Power Systems, Inc. pumps up sales tax compliance, powers growth with Sabrix MTS
Sabrix MTS is the outsourced sales and use tax service Power Systems has been looking for. “With Sabrix MTS, we have the assurance that we stay compliant, even as we grow, and free-up internal resources that can be applied to our core business. Sabrix has been a trusted partner since Day One, integrating seamlessly with our systems and processes and providing the consummate tax expertise that mid-sized companies, like us, can’t afford to maintain in house.”
-- Mike Akers, CFO
The Customer
In business since 1986, Tennessee-based Power Systems, Inc. is a leading provider of affordable, professional-grade health, exercise, sport performance and fitness equipment to coaches, athletes, fitness experts and the general public. Experiencing rapidly increasing sales, privately held Power Systems required a sales and use tax service that could scale with its business growth, reduce the costs of compliance across 20+ states, and support its e-commerce and direct sales model.
The Challenge
Power Systems’ sales channels include Web, catalog, phone and direct at as many as 125 trade shows a year. These activities are rapidly creating nexus, and commensurate audit exposure, in an increasing number of states. With the Accounting Director burning two days each month reviewing just the home-state tax return, and an accountant spending another seven days each month completing returns for remaining states, Power Systems needed to free its people for more strategic work, especially as the company continues growing.
Previously, Power Systems was using a service to supply monthly tax rate tables, address verification and tax determination, but was concerned with the incomplete tax jurisdiction coverage and discrepancies between tax figured for a quote vs. tax on the actual invoice. Despite spending approximately $1,500 a year in subscription fees alone, the company still had little visibility into the accuracy of the rates used.
Additionally, two days were consumed each month manually uploading tax rate updates from the service into the company’s systems.
“Power Systems is in the business of selling sports and fitness equipment, not managing sales and use tax. Sales tax management is the kind of problem that you can continually throw money at, yet still always find yourself behind the eight ball,” explains Mike Akers, CFO at Power Systems. “You’re constantly hiring and training new people, and always getting assessed. You need a large, dedicated staff to effectively manage sales tax compliance, but that was not a path we could afford to follow. Nor did we want to invest in an enterprise software solution, with all the upfront IT expenditures and on-going maintenance that entails.”
Instead, Power Systems began looking for an outsourced service that would deliver:
- End-to-end automation to streamline its tax management process and release employees to focus on cash flow-producing tasks.
- Increased accuracy including automatic and timely rate maintenance and correct tax determinations, even for states with extremely complex tax environments (min/max tax, tiered taxes, etc.)
- Real-time tax processing to handle orders being entered into the system right from the trade show floor, leading to efficient sales and order entry, as well as accurate tax calculation.
- Seamless, cost-effective scalability to accommodate Power System’s rapid growth, and the company’s eventual establishment of nexus across a majority of states.
- Tax Expertise through outsourced sales and use tax domain experts who can assure tax ongoing compliance as the company grows.
The Solution — Outsource for hassle-free tax compliance
Power Systems selected the Sabrix Managed Tax Service (Sabrix MTS), an outsourced sales and use tax service that scales effortlessly to handle Power System’s business growth nationwide, and covers the entire sales and use tax management process start-to-finish — including address validation, tax rate maintenance, tax determination and calculation, and return preparation and filing, as well as audit research and documentation.
“Sales and use tax management is a perfect outsourcing opportunity. By combining an on-demand service with deep tax domain knowledge, Sabrix brings substantial added value to the table,” claims Akers. “Sabrix MTS covers all sides of the sales tax equation — from accurate rates, determination and calculation to expert audit research support when needed. With Sabrix, we’re not only outsourcing the tax management processes, but also the sales tax expertise, so we can focus more of our internal resources on such things as payables and receivables and growing the business.”
In evaluating Sabrix MTS, Power Systems determined it would meet its requirements for accuracy, automation, and scalability in an on-demand fashion. It was also able to provide the real-time processing Power Systems needed for direct sales at trade shows, which previously were not being taxed to the customer, but rather were price adjusted to accommodate sales tax and later paid using reverse-from-tax calculations — a cumbersome process that needed to change before the company grew much larger. Finally, Sabrix MTS demonstrated the ability to fit in with Power Systems’ legacy systems, custom-built Web-store application, and future new systems environment.
Explains Akers, “Even though we’re implementing a new modern systems environment, Sabrix MTS still has had to integrate with our current legacy environment, which it has done seamlessly. I give Sabrix high marks for their professionalism and willingness to be flexible and not rigid in their implementation.”
“Sabrix is a trusted partner that I’d highly recommend for its tax domain expertise, professionalism, and strong commitment to customer satisfaction.”
The Results — Enhanced compliance & tens of hundreds of hours saved annually
Power Systems is now able to confidently CONTINUING TO expand its business presence, with a trusted partner assuring the highest degree of sales and use tax compliance every step of the way.
- Achieving a higher degree of compliance: In comparison to Power Systems’ previous solution, Sabrix MTS has increased the accuracy of tax calculations through more accurate and continually up-to-date tax rates, full coverage for over 11,500 tax jurisdictions in the US, robust postal code validation, and deep tax expertise. This not only reduces Power Systems’ audit exposure by ensuring that sales tax is accurate upfront, but also helps minimize the time, penalties and interest exacted by potential audits.
- Reducing cost of compliance: With Sabrix MTS, Power Systems now has an automated, cost-effective transaction tax compliance process that also frees up internal resources. Early tax processing and return preparation by Sabrix MTS enabled Power Systems to recapture seven days of staff accounting time and a two days of Accounting Director time each month. Also recouped are one to two days each month that were previously required to upload updated tax rate tables into the company’s internal tax database. This equates to thousands of dollars in annual manpower savings. Power Systems has also eliminated an annual $1,500 cost for purchasing third party tax tables that are included in Sabrix MTS.
- Seamless scalability supporting rapid growth: At the time of initial implementation, Power Systems had liability to collect and remit sales tax in over 20 states and counting. As the company continues to grow, it now has on-demand tax compliance capabilities that will scale seamlessly along with its business requirements. Hence Power Systems can continually run a lean operation, with more of top line growth finding its way to the bottom line.
Concludes Akers, “My advice for mid-sized companies is to pick a partner with both the tax expertise and technologies to focus on managing your tax compliance, so you can focus on building your core business. Sabrix is a trusted partner that I’d highly recommend for its tax domain expertise, professionalism, and strong commitment to customer satisfaction.”