You’ve reached the point where tax can no longer be managed reactively. The business has grown, complexity has increased, and the current approach – outsourced compliance with no internal oversight is starting to show cracks.
You know you need something more structured. Something with governance, accountability, and strategic alignment. In short, you need a tax function.
The challenge? You’re not ready to hire a full-time VP of Tax. Maybe the revenue isn’t there yet to support the investment. Maybe the recruiting timeline doesn’t align with your immediate needs. Or maybe you’re simply not sure what the role should look like long-term, and you don’t want to make a premature commitment.
Here’s what many businesses don’t realize: a tax function is not the same thing as a tax person. It’s a system—a set of processes, responsibilities, and strategic frameworks that ensure tax is managed proactively, consistently, and in alignment with the broader business.
You can build that system without a full-time hire. But it requires intentionality, structure, and often, experienced guidance to set it up correctly.
Before you can build a tax function, you need to understand what one actually entails. It’s easy to assume it’s just about compliance—making sure returns are filed and payments are made. But a mature tax function is much broader than that.
Here are the core components:
Someone needs to own tax—not just the execution, but the strategy, risk management, and coordination across the organization. This ownership ensures that tax doesn’t fall through the cracks and that decisions are made with appropriate oversight.
This is the baseline: income tax filings, estimated payments, sales and use tax, payroll tax, and any other regulatory obligations. But compliance alone isn’t a function—it’s an output. The function is what supports consistent, accurate, and timely compliance.
Proactive planning means identifying opportunities, optimizing structure, and making decisions with full visibility into their tax implications. This includes entity structuring, credit utilization, timing strategies, and alignment with business objectives.
Clean, organized documentation is the foundation of defensible tax positions and smooth audit processes. This includes maintaining support for deductions, credits, and positions taken on returns, as well as tracking intercompany transactions and transfer pricing documentation.
How does information flow from operations to tax? Who is responsible for gathering data, reviewing calculations, and ensuring accuracy? How are deadlines tracked and responsibilities assigned? These workflows don’t build themselves—they need to be designed and maintained.
Tax doesn’t operate in isolation. It intersects with legal, finance, operations, and executive strategy. A functioning tax operation ensures these touchpoints are well-coordinated and that tax considerations are part of broader decision-making.
As businesses scale, spreadsheets and email threads become inadequate. Tax functions need to integrate with accounting systems, leverage automation where appropriate, and ensure data flows efficiently from source systems to tax reporting.
A tax function encompasses all of this. It’s not a single role—it’s an infrastructure that supports how tax is managed across the organization.
Before building anything, you need to understand where you currently stand. Most growing businesses operate in one of a few common states:
Fully outsourced with no internal oversight. Compliance is handled by an external CPA firm, but there’s no internal coordination, strategic planning, or process governance. Tax happens in isolation, and leadership has limited visibility into positions, exposure, or planning opportunities.
Ad hoc internal management. The controller or CFO oversees tax alongside a dozen other responsibilities, but there’s no structured process, no dedicated bandwidth, and no specialization. Things get done, but inconsistently and reactively.
Fragmented across entities or teams. Different business units or subsidiaries manage tax independently, with no centralized coordination. Processes are inconsistent, data is siloed, and there’s no enterprise-wide view of tax obligations or strategy.
Each of these states has gaps—some more severe than others. The first step in building a tax function is identifying exactly what’s missing and what’s causing friction.
Ask yourself:
If the answers reveal uncertainty, inconsistency, or gaps in ownership, you’ve identified where the work needs to happen.
The instinct when facing these gaps is to hire someone to fix them. But hiring without structure just transfers the problem to a new person. Instead, the foundation needs to be established first.
Here’s how to start:
Even if you don’t have a dedicated tax leader, someone needs to own the function. This might be the CFO, controller, or a senior finance leader—but it needs to be explicit. That person becomes the point of accountability for tax strategy, compliance coordination, and cross-functional alignment.
This doesn’t mean they’re doing all the work. It means they’re responsible for ensuring the work gets done, decisions are made, and gaps are identified.
Tax doesn’t happen in a vacuum. It requires inputs from accounting, operations, legal, and sometimes HR. Defining these workflows ensures everyone knows their role and deadlines aren’t missed.
For example:
These aren’t trivial questions. Without clear answers, work falls through the cracks or gets done inconsistently.
Create a single source of truth for tax records. This includes filings, calculations, supporting schedules, correspondence with tax authorities, and documentation for positions taken on returns.
This doesn’t require sophisticated technology. It might start as a well-organized shared drive with a logical folder structure. The key is that it’s centralized, accessible, and maintained consistently.
Deadlines for filings, estimated payments, extensions, and other obligations should be tracked proactively—not managed reactively as they approach. A tax calendar ensures visibility and prevents last-minute scrambles.
If you’re working with external CPA firms or advisors, establish clear expectations around timing, deliverables, and communication. Regular check-ins, defined deadlines, and documented responsibilities prevent misalignment and ensure smoother collaboration.
These steps don’t require a full-time tax hire. They require intentionality and discipline. But they’re the infrastructure that makes everything else work.
Even with good intentions, many businesses make missteps when trying to build a tax function without dedicated leadership. Here are the most common:
External firms are excellent at compliance, but they’re not embedded in your business. They don’t attend leadership meetings, they don’t understand operational nuances, and they’re not positioned to provide real-time strategic guidance.
Relying entirely on external providers without internal oversight creates blind spots. Tax becomes something that happens to the business rather than something the business actively manages.
Processes that exist only in someone’s head are fragile. When that person leaves, goes on vacation, or gets pulled into other priorities, the process breaks down.
Documenting workflows—even simple ones—ensures continuity and makes it easier to onboard new team members or transition responsibilities.
Tax planning that happens in November is too late. By the time year-end approaches, most opportunities have already passed. Effective tax functions integrate planning into the business rhythm—quarterly reviews, transaction planning, and strategic discussions throughout the year.
When different people or teams manage tax for different entities without coordination, you lose enterprise-wide visibility. Consolidation becomes difficult, intercompany transactions aren’t properly tracked, and you can’t answer basic questions about overall tax exposure or effective rate.
Centralized ownership—even if execution is distributed—is essential.
The processes that worked when you had three entities and operated in one state won’t work when you have ten entities across multiple jurisdictions. Tax functions need to evolve. Without deliberate investment in refining workflows, upgrading systems, or enhancing capabilities, the function stagnates and becomes a bottleneck.
You can establish workflows, centralize documentation, and implement a tax calendar—but without someone driving it, the function will drift.
Here’s what leadership provides that structure alone cannot:
Strategic oversight. Someone needs to be thinking ahead—anticipating changes, identifying opportunities, and ensuring tax strategy aligns with business objectives.
Cross-functional coordination. Tax touches every part of the business. Leadership ensures those connections are strong and that tax considerations are part of broader conversations from the beginning.
Quality control. Even with external preparers, someone needs to review positions, challenge assumptions, and ensure accuracy. Leadership provides that accountability.
Continuous improvement. Processes need to be refined as the business evolves. Leadership identifies what’s working, what’s not, and where investment is needed.
Decision-making authority. Tax issues don’t always have black-and-white answers. Leadership provides the judgment and expertise to navigate ambiguity and make informed decisions.
This is where many businesses get stuck. They’ve built some structure, but without leadership to drive it, the function underperforms.
For businesses that aren’t ready to hire a full-time VP of Tax but need more than outsourced compliance, fractional tax leadership offers a practical middle ground.
It’s not traditional outsourcing. It’s embedded, senior-level expertise that integrates with your team, establishes the infrastructure your business needs, and provides strategic oversight without the cost or timeline of a permanent hire.
Fractional leaders work shoulder-to-shoulder with your finance team. They define workflows, implement governance, build documentation standards, and ensure tax is aligned with broader business strategy. They provide the leadership necessary to establish a functioning tax operation—and they do it with the flexibility to scale as the business evolves.
This model is particularly effective for:
For businesses in high-growth mode, building this infrastructure early is critical. The principles and frameworks that make tax functions scalable are explored in depth in our article on building a scalable corporate tax function during rapid growth—particularly for organizations navigating the transition from reactive compliance to proactive leadership.
Fractional leadership allows businesses to build the function correctly from the start, with experienced guidance that ensures the infrastructure can support future growth and eventually transition to a full-time model when the timing is right.
Building a tax function without a full-time leader is not a permanent solution—it’s a bridge. At some point, the business will reach a stage where a dedicated, full-time tax executive makes sense.
Here’s how to know when that transition is appropriate:
The business has reached sustainable scale. Revenue, complexity, and operational maturity justify the investment in a senior tax role.
The structure is clear. You know what the role needs to accomplish, what success looks like, and how it fits within the broader finance organization.
The foundation is in place. Processes, documentation, and governance are established. A new hire won’t be starting from scratch—they’ll be stepping into an existing, functioning operation.
Leadership bandwidth is constrained. The CFO or controller can no longer absorb tax oversight alongside other responsibilities, and the business needs dedicated focus on tax strategy and execution.
When these conditions are met, the transition becomes much smoother. You’re not hiring someone to build the function—you’re hiring someone to lead and scale it.
And if you’ve worked with fractional leadership during the build phase, that transition is even cleaner. The infrastructure is established, the processes are documented, and the new hire has a solid foundation to build on.
Most businesses don’t set out to let their tax function lag behind. It happens gradually, as other priorities take precedence and tax remains in reactive mode.
But building a strong tax function doesn’t happen accidentally. It requires intentional effort—establishing governance, designing workflows, centralizing documentation, and ensuring someone is driving the work forward.
You don’t need a full-time hire to start. You need clarity on what the function should include, commitment to building the infrastructure, and often, experienced guidance to set it up correctly.
The businesses that navigate this transition most successfully are the ones that recognize the gap early and take deliberate action to close it—before complexity outpaces capability and the cost of waiting becomes too high.
Ready to build a stronger tax function? Koru Accountancy helps growing businesses establish the governance, processes, and leadership needed to manage tax proactively and strategically. Let’s talk about what your tax function could look like, and how to get there.
