How To Scale a Profitable SALT Practice
Building up a state and local tax practice can help firms better serve their clients.
When the U.S. Supreme Court affirmed states' rights to collect sales tax on online purchases in South Dakota v. Wayfair, many states moved quickly to enact laws resembling South Dakota's to collect sales tax on remote purchases.
Few companies selling their products and services online understand economic nexus rules or have the capacity and capability to manage their sales and use tax compliance. If their accountant isn't performing a sales tax review and handling reporting and compliance for them, they may mistakenly assume it's not an issue — at least until they receive a nexus questionnaire from a state in which they don't have a physical presence and haven't been collecting sales tax.
This combination of evolving legislation and client need creates significant opportunities for firms to add or expand on a sales and use tax advisory practice.
Why Scale a SALT Practice?
Many firms outsource sales tax work for their clients because they don’t have a tax accountant on staff or because they don’t have the right technology to offer SUT advisory. This advisory side is one that many firms overlook, but it can provide significant episodic and recurring revenue.
What Is the Best Way to Scale a SALT Practice?
The best way to scale a SALT practice is to offer clients comprehensive sales and use tax advisory. Here are the top services firms can offer to their clients to help them be SUT compliant:
Determines whether or not a business has economic nexus in a state.
Nexus Exposure Analysis
Automates the complexity of analyzing a client’s transactions to determine where economic nexus has been reached and overlays physical nexus exposure in each taxing jurisdiction to quantify the exposure.
Properly register clients for the required permits and establish filing frequencies to reduce their expenses.
Voluntary Disclosure Agreements
Analyze whether or not a VDA is appropriate for clients. If an untimely tax registration would result in penalties and interest that would exceed the firm's fees for handling the VDA, a VDA is warranted.
Product Taxability Analysis
After a client is registered in the appropriate states, they need to comply. The first step in compliance is a product taxability analysis. This is an essential step before setting the client up with a sales tax compliance solution software because if an analysis hasn’t been completed, it won’t be possible to configure the software.
Firms should be ready to defend their clients with a total sales audit and be able to support the Recorded versus Reported taxable sales for each taxing jurisdiction their client is in.
Exempt Transaction Analysis
Allows firms to address any normally taxable transactions where no sales tax was collected. If a client is audited and those transactions are left unaddressed, a firm will have up to 36 month's worth of potential errors to go through for their client that could have been addressed the first month.
Allows accountants to make sure their clients’ new products are being taxed correctly.
Allows firms to streamline filing internally by producing a simple file during the consultancy phase that allows the practice to create tax summaries for each state their clients need to file in.
Recorded vs. Reported Reconciliations
Understand why there’s a difference between recorded and reported transactions. These differences should be accounted for before a SUT return is filed.
Level 3 Data Insights
Level 3 data insights harbor areas where firms can guide taxpayers to more profits, higher margins, or a less risky business.
Learn more about each of these services and why they’re essential to scaling a profitable SALT practice in this whitepaper produced by LumaTax and Boomer Consulting.
Finding an All-In-One Sales and Use Tax Solution
To successfully build up a SALT practice, firms need to provide services that address client needs, help make them more productive and efficient, and potentially reduce their tax liability and risk. Offering sales and use tax advisory services checks all of these boxes. Partnering with LumaTax allows firms to build a sales tax advisory practice without investing heavily in staff and spending hours collecting client data, researching and applying tax laws from multiple jurisdictions. That's why many well-known and respected CPA firms have already started using LumaTax in their firms.
Read more posts by this author