The taxes paid by American businesses account for 93% of all taxes remitted to the United States. It’s no wonder tax compliance is a major problem for businesses of all sizes. For financial institutions, this creates a major opportunity to be a part of the solution by proactively helping corporate customers stay on top of tax collection and remittance at every level. But what happens when a bank’s vendors don’t share this commitment to relieving tax compliance burden?
Landmark cases like South Dakota v. Wayfair serve as clear examples of the need for financial institutions and their fulfillment partners to stay on top of changing tax rates and remittance requirements. Unfortunately, many partners—even those that sit at the center of significant financial transactions, like remote deposit capture vendors—aren’t able to keep up.
Let’s take a look at that case, the far-reaching impact it has, and the difference a reliable fulfillment partner can make for your financial institution as it seeks to grow its footprint through services like RDC.
South Dakota v. Wayfair: Understanding the Case
On June 21, 2018, the United States Supreme Court ruled 5-4 on the case known as South Dakota v. Wayfair, affirming that a state can collect sales taxes from out-of-state companies that do business in the state—with certain restrictions. The decision applies to any business doing at least $100,000 in sales (or more than 200 separate transactions) a year.
And while the most immediate impact was felt in South Dakota, the decision has already begun to push a tidal wave of changes for businesses large and small throughout the country.
The Costs of Accurate Tax Collection
Staying compliant with hundreds (if not thousands) of state and local taxing requirements is a time-consuming and difficult process—one that financial institutions ignore at their peril. Having a fulfillment partner for critical corporate services, like RDC, that understands and is prepared to support the process from collection through remittance and reporting is more than just a good idea.
“This is not a job that can be haphazardly thrown together,” said Jason Traut, CFO of Superior. “There’s simply not enough information you can read about tax regulations within every state and jurisdiction to keep yourself out of hot water. You can’t throw resources at this problem quick enough to keep up with it all.”
Remaining compliant requires not only understanding and collecting accurate sales taxes depending on a customer’s location but also lots of advance work when setting up accounts to remit sales taxes to the right authorities throughout the country. This carries significant costs both in terms of labor and possible fines for noncompliance.
“The key takeaway here for financial institutions is to ask a very important question: Who are your vendors, and are they working as hard as you are to remain compliant?” Traut said. “Ignorance is not an excuse for failing to meet tax requirements, and if your vendors are dropping the ball, that’s going to reflect on you in the eyes of your corporate customers.”
The Superior Difference
The best RDC vendors handle both the collection of taxes from corporate clients and tax-exempt processes for your bank’s nonprofit and government clients. At Superior, we make it a top priority to take the guesswork out of tax compliance. We’ve systematized sales tax collection in all 50 states where we ship our products.
“We’ve been collecting sales tax for our clients and their customers since 2005,” said Jason. “It began when one of our largest banking clients, a top-three asset-size financial institution, insisted we handled collections on their behalf in every state where they did business.” Today, Superior handles between 15,000 and 20,000 transactions a month, with each one put through a rigorous process that involves systematic reviews to ensure proper reconciliations and remittances in keeping with jurisdictional sales tax requirements.
As major changes like those brought about by South Dakota v. Wayfair continue to shape the nature of tax compliance for American businesses, Superior is committed to staying on top of tax regulations to ensure your financial institution is in full compliance with tax rules, regardless of where products are shipped.
At Superior, personalized service like this sets our remote deposit capture program apart. Click here to speak with a product specialist to see how we can help you confidently support your corporate clients today.
