Navigating Agencies and Sales Tax Compliance

As a business owner, you are already probably aware of the nightmares during tax season. Sales tax compliance is not an easy job as it includes navigating the confusing sales tax rates, rules, and requirements that could change at any time and may vary in different states.

In one survey, 53% of the respondents admitted that complex tax rules and rates subject to change were among the most significant challenges in the process. Additionally, 42% find managing consumer use tax obligations expensive for their business.

Thus, it's understandable why more and more are turning to sales tax agencies to help them with sales tax compliance. However, most sales tax firms are more time-consuming and expensive than using sales tax automation software.

On this page, you will understand why sales tax automation is a better choice than the other more known sales tax agencies available.

What Is a Sales Tax Agency?

Sales tax agency refers to a third-party accounting firm, tax service provider or tax professional who manages a business's sales tax compliance. Although most sales tax agencies are helpful and get the job done, all of them, except the sales tax automation agencies, face the same dilemma -- they depend on a human expert who needs to stay up to date with complex tax laws and regulations. Unfortunately, they are subject to human oversight.

Also, human-based processes can be slower than automated software, potentially causing delays in filing or processing. Depending on the size of your business, the process may become more cumbersome and expensive since these agencies have to allot more human resources for the job. 

Imagine this: you realize that you have to fix something for your tax filing, and you are close to your deadline, but you can't reach them for assistance. What will you do? Plus, most of these sales tax agencies tend to be more expensive because they use human resources.

There are several types of sales tax agencies. Each type of agency offers a unique set of services that can be tailored to a business's specific sales tax challenges, whether it’s simple compliance or complex multi-state taxation issues.

Here are the different types of sales tax agencies.

Tax Consulting Firms

They provide specialized advice on sales tax compliance, tax planning, and audit support. They often have dedicated teams focusing on indirect taxes like sales and use taxes. Among the popular tax consulting firms are PwC, Deloitte, Ernst & Young (EY), and KPMG.

KPMG, for instance, has received mixed reviews from its customers. Many find KPMG a great agency, but most are not happy with the cost and the long process.

“Price is insane per hour. This hinders the engagement time frame,“ one customer wrote.

Another had an issue with the long wait. According to Jas, a KPMG customer, her issues with KPMG are that she was always charged with the cost of service and the "speed at which service is supplied."

Accounting Firms

They offer sales tax compliance services, tax return preparation, and general tax advice. They can also help with nexus determinations and filing multi-state tax returns. This includes local and regional CPA and mid-tier firms like RSM and Grant Thornton.

Grant Thornton is popular for catering to huge businesses. However, the downside is that the people working at the firm were very busy. “The team who helped us implement OneStream are very busy. Sometimes turn around for communications can be delayed if they are working on multiple clients at a time,“ Jonathan F. wrote.

Another online user admitted they were “biased“ because they worked for Grant Thornton. However, they noted that the firm will likely cost too much for small businesses. “It’s one of the big firms so it will cost you. I don’t know the size of your business or personal life but if you have a complex situation it’s great because all services are under one roof. Otherwise, get a smaller firm with [a] cheaper rate,“ another wrote.

Legal and Tax Law Firms

They offer legal advice and representation in tax disputes or audits. They often work with businesses to manage complex sales tax issues, including litigation and negotiations with tax authorities. Legal and tax law firms specialize in tax law, like Skadden, Arps, Baker McKenzie, and McDermott Will & Emery.

Legal and tax law firms offer impressive services. However, the downside with tax law firms is that they tend to be expensive, probably because the attorneys have accounting and law degrees.

According to Cross Law Groups, tax attorneys can charge an hourly rate between $200 to $400 per hour. But those who are highly experienced can charged up to $1,000 per hour.

One user turned to Reddit and asked if the $500 hourly rate was fair or if they were getting ripped off. “Their hourly rate for the research is almost 500 USD per hour and then about 600 USD for every form filed. Am I getting ripped off,“ the Reddit user asked.

The post received several responses with many saying that it was a fair price because tax layers were really expensive. “I’m acquainted with two tax attorneys, one charges $800 an hour and the other charges $1,200 an hour for most cases. So $500 an hour sounds like a bargain to me,“ user @NightWriter007 commented.

“Tax attorneys are in some respects double professionals, so yeah that rate seems pretty fair. Seniors at CPA firms get billed out at 200-300 an hour – if anything that seems low,“ another user added. “Agreed $500 is average,“ a third person opined.

Business Process Outsourcing (BPO) Companies

Some BPO companies offer comprehensive tax compliance services, including handling sales tax calculations, returns, and reporting as part of broader finance and accounting outsourcing services. Among them are Genpact, Infosys, and Accenture.

Accenture is one of the known BPO companies worldwide. However, one said it can be costly for small and medium-sized businesses. “Maybe some range of prices that can be costly for some SMBs,“ one said.

Another said she had a great experience with Accenture, but felt that sometimes they had to work with “untrained“ members of the team, which was an unnecessary addition cost for them to pay. “Some junior folks in the team are untrained and have no knowledge about [the] product but add up to the cost while implementing a software or providing any other service,“ Karishma wrote.

State and Local Tax (SALT) Advisory Firms

They focus on state and local tax compliance, including sales and use taxes. These firms help businesses navigate complex multi-state tax issues, especially in states with intricate tax laws. Among the most popular SALT advisory firms are Ryan, Inc., Duff & Phelps (now Kroll).

Puneet G. was happy with Kroll’s service. However, since the company is big, when one raises an issue, it takes a longer time to be resolved. “[It] takes few escalation and few moments to resolve the question,“ Puneet wrote.

Another customer was unhappy with the amount of money Kroll charged to them. The client said it billed them too much and exaggerated the amount of hours it would take to get the job done. To make the matter worse, the customer support was reportedly non-responsive.

"They bill £500+ an hour and claim it takes them to do in 200 hours what any other organisation can do in 10 hours. They have dragged out both the administration processes to as long as they possibly can. Everything is about milking as much money as possible for themselves," the client said.

Sales Tax Automation Providers

These companies provide cloud-based platforms that automate sales tax calculation, reporting, and remittance. They are particularly useful for businesses with high transaction volumes or multi-state sales tax obligations. Among the most popular sales tax automation companies are Avalara, Vertex, and TaxJar.

Businesses that turn to sales tax automation are quite happy and satisfied with their decision as it reportedly made sales tax compliance much more convenient and stress-free for them. Here are some reviews about how Avalara helped businesses with their sales tax compliance.

One said sales tax automation was reliable. “I feel confident that we are collecting and reporting the correct amount of sales & use taxes on every invoice,“ the Avalara customer said.

Another echoed the same sentiment, commending Avalara for making sales tax compliance easy for their business. “Avalar has taken the guesswork out of sales tax for our company. Not only does it help keep us in compliance with state government but it also streamlines our tax reporting,“ another verified user said.

Another satisfied sales tax automation customer was happy with how Avalara made the entire process convenient for them. “Once Avalara is set up, the filing of sales tax returns is extremely efficient and takes away the pain points of filing returns,“ Ashley S. said.

Avalara is a great sales tax automation provider, though some struggle with its onboarding process because it isn’t easy to set up. However, that should not be a problem because there are other sales tax automation companies that offer the same quality of service without those issues. Kintsugi delivers the same expertise in calculating and filing sales tax, with a more straightforward onboarding process, no-code integration, 24/7 customer support via Slack, and better pricing models.

Sales Tax Automation Agencies Are The Best Choice

Sales tax automation offers tons of benefits that you cannot enjoy from the other, more traditional sales tax agencies that still use human resources. From streamlining the process, cutting costs and time to delivering accurate reports.

Here are some reasons why sales tax automation agencies are the better option.

1. Accurate Tax Calculation

Automated systems excel in accurately calculating sales tax across different states and tax jurisdictions. These systems integrate with business systems like accounting software to guarantee that the correct rates are applied according to the specificity.

This is key to reducing human error and guarantees a professional payback on compliance issues. Companies using automated solutions have reported an error rate of less than 1%, compared to the 20% error rate often seen with manual processes.

Automation has made a transformative wave in sales tax compliance, revolutionizing how businesses deal with the complexities of tax regulations. Businesses can now get rid of the manual calculations that they had to do in the past, as well as the endless spreadsheets and worries about getting compliant.

2. Centralized Tax Data

One of the primary advantages of automation is centralization. Businesses can save and run all their dealings, such as financial transactions, tax records, and compliance reports, in a single location. This method simplifies the data management process, promotes the economic system's performance level, and lays out a clear path of operation for tax welfare systems in enterprises.

Kintsugi, one of Avalara’s alternatives, offers no-code integration, allowing business owners to integrate their existing ERP, HR, and e-commerce to the platform seamlessly.

3. Real-Time Nexus Tracking

Manual nexus tracking is complex and requires a lot of time. Automation makes this process easier by providing real-time tracking of different nexus thresholds for different states, for instance, and the possibility of the nexus triggering.

This proactive approach allows businesses to be well-prepared and fully follow rules and regulations. With more than 35 states implementing economic nexus laws, staying compliant is a never-ending task that automation simplifies. However, automation makes it a lot easier for you to keep up-to-date with your nexus.

4. Saves Times And Boost Productivity

One of the major benefits of automation is the amount of time you save for yourself. Research indicates that companies spend an average of 300 hours annually on sales tax compliance when handled manually. That amount of hours could have been spent on marketing or growing the business but has been wasted on tax work.

“Achieving compliance is not an activity that is going to generate any revenue but many businesses are spending hundreds of hours each year doing this work,“ said Pujun Bhatnagar, CEO of Kintsugi.

Automation can drastically cut this time down, allowing businesses to focus on growth rather than paperwork. Yes, business owners should focus on growing their business and leave the tax issues to the experts. Sales tax automation companies like Avalara and Kintsugi can handle them with ease and accuracy because that’s what they do best.

5. Saves Money

Sales tax automation can save businesses significant amounts of money in various ways, particularly by reducing reliance on human resources, which is really expensive. Without automation, calculating, filing, and remitting sales taxes requires dedicated staff. Hiring and training employees to manage this process is costly, especially for companies operating in multiple jurisdictions with varying tax rates and rules.

Automating sales tax compliance can drastically reduce the need for dedicated tax specialists or accounting staff. Instead of a full-time employee manually managing tax calculations, the software can handle the entire process. By automating, the resources that would have been spent on tax-related tasks can be redirected toward more revenue-generating activities, such as sales, marketing, or product development.

6. Offers Proactive Solution

Another major advantage when opting for sales tax automation is the proactive solutions these tools usually offer. Advanced automation tools can use predictive analytics to anticipate client needs. For example, they may detect when a business might have a tax filing issue or potential sales tax nexus obligations, allowing agencies to offer proactive solutions to prevent problems.

Predictive analysis in sales tax automation uses data, statistical algorithms, and machine learning techniques to identify patterns and make informed predictions about future tax obligations and compliance risks. By leveraging predictive analysis, businesses can enhance their tax management processes in various ways, leading to increased efficiency and cost savings.

7. 24/7 Customer Support

Sales tax automation agencies offer 24/7 customer support. So, entrepreneurs can enjoy peace of mind that no matter what hour of the day, they can receive the assistance they need. Imagine this: you are having tax issues at 10 p.m. and your tax filing deadline is tomorrow. Of course, you will likely panic and have a hard time sleeping thinking about the unresolved issue.

However, with sales tax automation agencies' 24/7 support, you are unlikely to experience that. Also, tax season and end-of-quarter deadlines often create a surge in support requests, but you will surely be attended right away when using sales tax automation providers.

Go Automated, Stay Compliant

The complexity of tax regulations demands accuracy, updated knowledge, and the ability to scale. Automated sales tax solutions address these issues with ease, allowing you to remain compliant while stress-free so you can concentrate on your business and not on the unnecessary paperwork. Not to mention, by going automated, you save money, time, and energy.

Why take chances with your sales tax compliance? Automate it, let it go by itself, and sleep well with the thought that your business is fully compliant, no matter where your sales take you.

Sources:

[1]https://gitnux.org/workflow-automation-statistics/

[2]https://www.workato.com/the-connector/8-automation-stats-cio/

[3]https://maticangroup.com/global/manufacturing/