For many businesses, state tax compliance can be a significant challenge, involving numerous returns to be filed, apportionment calculations, and frequently changing regulations from state to state. In a recent webinar, GTM Senior Managers Dawn Deitrich, Laren Hendrickson, and Blake Lowry shared how companies can streamline and improve their state compliance processes. Here are a few key takeaways from the webinar.
Understanding state compliance challenges
Ensuring proper state compliance is no small feat — in large part because of the number of state filings a company completes each year. How many exactly? Here’s what webinar attendees reported:
- 42% reported filing 100-500 state returns annually
- 30% reported filing 20-100 state returns annually
- 15% reported filing 500-1000 state returns annually
- 4% reported filing 1000+ state returns annually
When it comes to the actual business of preparing state returns, we often hear from clients that the gathering and formatting of data for apportionment is the most time-consuming and arduous aspect of state compliance. Sure enough, 45% of webinar participants reported that this was their largest pain point.
How tax automation services can minimize pain points
Data gathering is arguably the single most important part of state compliance. Bad data going into your tax department will inevitably mean bad filings coming out at the end of the line. There are two main ways of gathering data for your tax department:
- Centralized data sourcing – In this setup, the tax department can access all the necessary data from apportionment directly, from payroll to sales to property data. This is often the most efficient apportionment structure, as the data-gathering process doesn’t have to leave the tax department.
- Standardized data collection – The standardized data collection model works for departments that don’t have unilateral access to the necessary apportionment data across the company. In this system, the tax department reaches out to other teams and solicits data from them directly. While this can be slower than a centralized data sorting approach, it’s still possible to receive great data with this method. By leveraging tools like SharePoint, tax departments can create a single template that is distributed to the various business units, who will then fill out the template with the necessary data.
Data management — importing data efficiently
Several new technologies have helped simplify the work of importing data. Both ONESOURCE and Corptax have Excel add-ons, which establish a two-way connection between your Excel templates and your tax-preparation software. In addition, third-party software programs like Alteryx can help your tax department better integrate its data, essentially serving as a central access point where you can take your data-gathering materials and transform them into a format that can be used for calculations and reporting through ONESOURCE or Corptax.
For a tax department, these technologies offer major value, enabling the team to manipulate data on both the importing side and the tax-preparation side. The speakers covered specific demonstrations of imports for both ONESOURCE and Corptax, explaining how each software can help with State A&A, State Taxable Income Adjustments, State Tax Expense, and State Tax Payments.
Dashboarding for review
Finally, the speakers discussed the ways tax-preparation software can lead to new insights for management during and after the tax-preparation process. One particularly useful example is the “state heat map” function, which shows a company’s tax liabilities broken down by state. For departments looking to present tax findings to corporate leadership outside the department, these dashboards can be valuable for highlighting tax trends and analysis in an easy-to-understand, digestible format.
How GTM can help ease state compliance challenges
At GTM, we offer a range of tax solutions for clients, whether it’s a fully outsourced model where we handle filings on behalf of your firm or a co-source structure where we work with your existing tax department to prepare and produce returns more efficiently and effectively using the latest technology. Our team is also available to review returns or offer consulting on new tax-reporting technologies, ensuring your company is taking advantage of the latest state compliance tools.
No matter what strategy your tax team applies to state compliance, the key takeaway from this webinar is that companies need effective technology that allows them to gather data seamlessly and then import it to tax-preparation software. Ultimately, without good data, an efficient tax return isn’t possible. To learn more, view the full recording of the webinar here.
