Taxes: compliance more complex than ever: recent tax code laws implemented around the nation are increasingly complicated, unpredictable and costly when misunderstood. Financial executives can confidently and cost-effectively achieve business tax compliance--regardless of the changes.

• Author: Yrjanson, Carla
• Position: Tax

As the economy continues to struggle, governments across the nation--and particularly at the local level--continue to rely on tax revenues to shore up massive deficits, which has a direct impact on businesses. This affects how much tax a business has to pay or, in the case of sales tax, find additional operational resources to collect sales tax on behalf of the government.

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The following examines a range of current business tax code laws--from tax increases, decreases and exemptions to newly implemented and sometimes downright strange laws--in order to reveal the most attractive or unattractive regions in which to do business and to analyze just how complex achieving business tax compliance can be.

A caveat: since tax codes in their entirety are so complex, for purposes of this article, just a fraction of the many tax codes and government-mandated compliance programs in the United States that businesses should consider are reviewed (such as unclaimed property). Financial executives should examine their specific industry and product offerings to determine the most cost effective manner in which to conduct their business.

Tax Market Landscape

In the first quarter of 2011, total tax revenues for state and local government were up 4.7 percent, as compared to Q1 of 2010, for a total of $321.6 billion. That marked the sixth consecutive quarter of positive year-over-year growth.

Of the largest tax categories, general sales tax and corporate income tax showed positive growth over the same quarter. However, as the real estate market continues to struggle, property tax declined for the third time since the first quarter of 2009.

* Sales Tax. General sales tax revenue, which represents the second-largest source of income for local governments, rose 5.8 percent, to $73.7 billion, from $69.7 billion in 2010.

For those who have to manage sales tax--whether an increase or decrease or new tax laws entirely--each change represents a significant operational and cash flow outlay for companies that are burdened with implementing those changes in a timely fashion as they collect the tax from their customers on behalf of the government.

As such, when considering the impact that sales and use tax has on the company, financial executives should mostly be concerned with the number of changes in a given year.

For a business that runs its sales tax function completely in house, just one sales tax change requires substantial oper-ational resources. Now imagine having to implement those changes more than 1,000 times, which is the average number of sales tax code changes local and state make in a given...