How to Evaluate Sales Tax Software — and Why an Automated Solution Is Necessary

Mistakes in sales and use tax compliance are often costly. Just how so? Wolters Kluwer partnered with the Aberdeen Group to survey tax professionals and found that 97 percent of surveyed organizations reported experiencing audits in the past five years (Download the white paper here: Improve Your Sales and Use Tax Compliance to Grow Your Business). Seventeen percent of those organizations paid penalties, which were costly, and included 1-2 percent of revenue in fines alone, which for some businesses, added up to more than $5 million. Moreover, once audited, an organization is likely to be audited again. The study showed that 34 percent of those audited in the past five years have been audited more than five times.

Because penalties are so high, some of the companies surveyed resolved that they would never face such penalties again. These “Leaders” made big improvements in their sales and use tax compliance. These companies, which scored in the top 35 percent aggregate for performance scores, experienced a 10 percent improvement in cost of handling audits over the past two years, realized an 8 percent improvement in time spent addressing sales tax errors over the past three years and saw only 1 percent of their audits result in fines in the past two years.

These leaders did this by turning to top sales and use tax software that delivers:

  • Workflow automation. This includes automation features for determining nexus, evaluation, exemption management, calculation, filing, remittance and recovery in order to ensure that accurate data is collected and utilized.
  • Improved visibility. Leaders chose software that provides the centralized management of tax information, along with the ability to review, edit, print, audit and e-file returns.
  • Regulatory change support. Leaders chose software that automatically keeps current with taxability data and is updated at least monthly.

Eighty-three percent of Leaders implemented a sales and use tax solution that combines all of the above in order to benefit from a single solution that supports their needs from end‑to‑end, in an easier to implement, more cost-effective package. The software automatically manages sales tax exemptions, researches rates, determines taxability and provides reports and an audit trail, and uses accurate and current rates/taxability content. The indirect tax team can rely on this software and spend less time on calculations and more time on other higher-value activities. Additionally, with this high-end software, companies can avoid both noncompliance penalties and repeat audits.

When choosing software, bring in other stakeholders, such as IT leaders, who will need to help with the selection, implementation and support. Be ready to adjust your overall sales and use tax processes to gain the full benefits of the automation software.

Perhaps the most important consideration when choosing sales and use tax software is selecting the right solution provider. The company you choose should be reputable and able to provide a tax calculation system that combines industry-leading tax rate and taxability content with highly accurate jurisdiction boundary information. We at Wolters Kluwer have been selected by the IRS to provide sales tax tables to taxpayers for the past 12 years, which attests to the reliability and the quality of our CCH® SureTax® and CCH® Sales Tax Office sales and use tax solutions.

Once implemented, plan to provide staff with training so that your indirect tax team can use the software fully to your company’s greatest benefit.

To get more insights into sales and use tax or to learn more about the statistics cited above, download our free white paper: Improve Your Sales and Use Tax Compliance to Grow Your Business.

AUTHOR

Shawn OBrien

All stories by: Shawn OBrien

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