SOURCE: Sabrix

October 10, 2006 08:55 ET

Study Shows Sales and Use Tax Compliance Creates High Costs and Headaches for Small-to-Mid-Sized Companies

Finance Executives Look to Outsource Process for Cost-Effective Tax Compliance Without the Hassle

SAN RAMON, CA -- (MARKET WIRE) -- October 10, 2006 -- Small-to-mid-sized companies average more than $327,000 in annual costs to manage sales and use tax compliance. And, despite this significant investment, these companies still average $32,000 each year in penalties and interest due to errors. These are the findings of an independent survey of more than 500 finance executives at small-to-mid-market companies conducted by Tallman Insights and Mindwave Research on behalf of Sabrix, Inc.

The survey of companies -- ranging in size from $20M to just under $1B in corporate revenue -- concludes that changing tax rates and rules and expensive manual processes are key drivers of compliance costs. With more than 11,500 tax jurisdictions in the United States, companies struggle to remain up to date on the latest tax regulations. In total, there were 478 rate changes to sales and use taxes in the U.S. during the first half of 2006. According to the survey, mid-sized companies file an average of 86 sales tax returns each month, although numbers can reach into the hundreds as companies grow or expand into new tax jurisdictions. In a typical month, the average mid-market company experiences a change in 16.4 percent of the jurisdictions in which they file while some companies experience as much as 50 percent churn.

The survey also reveals that senior finance professionals are not always aware of the total cost of transaction tax compliance and actually underestimate their total cost of compliance by as much as 50 percent. Costs are typically spread across company personnel, tax research subscriptions, third-party tax return preparation, and tax consulting.

Nearly 60 percent of finance executives participating in the survey indicated a strong interest in outsourcing sales and use tax compliance, citing the need to free themselves from the complexity of sales and use tax management, as well as the desire to lower compliance costs. More than 75 percent of the survey respondents have already outsourced other financial and administrative processes, such as payroll, benefits administration, and expense reporting, and acknowledged that transaction tax compliance is a financial business process that they would outsource either to remove the hassle or to lower costs.

"At Sabrix, we've established a leadership position in on-premise software for large, multi-national corporations," says Steve L. Adams, president and CEO of Sabrix. "However, rather than simply take the same offering to the mid-market, we felt it was very important to get direct feedback from senior finance professionals in small-to-mid-market companies to understand their specific challenges, the type of solution they would prefer, and, specifically, their interest in outsourcing the tax compliance process. The survey showed unequivocally that CFOs and other senior finance professionals would take advantage of an effective outsourced solution if it enabled them to focus on their core competencies and limit their audit exposure."

More details on the survey are available online at: http://www.sabrix.com/mts/whitepaper-managing-tax-compliance-benchmark.html

About Sabrix

A proven expert in transaction tax management, Sabrix enables finance, tax, and IT professionals to achieve accurate, timely, and cost-effective compliance for sales tax, use tax, VAT, and industry-specific taxes and fees. The Sabrix Managed Tax Service™ eliminates the hassle, limits the audit exposure, and reduces the cost of tax compliance for mid-sized companies. The company's Consolidated Transaction Tax Management™ applications and services empower global companies to manage transaction tax with consistent accuracy, control, and efficiency. Sabrix's customers include Amazon.com, BASF, Cisco, DTE Energy, IBM, QUALCOMM, Sportsman's Warehouse and York International. For more information, please visit www.sabrix.com.

Sabrix, Sabrix Managed Tax Service, and Consolidated Transaction Tax Management are trademarks of Sabrix, Inc. All other company and product names are trademarks or registered trademarks of their respective holders.

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