Most companies unfortunately experience significant transaction tax errors each month, and the root causes for these errors are simply too voluminous to list. Nonetheless, we have found the number one issue behind all such errors is incorrect and/or omitted data. So, if you want to significantly reduce your chances of having tax errors, you need to constantly review the information going to the tax engine, as well as the answers coming out.
Are you collecting, storing, and using the necessary data to ensure your tax calls are correct? If you’re not sure, you might want to see if your data can answer these three key questions…
1. What is Being Purchased?
This is fairly simple, or so it would seem. Did you know a good portion of companies can only see that something was purchased, but they can’t tell specifically what it was? I know that seems ridiculous, but I assure you we see it all the time. Often, the reason is because Accounts Payable isn’t required to key line-level detail into their payment system. However, it sometimes happens when line-level detail is keyed but then rolled up, or consolidated, for other business purposes. Regardless of the reason, you need to ensure all purchase information is collected and stored at the detailed line level. It might seem obvious, but this is an essential step that is too often ignored!
2. Where is it Going?
Once you can safely determine what is specifically is being purchased, you need to know where the transaction occurred. For smaller companies, this is usually simple, as there is often only one location. However, larger companies are another story. The answer gets exponentially more complicated when there are multiple locations, companies, business units, etc. As such, Cost Center, Profit Center, and Buyer Ids tend to become invaluable to help solve the mystery.
3. How is it Going to be Used?
It seems like knowing what is being purchased and where it’s going should be enough to drive an accurate tax result, right? Unfortunately, no. Companies operating in “exemption-rich” industries still need to know more! They need to know how the purchase going to be used. Again, this seems obvious; after all, a hammer is used for hammering, a computer is used for computing, and a drill is used for drilling. It almost seems like the “how” is right there in the name. Yet, computers can be used for accounting, manufacturing, or organizing human resources information. Even less-complicated tools, like hammers and drills, can be used at various stages of production, or can be incorporated into a piece of equipment, or can simply be part of a tool box in a supply closet. The purpose may not be so obvious, so your data needs to reflect how the item will be used so you can tax it accordingly.
Running through this three-question process will ultimately help you determine if you have good data. If the data you’re leveraging for your tax calls can answer each of these questions, you’re likely on the right track and ahead of the curve. But if it can’t, you may be overpaying your tax obligation and/or taking on unknown risks!
Sales and use tax errors are costing most companies an exponential amount of money every year. As such, it’s critical to maintain a defined and repeatable process to get things right. This includes regularly auditing the source data going to your engine, as well as regularly auditing the results coming back from your engine.
For those somewhat new to sales tax automation and/or thinking about leveraging it going forward, there are many other topics you should consider before adopting your ultimate solution. Below are a few that come to mind, along with how our solution can help with each.
1. Implementation: When working in various systems, the setup can often take months or even years to complete. Long implementation processes can be frustrating and hinder performance. With TaxView Pro, our implementation process is efficient and timely. Most clients are up and running in just two months.
2. Configuration: Tax rules, regulations, and rates are constantly changing. When configuring and customizing rules, it is important to build rules that fit for your business, are simple to understand, and yield an accurate result. With TaxView, the rules are easily configurable and can change with your business and associated tax laws.
3. Visibility: Your automation must contain robust reporting to ensure accuracy. Additionally, it’s good to adopt and adhere to reviewing your source data and results on a monthly cadence. Often, looking at data can be complex and take long periods of time. Using TaxView provides granular visibility into all transactions and gives the ability to review them quickly. Gone are the days where data is too complex to comprehend or too difficult to organize.
4. Accuracy and Efficiency: Inaccurate and/or omitted data is the number one cause of sales and use tax errors. Not to mention, it makes the process completely inefficient. With TaxView Pro, we have various ways to identify and fix all associated tax errors in a simple and efficient manner. Furthermore, we guarantee all of our results with our Zero Fee Guarantee.
How much are sales and use tax errors costing you? For most companies the answer is shocking. Tax over and under payments for non-compliance can easily cost companies hundreds of thousands to millions of dollars each year. Ideal for complicated tax requirements, TaxView Pro brings clarity and huge savings to your sales and use tax function. Our turnkey solution is configured at a granular level with all applicable tax rules for your business to calculate the most accurate tax possible. To see more benefits, click the link below.
The third and final cornerstone is Affordability.
All companies can benefit from implementing tax automation on their purchase-side, but unfortunately the vast majority of available options are priced well outside the reach of the middle-market. Without such automation, companies in this market segmentation tend to overpay their obligations, have compliance issues and/or get hit with surprise audit assessments. None of which is good when money is in heavy demand for a growing business.
TaxView Express will ultimately save your business tens of thousands of dollars each month! Not only is it one of the most cost-efficient solutions available today, it also comes with the company’s exclusive “Zero Fee Guarantee.” This means, if your benefit doesn’t exceed twice your cost, you don’t pay!
It only takes $5,000 to get started with TaxView Express. This setup fee covers the development of your custom environment, as well as the build-out of your JE writer for journal entry extracts. After set-up, you pay just $2,500 per month.
TaxView Express takes a specific and unique approach that amplifies accuracy, simplicity and cost savings. No longer do middle-market companies need to spend an exorbitant amount of time and money to achieve the same benefits of those larger companies with dependable tax automation. The utilization of our smart technology provides maximum flexibility and is designed to always stay up-to-date with unmatched accuracy and simplicity at an affordable cost.
Dynamic Tax Solutions, Inc. (DTS), was established in 2009 by founders with collectively more than 40 years of experience in sales and use tax accounting and auditing. Over the last decade, DTS has helped many of the largest companies in the world to identify and correct their purchase-side transaction tax errors on a regular monthly basis. Understanding that such errors were not exclusive to the Fortune 500, DTS recently developed a new middle-market tax application, TaxView Express, featuring simplicity, accuracy, and affordability. TaxView Express will solve your challenges and ultimately make your monthly accrual process more efficient. To find out more about TaxView Express, click here.
The second cornerstone for a sound sales and use tax automation function is simplicity.
A good sales and use tax system must be simple in its configuration, ongoing use, and reporting. in my opinion, each of these elements must be understood and managed by tax professionals without the aid of I.T. professionals.
Sales and use tax systems are often far too complex to be used by tax professionals. They often require specialized IT resources to build an interface to an ERP system, they often require complex routines to handle simple decisions, and reporting is rigid. Add massive data files to the mix and you have a recipe to overwhelm a tax practitioner. Too often, I see CFO’s who assume that the sales and use tax function is under control when such expensive systems are implemented to only find out later they are in a worse situation than before when significant over-payments are uncovered or when significant fines and penalties are paid to jurisdictions under audit.
Choose a system that allows tax professionals to do their job. TaxView Express is an application that is a fully hosted, cloud-based software solution that doesn’t require significant IT support or additional hardware. TaxView Express also contains an integrated Express Manager, which serves as your in-app guide, assisting with everything from data import, tax decisions, tax rates, and dynamic reporting. With these and many other features, DTS has made using TaxView Express as easy as checking your email.
To read about the first cornerstone, accuracy, CLICK HERE.