A Tax Software Service Bureau is a company that provides business services for a fee. You may ask yourself how Service Bureau fits into the Retail Tax Preparation Industry. The service bureau business model is one of the little-known secrets in the Tax Industry. As a result, very few people openly discuss the benefits of being your service bureau and what it is.
Simply put, a service bureau provides tax software, Training, and ongoing support to tax professionals. If you already own a tax office or are in the tax industry, creating your own Service Bureau brand is one of the most lucrative business models in the industry.
3 ways Service Bureaus generate income
There are multiple revenue sources that Service Bureaus can tap into within the tax industry. Typically generate revenue off of each bank product funded within their Service Bureau.
Service Bureau Fee:
You may have software currently through a service bureau or have seen a line item in your software for Service Bureau Fees. In most cases, this is how the service bureau earns money. For example, every time you or your office file a bank product tax return, that fee is debited from your customers’ refund and paid to your service bureau.
The biggest misconception regarding Service Bureau Fees is that the SB Fee is something the tax preparer is charging and earning, which is not true in most cases. Instead, the revenue generated from Service Bureau Fees is getting paid to the Service Bureaus.
Service Bureaus usually have Co-Branded software, Which means that the software they have is custom to their Tax Business brand. With their Co-Branded software, they can re-sell to tax preparers, tax business owners, and even other tax professionals looking for tax software. They also have the freedom to sell the licenses to use their software for whatever price they want and charge yearly renewal fees for those licenses.
Revenue Splits are a big revenue generator for Service Bureaus who choose to offer them. A Revenue Split is where the Service Bureau makes a percentage of all tax preparation fees charged by the preparer for the services provided to the preparer by the Service Bureau. This Revenue Split is separate from the Service Bureau fee. The most common Revenue Splits are 70/30, 80/20, or 90/10, with the smaller percentage going to the Service Bureau. Usually, with the Revenue Split option, the Service Bureau provides additional services other than software sales. For example, software training for the preparer and staff of the Tax Business, assistance with marketing, and ongoing support.
In short, If you are a seasoned tax professional looking to grow your business and revenue or want to get out of the tax preparation side of the business, then starting your own Service Bureau might be the right move for you.