Published: January 19, 2021

Accounting Firms – Think Twice about Cloud-Based Sales Tax Automation

Accounting Firms Sales Tax Compliance

Accounting firms are hungry for ways to provide evermore services to existing clients while appealing to larger swaths of new clients. Automated cloud-based tax compliance has emerged as a seemingly savory low-hanging fruit on which accounting firms can sate their appetites and launch a new generation of sales tax compliance services.

They will tell you it’s simple. Partner with a third-party firm specializing in cloud-based sales tax compliance, add a click here and a click there and voila. Promises of efficiency and massive scale ups are given while mitigating compliance risks and creating opportunities to free up precious resources for higher-value targets. Leave sales tax compliance to the pros they will say. It seems all will be right in the world with this win-win scenario. Who knows, maybe a unicorn will appear too.

Before committing, and preparing for the unicorn visit, let’s take a deeper dive into the world of cloud-based sales tax compliance automation. Cloud-based compliance automation does have some perks. With offsite employees becoming the norm for accounting firms, there is flexibility for staff to manage cloud-based outsourcing from just about anywhere. With simple tax returns, the third-party provider probably can do an efficient and effective job of setting up clients, managing sales tax data and preparing the returns and remittances.

As we know though sales tax compliance is NOT consistent or simple. It requires skill, experience, and expertise and should be taken seriously. Statutes are notoriously complex, at times incomplete and nexus rules are in constant flux. A misunderstanding of filing requirements, poor exemption certificate management, late filings, misapplying tax credits and missing notices could lead to hefty penalties and extra costs. If not in compliance, sales tax issues may involve material dollar amounts that will warrant immediate attention.

Third-party cloud-based firms likely do not or will not have sales tax technical expertise to address these and the myriad of other issues that might arise. If an audit comes up, and it will, is the third-party cloud-based firm capable of managing it? Or are the accounting firm’s hard-won clients out of luck? Audits can be expensive, often described as back-breakers in a worst-case scenario and shouldn’t be left to chance.

Also, it’s important to note, true public accounting firms that would be governed by SEC/PCAOB will not be able to handle the funds piece of the compliance. There are restrictions (read “prohibitions”) for firms that engage in attest services regarding handling any of their clients’ funds. This extends to sales tax compliance too. To address this issue, CPA firms must then bring in another service provider (for example, AnyBill) at an additional fee, thus increasing the client’s overall cost of compliance. Alternatively, the CPA firm will have to send everything back to the client for payment, which only further decreases the value proposition in sales tax compliance outsourcing.

Skill, experience and expertise count. Clarus Partners specializes in all aspects of sales tax. Compliance is only the beginning. It takes a firm knowing nexus laws, new developments and experienced people to ensure a client’s needs are completely covered. Our comprehensive approach features co-sourcing and outsourcing solutions that provide the same compliance services that accounting firms would pay for cloud-based providers, but with advanced expertise and knowledge to handle all other sales tax concerns from the simple to the complex. Hoping a third-party partner can handle sales tax is not a great strategy. Knowing a third-party firm will handle all sales tax obligations is. We don’t like surprises either. When evaluating sales tax solutions, Clarus Partners is a firm worth looking at. We have sales tax solutions. As for unicorns, well…