Print Solutions Magazine, July 2003 -- Tax Forms Hold Steady

E-filing struck a new record this tax season, rightly giving the Internal Revenue Service some bragging rights. As of April 25, 51.7 million taxpayers filed returns electronically, breaking 2002's final total of 46.9 million, the agency touted. With e-filing available until Oct. 15, the IRS expects the number of electronic returns to grow substantially.

The good news is that burgeoning electronic returns haven't led to a dismal season for distributorships offering tax forms. On the contrary, many firms made significant profits last tax forms season (according to industry experts, the average profit margin is 50 percent to 75 percent) and are heading toward another profitable one come September.

"The best thing is that everybody needs tax forms," says Lisa McMillen, vice president of operations at San Jose, Calif.-based distributorship Evergreen Data Systems Inc. "It's a great product and has a great profit margin." The distributorship has been offering tax forms--mainly W-2s and 1099s--since 1990. It has approximately 3,000 clients, including large software companies, the local government and financial firms.

Distributorships that experienced declining tax forms sales in the last few years probably were affected more by the U.S. economy than e-filing, McMillen says. E-filing hasn't affected Evergreen Data Systems' sales because the company sells tax forms mainly to large corporations, which still need W-2s and 1099s that require hard copies. Some of those end users need fewer tax forms because they've laid off employees, she says, but the distributorship gained new clients and maintained its tax forms success.

3 Tax Form Tips

1. Understand the product. At least one person in the distributorship should have a complete understanding of tax forms. "You just can't say, 'Let's start selling tax forms,'" says Lisa McMillen, vice president of operations at San Jose, Calif.-based distributorship Evergreen Data Systems Inc. "You'll only end up irritating your customers. You need to have the expertise."

2. Keep in touch with customers. The tax forms market is competitive, and many manufacturers sell direct. "To beat them, make sure you offer very good pricing," McMillen says.

Once the tax season begins in September, call and visit your customers, says Harold Price, owner of Greenville, Texas-based distributorship Professional Tax Forms HDT Inc. "Make the effort to call them up and remind them what they ordered last year," he says. "Sometimes, they just forget to reorder."

3. Evaluate customers' needs. Customers may ask for tax forms with more sections than they need. By making clients aware of less-expensive options, end users can save money and distributors can gain customer loyalty.

Loyal Clients and Additional Business

Harold Price, owner of Greenville, Texas-based distributorship Professional Tax Forms HDT Inc., has sold W-2s and 1099s for the last 10 years. The distributorship targets certified public accountants. Although the company has experienced a sales decline each of the last three years, Price says "it's still a very profitable business because old customers generally tend to stick with us."

To ensure his customers don't go elsewhere, Price aggressively keeps in touch with them. Every year, he teams up with Oxnard, Calif.-based TFP Data Systems to offer tax forms. In July, TFP Data Systems sends Price a catalog detailing the latest IRS tax form changes. (See "2003 Tax Form Changes" on page 57.) After thoroughly understanding the changes, Price visits local clients in September to remind them about their tax forms needs and to mention the changes. (He calls non-local clients.)

Price says a major benefit of visiting or calling tax form clients is gaining other printing jobs. "Selling tax forms is a good way to lead into other products," he says. "Customers sometimes mention that another firm is looking for help with a printing job. You simply grab the opportunity and take it from there." McMillen also gained several profitable jobs, including ones for checks and purchase orders, when selling tax forms.

Before offering tax forms, McMillen says, distributors should understand their various parts and sections, as well as printing requirements. Many end users know they need 1099s, but aren't aware of other tax forms they require, she says. "There are so many things on the form that you literally have to walk through the entire form and help the client figure out what he needs," McMillen says.

Partnerships Yield Rewards

Distributorships offering tax forms need solid support from manufacturers, which can provide marketing materials such as catalogs, brochures and fliers. Distributors use catalogs to understand various tax form types, changes and prices. They also can tout their tax forms services to customers and prospects by mailing them brochures and other direct mail pieces. Manufacturers also can help distributors by identifying potential tax form customers and warehousing enough forms to handle rush deliveries.

"Every manufacturer can print, but what you want is a definite partnership," McMillen says. The distributor/manufacturer relationship clicks when the manufacturer offers the above services as well as quick response and turnaround, she says. McMillen, who has worked with TFP Data Systems for several years, prefers working with only one tax forms manufacturer instead of relying on several vendors. It's wise to develop a solid relationship instead of "messing with too many tax forms from too many suppliers," she says.

Some distributors need a couple of years' experience before they're comfortable selling tax forms, McMillen says. Employees need a solid understanding of the forms and the perception to understand what their clients need. She says distributorships with high turnover rates might have difficulty selling tax forms because new salespeople require training. "Employees also should be able to handle complaints when wrong forms or the wrong number of forms are mistakenly sent to clients," McMillen says.

Unlike other products in the document industry, Price says distributors have to spend time every year to become familiar with IRS changes. "Three years ago, there were tons of changes," Price says. "That took a lot of time. But it's worth the effort."