwise known as notices). Getting corporate officers to sign these – especially toward the end of the year – can be challenging.
While February 1, 2012 seems a long way off, there’s not much time left. If you are planning to have a new compliance process in place for 2012, Time is Running Out!
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?