6 considerations when evaluating a communications tax compliance solution

The communications tax compliance world is complicated. When it comes to communications products and services, a multitude of tax types can apply, including traditional sales and use tax and a host of communications and telecom taxes that have their own rates, rules, and jurisdictional boundaries. The complexity is magnified as these regulations are applied to a dynamic industry with new technologies and products continually being developed. It’s no wonder many businesses choose to automate compliance to stay ahead. But even if you know you need to automate, you might wonder how to get the most from your investment.

Businesses of all sizes face challenges with calculating communications tax, tracking tax-exempt sales, filing returns, remitting payments, and managing business licenses, all while driving growth. Asking the right questions up front can help you choose a communications services tax compliance partner with the technology to support your compliance needs. Not collecting enough information can lead to misunderstandings, compliance risk, and buyer’s remorse. 

Before selecting a partner, ask these six questions to help establish the solution you’re considering meets or exceeds your expectations. We’ve identified potential pitfalls that can come from making the wrong choice as well as benefits your business will gain from making the right decision.

1. Does the telecom tax solution easily integrate with our existing tech stack?

Potential pitfall: Integrations can come with hidden costs and pains. If you don’t choose wisely, you might end up with an incomplete, poorly documented API build that offers little technical support. You could be looking at a lengthy integration process that sets you back.

2. Is the solution equipped to handle tax-exempt sales?

Potential pitfall: If you sell communications services to resellers or your customers include government agencies or nonprofit organizations, you must be able to collect and manage communications tax exemption certificates. You may already have a process in place to manage sales and use tax exemptions, but if you aren’t set up to effectively handle the unique forms and rules that come with communications tax exemptions, you may be looking at a costly audit.

3. Am I getting a complete solution with end-to-end capabilities and automation?

Potential pitfall: Piecing together multiple solutions from different vendors to handle the various aspects of tax compliance can lead to errors. You could be stuck with manually moving data and incur additional overhead from stitching together disparate solutions and managing multiple vendors. Worse, you could discover those errors too late, leading to missed returns filing deadlines, unanswered or delayed notices, and negative audit findings.

4. Does the solution have extensive content and capabilities to support our company’s growth?

Potential pitfall: Your tax and compliance obligations can change suddenly, frequently, and in many different ways. New product introductions, mergers and acquisitions, and expansion into new jurisdictions or countries create many new challenges and automation needs. It’s crucial to have a telecom tax compliance solution that keeps pace with these changes. A compliance platform with inaccurate or insufficient tax content or limited features can put your business at risk. If you opt for a vendor that purchases tax content from a third party, it may be unable to add missing content when you need it. Limited features and capabilities can mean implementing elaborate and unproven work-arounds or having to find and integrate another solution to address new requirements, both of which increase risk and your costs. Imagine if this were to happen every time your business expands its products and communications services or adds customers in new jurisdictions or countries.

5. Does the communications services tax compliance provider have the ability to innovate and evolve?

Potential pitfall: Tax compliance providers come in all sizes with different levels of experience. Putting your trust in a provider that’s small, new, or only handles certain aspects of tax compliance for particular industries might not seem like a problem at first. But what happens when it’s time to expand product lines, grow into new markets, or enter into a merger or acquisition? Some providers won’t be able to keep up.

6. Will we have access to communications tax experts who can help us succeed?

Potential pitfall: Some tax compliance providers are better than others at providing support. As your business evolves, you may have new compliance concerns or questions about how to continue using your solution to its full potential. Once you’ve implemented the solution, you don’t want to be left to fend for yourself.