A Guide to Online Tax Collection for Local Governments
Chapter 1
Online Tax Collection
Chapter 2
Finding the Right Tax Software
Chapter 3
Improving Tax Compliance
Chapter 4
Increasing Tax Revenue
Chapter 5
Collecting Multiple Tax Types
Chapter 1
Online Tax Collection
As more and more business processes become fully automated and are brought entirely online, it’s more critical than ever that local governments follow suit to avoid risking non-compliance from steps that are too complicated or burdensome for businesses.
Local governments need an intuitive, uncomplicated tax collection software solution that eliminates the many antiquated, manual elements inherent to current processes so they can rise to meet the modern expectations of local businesses and community members. In doing so, they can allocate resources more efficiently, expedite public projects/services, and much more.
On a more granular scale, when used properly, modern tax collection software helps to automate manual processes, eliminates repetitive tasks, removes human mathematical errors, and provides an easy-to-understand, paperless filing system for businesses so they can join their local government in getting back to helping their community thrive.
Taking all of this into account, it’s essential that local governments have a detailed understanding of what tax collection software is, what good tax collection software can help them accomplish, and what all the benefits of a fully online tax collection software solution are—both for themselves and for community members.
Read on to explore the finer details of tax collection software, and get a clear understanding of the myriad benefits a fully digital solution can provide to all parties.
Uncovering the Business Owner Experience with Local Government
Online Tax Collection 101: What Is It, and Why Is It So Important Now?
In its simplest form, online tax collection seeks to not just reduce, but fully eliminate the tedious manual elements of the filing and collection processes that can slow down agencies and frustrate community members.
But why is tax collection software so important? What are the advantages and benefits of a fully digital solution that make it the choice for local governments looking to modernize their tax collection processes?
Convenience & Accessibility
One of the clearest advantages of an online tax solution is the convenience it offers to local taxpayers. Long gone are the days when filing taxes should require a visit to the local tax office or bank—but it’s much deeper than that. As more businesses digitize their services—like retail, food service, healthcare, real estate, travel and hospitality, etc.—the level of convenience this brings has now become an expectation across services.
With an online solution, taxpayers can easily access 24/7 online tax filing services from anywhere at any time simply by using their computers or smartphones. This level of access greatly reduces the time and effort required to file and removes compliance excuses related to jurisdiction or post office open hours. The result is a much more streamlined, painless process for businesses to meet their tax obligations promptly and accurately.
Security & Transparency
Most people know someone who has been the victim of a large-scale data breach in recent years. As such, security is of the utmost importance when it comes to private information, especially when it involves financial information and taxes. Online tax filing and collection platforms equipped with advanced security measures help protect sensitive information.
Local governments can address cybersecurity threats and data loss by implementing a robust data backup plan and other fail-safes like secure payment gateways and multi-factor authentication to keep user data secure and mitigate the risk of data breaches, ransomware attacks, and fraud.
Additionally, online tax filing and collection platforms promote transparency and foster trust in the taxation process. Individuals are able to view their filing history, receipts, and tax liabilities in real time, cultivating a greater level of trust and accountability between local government and the community.
Timely Updates & Quick Processing
In the past, delays in tax filing acknowledgment and extended, unreliable processing timelines were not uncommon, leading to disputes, inconveniences, and a general lack of faith in the filing process.
With online tax filing and collection, taxpayers can receive instant acknowledgment once they file. This immediate confirmation goes a long way to provide peace of mind and potentially improve future compliance.
Online solutions also facilitate quicker processing, ensuring funds reach the government faster. This enables governments to more quickly account for and allocate the resources necessary to initiate or complete public projects and services to benefit the community.
Reduced Administrative Burden on Agency
Manual processes have always been the greatest source of administrative burden on government tax collection. For local governments, transitioning to an automated online tax payment system is the quickest and most effective way to significantly reduce this burden.
Automation of formerly manual tax collection processes greatly reduces the need for manual intervention from government employees (intervention that can still be prone to human error), optimizes operations, and significantly cuts down on paperwork.
Gone are the days of administrative tasks like mailing tax forms monthly to businesses. An online tax system should automatically assign tax forms and notify businesses of their liabilities without administrators lifting a finger.
Maximize Revenue & Compliance
The convenience of online tax filing also plays a crucial role in boosting overall revenue collection for local governments. How? When the tax filing process is streamlined and simplified, more individuals comply with their tax obligations.
As McKinsey puts it, efficient taxpayer service helps achieve a lower error rate and greater compliance. Increased compliance rates result in higher revenues, which can then be used to fund essential public services and advance new initiatives.
Additionally, the International Monetary Fund (IMF) also claims that digital tax filing systems generate vast amounts of data that can be harnessed for data analytics. The data governments collect can provide new insights into taxpayer behavior and their reasons for non-compliance, and it can also help in developing a more streamlined tax policy.
The following chapters explore these benefits further.
Is Your Current Tax Collection Process Fully Online – Or Merely Parts of It?
The reality is that all the benefits of implementing tax collection software can only be realized by local governments if the entire process is digitized. This begs the question—are you really online, or do you just have some steps in the process online?
Plenty of communities find themselves in this space. They may have some online forms or part of the process can be completed online, but it’s far from the seamless online experience taxpayers have come to expect.
The same can be said of the collection side as well. If any of the tax-related duties of local government or community members still require manual intervention for completion, then you have your answer as to whether your current solution is as digitized as it could be.
In-House, Custom-Built Government Tax Collection Solutions (& Their Potential Pitfalls)
Many state and local agencies have some sort of online system for tax collection that may seem adequate on the surface, but sometimes these systems only bring part of their process online.
This still leaves the door open to the same issues inherent to a completely undigitized system. Any local government operating in this way should strongly reconsider. Repetitive tasks and manual workflows that require human intervention should be brought fully online for everyone’s convenience.
When it comes to an in-house, custom-built solution, agencies often find the system hard to maintain or update with new features. Agencies cannot be expected to maintain systems at the same level as a software company meaning it is often best to leave the maintenance to vendors that focus on it full-time.
Having an online filing system with intuitive forms and auto-calculations that lets individuals submit everything directly to their local government is incredibly beneficial. When looking to provide a smooth experience for both staff and taxpayers, end-to-end digitization is key.
The Time to Modernize Your Tax Collection Software Is Now
Local governments can deliver a better user experience to their staff and taxpayers with a fully online tax collection solution. For every benefit that a fully digitized solution provides, there is a drawback of a manual system that negatively impacts time savings, clarity, convenience, compliance, revenue collection, and more.
Given the advancements in software in recent years and the impacts of the global COVID-19 pandemic that caused countless businesses to digitize services, governments need to keep up with this new level of convenience that the market has provided. As local governments devise a cohesive plan for digital transformation, a fully streamlined tax collection solution should be an essential part of that plan.
on-Demand Webinar
Ensure Occupational Tax Compliance:
A 15-min Online Session for Finance Leaders
Chapter 2
Finding the Right Tax Software
Explore some of the key questions for agencies to consider when searching for tax collection software that can optimize existing processes, deliver a modern experience to taxpayers, and provide a single source of truth for staff.
Additional Resources
Success Story
How Bay County, FL Brought New Efficiencies to Tax Compliance Processes
Chapter 3
Improving Tax Compliance
With an effective tax collection solution in place, agencies can provide timely notifications to taxpayers, increase data security, and deliver comprehensive support to their communities. Learn how these and other solution benefits have a tangible impact on compliance.
Success Story
How Breckenridge, CO Ensures Tax & Licensing Compliance
Chapter 4
Increasing Tax Revenue
Introducing best practices into the tax collection process—including automating penalty and interest calculations, providing 24/7 online access to taxpayers, and maintaining clear and regular communication—can help improve engagement and increase revenue for agencies.
Chapter 5
Collecting Multiple Tax Types
A comprehensive tax solution can scale to streamline diverse tax types, such as sales and use tax, occupational tax, lodging/short-term rental tax, and more. Learn how implementing one solution to manage multiple tax types benefits agencies and their communities.
6 Benefits Businesses Will Buy Into for Compliance
Access this guide to explore how a modern, streamlined tax filing and collection solution benefits local business owners and governments.