When You Have to be Right (Parts 4-5) – Sales Tax Planning

Sales Tax and Use Tax considerations have a deeper impact than just the back-end fulfillment. Understanding your current and future sales tax obligations informs business planning and helps align with your goal of good corporate citizenship.

Part IV:  Supporting Strategic Business Planning

“If you always do what you’ve always done, you’ll always be where you’ve always been” [T.D. Jakes].

Sales tax solutions, like other tax solutions, have for decades been considered primarily a compliance function.  However, that seems to be changing.  It is being heard these days more and more in the business and consulting communities around the country that “the main role of the tax function should be to support a business in meeting its strategic goals rather than just compliance”.  Planning for the future growth of the company can reliably utilize and incorporate the results of current tax rules, as well as potential future tax rules as a part of risk and opportunity assessment in the business planning process.

After all, sales and use tax compliance software touches just about every aspect of the business, including:

  • Sales order processing.
  • Sales invoice billing.
  • Accounts receivable.
  • Credit processes.
  • Purchase order processing.
  • Accounts payable.
  • Purchasing cards.
  • Capital asset acquisitions.
  • Goods movement.
  • E-commerce.
  • E-procurement.

And the following departments are integral to any sales and use tax process and should be involved in all aspects of the implementation and planning process:

  • Accounting, including fixed assets, general ledger, and financial reporting.
  • Accounts payable.
  • Accounts receivable.
  • Customer service.
  • Order entry.
  • Master data maintenance, including customer, vendor, item, and plant (the company’s own locations).
  • Information systems.

A sales and use tax process that reflects the best practices of the industry systematically brings together the key data in each of these account for current and past years, and then applies expert analysis to compute results, which then can be combined with other data for use in current and future planning. And high-quality data is probably the most important since the ability to advise on business transactions both internally and externally with respect to both compliance and planning depends on that.

 

Part V:  Being a Good Corporate Citizen is Good Business

Tax administrations are seeing themselves as more than just tax collectors, but rather as service providers for citizens. Tax collection can enhance accountability between citizens and the states, in addition to raising the revenue needed to fund essential services.

But what’s in it for companies?   When companies are meeting their tax obligations accurately and responsibly as good corporate tax citizens, such behavior adds value to the company brand.  It’s good business to be a good corporate citizen, e.g., you have employees who are proud to work for you and clients who are proud to be associated with you.

We know that potential new clients almost always ask questions like “…tell me about yourself and why I should trust you to do business with us…”  Good corporate tax behavior demonstrates not only a commitment to tax competency but tax responsibility.  It is in the best interests of businesses to partner with service providers that not only provide solutions that build up the corporate brand in the community, but that practice good citizenship themselves, not only to tax authorities and governments, but also investors, the media and the general public.   Such company values and business practices include a commitment to using high standards of professional conduct and ethics as well as dedicated to being a responsible partner in society.  Such companies practice what they preach and build up the confidence and trust in such service providers.  Witness that more and more boards of directors are no longer implementing aggressive tax minimization plans without first doing a risk assessment of the potential negative public impact on the brand of a company that is perceived to be using “schemes” to avoid paying their fair share.

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AUTHOR

Jerome Nestor

Jerome Nestor, Esq., CPA, MBA-Accounting Information Systems Manager Tax & Accounting North America Wolters Kluwer Mobile: +1 847.312.5671 Email: jerry.nestor@wolterskluwer.com

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