3 Growth Activities with Sales and Use Tax Compliance Considerations

Growth Activities That Can Be Life (and Tax) Changing

Growth isn’t a one-size-fits-all approach. In fact, companies expend a great deal of energy and resources deciding which pursuits will move the needle the furthest toward achieving specific goals, and where to prioritize their time and investment.

Oftentimes, sales and use tax get left out of this equation, especially when it doesn’t appear to directly correlate to the task at hand. Certain growth activities, like adding new locations, products, or sales channels, instinctively signal a need to alter sales and use tax compliance practices. With others like financing rounds, acquisitions, or technology platform changes, tax implications aren’t as obvious and therefore are more likely to be overlooked. Yet these are often the situations where compliance strategies can have the greatest and most lasting impact.

Below is a brief glimpse of how sales and use tax compliance can come into play for 3 business growth activities that can be life (and tax) changing: financing events, mergers and acquisitions, and technology platform integration projects. Here’s what you should be aware of when going through these processes.

3 Growth Activities with Sales and Use Tax Compliance Considerations:

Financing Events

For any financing event, public or private, investors look closely not only at how you plan to grow the business, but also how you are managing it now. Poor sales tax management practices or unfavorable audit outcomes can impact valuation, jeopardize funding, or even nullify deals. High visibility events like funding rounds and IPOs can also bring your business to the attention of state auditors looking to draw in more tax dollars.

Mergers and Acquisitions

The meshing together of people, assets, systems, and processes is no simple feat. So, it’s not surprising that business integration issues following M&A transactions are one of the biggest things keeping company execs up at night. Between due diligence, integration, accounting/financial reporting, and post-acquisition compliance, who has time for the minutia of sales tax? It can be easy to overlook tax obligations or liabilities, which can raise red flags with investors early in the process, or with auditors later.

Technology Platform Changes, Consolidations or Upgrades

During change events, it’s good practice to evaluate your financial systems and fill any gaps with new solutions or functionality that can advance your growth objectives. For example, tax automation software that unites critical transaction data from disparate systems and processes can alleviate compliance issues during post-merger integrations, reducing audit risk and avoiding delays in closing the books.

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Permission to reprint or repost given by Avalara. Content previously published at www.avalara.com/blog.

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William Wu

Insight written by William Wu

Executive Vice President at Rand Group

William Wu has over 16 years’ experience consulting for and performing ERP software implementations in the energy, technology, telecommunications, and service industries. With a background in both accounting and business and extensive certifications in ERP systems, William possesses both the drive and skill to move a company from where it is, to where it needs to be.

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