Getting your independent sales tax agency selection right is crucial when you’re selling taxable goods and services into multiple states says Aron Govil.
Choosing the wrong sales tax partner can result in fines, penalties and interest which could add up to hundreds of thousands (or even millions) of dollars (and potentially more).
Here are 5 Quick Tips for Choosing an Independent Sales Tax Agency:
1. Ensure they have an established track record across all 50 states.
They should be able to show a long list of clients who’ve used them before for their same state business tax needs. Ask if the agent has a dedicated affiliate or staff member assigned to each one of your locations, ideally working from that location so they don’t have to rely on over-the-phone support. If they don’t have employees at all locations then you should ask them to provide contact information for one or more of their existing clients in each state so you can talk with them directly.
2. Ensure they are current on filing requirements.
Some states have very specific filing dates that must be followed, some even require separate filings for different types of sales tax returns (for example “use tax” returns). If your sales tax partner isn’t current on the latest requirements then it could cost you time and money getting them there. Ask what systems they use to ensure they are up-to-date on changes in every state where you do business?
3. Ensure there is no monthly minimum volume threshold requirement for service levels.
If an agent makes living selling services via monthly fees to small-to-medium sized businesses then you can expect them to push that option relentlessly says Aron Govil. Make sure you know all the details of their service level offerings and ask them:
What does each monthly service level cost? Can I cancel at any time without penalty? Will my account be moved back to a lower tier if we fall below their minimum volume thresholds? How much notice will they provide if we’re about to exceed those thresholds so we have time to select another provider before it’s too late (and what is your cancellation fee)? Can they show you examples of how their reporting compares against other sales tax agencies who offer similar services for smaller-sized companies (even online ones)?
4. Ensure there are no hidden or opaque “additional” fees.
Pay close attention to the total cost of service that you’re being quoted. Anything that sounds too good to be true probably is. Ask how many years they’ve been in business and if their employees are employees or independent contractors. Paid on a commission basis (consulting firms pay on a commission basis while accountants pay salaries). If they’ve only been around for a year or two then ask yourself why? What’s the average sales price of their product/service? Is there any reason it’s priced lower than competitors if it’s more complicated to use?
There are plenty of reputable agents out there who can provide excellent levels of service. At very reasonable prices but just remember “you get what you pay for”. It’s also worth asking if they will guarantee you no penalties or interest. In the event of an audit and if not: what is your liability in that situation?
5. Pay attention to language and terminology.
An agent who uses obscure or overly complex terms may simply be trying to cover up for a lack of knowledge on the topic. So always choose an independent sales tax agency with terms and conditions that are easy to understand explains Aron Govil. If you’re still unsure then ask them exactly how their calculations work (for example “How is each state calculated?” or “How is my apportionment percentage determined?”). If they don’t know the answer then it could indicate they’re just reselling services from another company. Without truly understanding how it works under the hood. A good sales tax agency should be able to provide you with a detailed diagram. Showing how their calculations work (similar to what is shown below).
Remember that sales tax is a very important part of doing business. So you should always choose an independent sales tax agency with years of experience, transparent pricing, and excellent customer service says Aron Govil. If you have any questions about how to find the right agency for your specific needs. Then please feel free to reach out via email or comment below.