Study shines light on communications and media industry complexity: How best-in-class performers manage evolving service requirements and tax concerns
- May 11, 2020 | Avalara
In partnership with research group Aberdeen, Avalara has released a survey revealing how communications and media service providers are modifying business service models in response to rapidly changing industry realities.
Survey data indicates growing customer demand is pushing companies to bundle a more diverse set of services, with 77% of leaders now pointing to options for video or digital content as critical, closely followed by 5G and IoT. To effectively achieve this product mix, nearly three-quarters of respondents (73%) plan to couple or partner their solutions with other providers to offer increased service breadth over the next two years.
With this increased convergence of service offerings, tax complexity concerns are high: 75% of respondents admit to tax-related fears, which is justified, as 58% admit to previously failing a tax audit. The chart below highlights the top variables reported to have the greatest likelihood to cause an audit failure and impede ongoing communications tax compliance.
Becoming a best-in-class performer — it’s easier than you may think
It’s clear that understanding the tax impacts of this changing landscape is complex for both seasoned communications tax professionals and those new to communications tax. As part of this study, Aberdeen investigated business performance. Companies who are best-in-class performers feel more prepared with communications tax compliance since they have a more dynamic model based on a SaaS solution, even as their product mix changes. More than two-thirds (69%) of best-in-class respondents plan to proactively change their tax management process in the next two years.
So, what should a company do to help ensure it can become best in class?
- Understand tax implications across your full suite of products. Are any of them taxed individually as a communications service? What about in a bundle? Does it vary by jurisdiction? (This answer is almost always yes.)
- Assess whether you have the right levels of expertise and people in place. Communications tax is very different than sales and use tax, so does your team have the correct expertise? Does your team have the bandwidth to track communications rate, rule, and form changes in 12,000+ jurisdictions? Are there opportunities to automate?
- Ensure you have the correct technology in place. Communications tax is much more complex than sales and use tax. Do your tax and billing platforms support accurate calculation and reporting for both sales and use as well as applicable communications taxes?
Best-in-class companies often rely on SaaS-based solutions that can be updated in real time, removing many of these burdens from tax and IT teams and significantly reducing tax risk — and provide a unified platform for both sales and use and communications taxes.
To learn more about this study, you can download the full research report, which includes business drivers for change in the communications industry and more details regarding what these best-in-class organizations are doing to prepare for the associated challenges. Avalara experts are also available for additional insights on industry convergence, tax complexity, and risk mitigation.
Find out more about Avalara for Communications or reach us at 844-722-5747.