Top 5 communications tax compliance must-haves
With the rapid proliferation of communications tax, many business executives are waking up to find their companies are now liable for a broad spectrum of new regulatory fees and special taxes.
Whether you're rolling out new features, introducing new products, or adopting a new array of offerings through a merger or acquisition, the outcome is the same: Any time a business adds connectivity, voice, or video services, the likelihood of communications tax obligations, including specialized streaming taxes, increases.
The question to ask now is: What will it take to successfully manage communications tax compliance?
When preparing your strategy, it’s important to look beyond the basics of calculations and filing to find robust technology capable of handling the many complexities of communications tax. You’ll need to stay up-to-date on a complex array of rules, rates, and filing requirements across 60,000 taxing jurisdictions, which means not just any software will get the job done.
Based on best practices used by companies that excel in this area, we’ve identified five essential must-haves to look for when selecting communications tax software.
1. End-to-end capabilities
While you could rely on a different solution to meet each individual component of communications tax complexity, this fractured approach can cause friction; create costly downtime delays; lead to inaccuracies; and, ultimately, increase your risk of noncompliance or worse, lost revenue. Using multiple vendors is not only time consuming — you’ll have to manually move data between systems or wait on IT — but can also lead to inaccuracies, inconsistencies, and late filings. And without readily available, out-of-the-box integrations to your billing platform, you’re likely to contend with incomplete and poorly maintained APIs. Together, these issues can all add up to a costly, cumbersome system that makes it difficult to find and resolve errors — let alone get technical support when you need it.
A better approach is to rely on an all-in-one automation platform that allows you to simplify and streamline each part of the communications tax compliance process. In addition to identifying all potential tax collection and filing requirements, you'll need special features such as geocoding to pinpoint a customer’s exact location and support to ensure you're registered and licensed in all necessary jurisdictions. There are important regulatory forms to file, such as the Form 499-A that comes with 50+ pages of instructions, as well as exemptions that need to be validated and documented. With the right technology, you can have all of these needs met in one centralized, end-to-end solution.
2. Extensive content
If there’s one certainty about communications tax, it’s that the regulations and requirements are always changing. Your communications tax software should be, too.
It’s not enough to use tax software that simply connects you to third-party data; it just doesn’t provide the accuracy and timeliness for an industry in motion. For a solution to be capable of keeping you in compliance as changes occur, there should be a continuous behind-the-scenes process for research, content verification, and updates.
Before adopting new technology, do some due diligence to ensure you’ll not only have the rates and rules you need for compliance today, but also the processes that will help future-proof your business for years to come — even for products and services that aren’t yet on your horizon. There should be an entire team of specialists monitoring the landscape at each of the 60,000 jurisdictions in real time to validate not only rule and rate changes, but also any returns or regulatory form changes.
3. Proven expertise
A lack of expertise can leave a business open to risk. Communications tax can get incredibly complex, much more so than sales tax. But unfortunately, not all communications tax providers have the knowledge and experience required to truly support every business, particularly in emerging communications tax industries.
It’s important to be able to lean on experts you can count on for guidance and technical support. You’ll need a sales engineer to help with integrations, a content team to share insight on new taxes and legislation on the horizon, and a dedicated account manager to help when difficult questions arise.
When vetting vendors, pay close attention to the company’s track record on expertise and thought leadership. A detailed understanding of the landscape, and the ability to anticipate change, will make a big difference in the long haul.
4. Omnichannel support
Staying compliant will do more than just keep your company profitable; it can have a big impact on your customers’ experience, too. Depending on your industry and offerings, your communications tax engine will need to keep up with all types of transactions, from quotes and orders for physical invoicing, to batch invoicing runs, as well as real-time ecommerce calculations. The speed and reliability with which your technology processes these different activities can have a direct impact on revenue, so it’s important to have the right system in place.
That means you’ll need to be able to integrate seamlessly with any billing systems you use, from subscription management software to traditional ERPs, all from the same streamlined solution. And any solution will need to be capable of meeting your future needs as your business grows and expands.
5. SaaS-based tax solution
Accurate and timely data is key to tax compliance. Communications tax rates and requirements need to be updated regularly, integrations should be seamless, and data should flow effortlessly between components. To meet this stringent checklist, many businesses are turning to cloud-based platforms — with good reason.
With a reliable SaaS-based tax engine, your software is regularly updated, and you’ll be ready any time a rule, rate, or form changes. As your business expands and your needs change, it’s important to have a hardened solution in place that will be capable of scaling along with you — without having to wait for time-intensive updates or IT input.
And, as you innovate and delve further into the realm of communications tax, the right SaaS-based returns and filing software will make it much easier to stay ahead of the latest fees and filing requirements, provide higher levels of security and reliability, and lower overall costs of ownership.
These five must-have elements are far from the only capabilities to watch for in a communications tax solution, but they’re some of the most critical to reduce risk. Each one plays an essential role in managing tax and regulatory challenges today, and will help future-proof your business for whatever may happen tomorrow.
Looking for more insights? We go into greater detail on these and other best practices in the white paper, The proliferation of communications tax. View it now for a detailed overview of the changing landscape, along with insights you can use to help determine if, when, and how your company should begin to collect and remit communications tax.
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