White paper
Streamline indirect tax compliance by leveraging integrated technology
Being both compliant and on time are challenges that indirect tax managers find to be, well, taxing. Ensuring accurate and timely compliance is complex with growing markets, e-commerce opportunities expanding at an unprecedented rate, and tax authorities’ rapidly changing rules, regulations, and evolving requirements.
Furthermore, digitizing tax regimes worldwide and continuous transaction controls (CTC) are pushing companies much closer to real-time reporting and remittance, which requires instantaneous, absolute accuracy. Although the United States has not yet mandated e-invoices or real-time reporting, the success of these measures in boosting tax revenues in other countries suggests that they may soon be adopted nationwide or by individual states.
All these factors complicate the evolution of tax departments from traditional compliance roles to more strategic, value-adding functions within businesses. However, this shift is essential for tax departments to truly add value to their organizations. They need to transition from a reactive approach to a proactive one, using analysis and insights to influence and drive business decisions.
Making this transition requires an integrated, holistic approach that considers cloud technology, end-to-end processes, and people skills. When an organization has a centralized platform for tax operations, compliance, management, and e-invoicing supporting its entire organization, it removes the complications of end-to-end indirect tax compliance — and the tax team can spend more time on the activities that bring value to the business.
In this white paper, you’ll learn why this unified, holistic approach is the answer to indirect tax and e-invoicing challenges today and in the future. You’ll also learn how to choose the right solution for your business — a solution that will position your company to stay ahead of sales and use tax, value-added tax (VAT), and goods and services tax (GST) compliance issues.
The growing challenges of end-to-end indirect tax compliance requirements
Tax compliance is serious business. Being non-compliant can result in hefty penalties and interest charges.
If your business includes an e-commerce platform, meeting your obligations is even more complex and demanding. The sales and use tax impact of the 2018 U.S. Supreme Court ruling in South Dakota v. Wayfair, Inc. freed states to charge taxes on purchases from sellers located outside the state.
This ruling upended traditional economic nexus rules, and it’s now necessary to know and follow the regulations in every tax jurisdiction. In the United States alone, there are 50 states plus protectorates, territories, and over 20,000 incorporated municipalities. Each time a tax rate, rule, or regulation changes, you need to update that information within the systems across your organization.
The challenges further compound if you operate internationally, particularly with the e-invoicing requirements sweeping across Europe and other parts of the globe.
In the Thomson Reuters report, “Challenges and changes in indirect tax and compliance,” respondents said optimizing efficiency was critical to the success of the indirect tax function. However, achieving that efficiency is tricky: the biggest challenges to achieving respondents’ function goals were related to efficiency in managing processes and resources. Technology and automation were the top cited challenge (40%), followed closely by resource constraints (39%).
Of those who said they felt resource constraints, 52% considered themselves somewhat under-resourced, and just one in four said they had sufficient resources. The Thomson Reuters report, “The 2023 State of the Corporate Tax Department,” illustrates the danger of a tax department with limited resources:
- While 61% of surveyed businesses incurred tax audits in the previous year, 72% of those with under-resourced tax departments did so.
- Less than half (47%) of companies with under-resourced tax departments incurred tax penalties, compared to 42% of all businesses.
- In both cases, more than one-third of companies incurred six or more audits and penalties of more than $50,000.
Even those respondents who felt their department had the necessary resources often complained about inefficiencies, citing time management, data management, and process improvements as challenges within their corporate tax departments.
These challenges are hindering efforts by indirect tax teams to be strategically focused on adding higher-level value to their organizations.
Technology has the potential to relieve some of these resource limitations by eliminating tedious tasks. However, as noted, technology and automation are the most challenging obstacles to achieving indirect tax function success because too many companies rely on traditional, siloed approaches to indirect tax transformation. As a result, they end up with a “Frankenstein” technology stack that takes a lot of effort to work with, especially from a data perspective.
Streamline compliance and reporting with a unified tax system
Instead, imagine a process where users could make one change to the tax system and have it automatically flow to all your systems, accurately aligning them to your organization’s global compliance and business requirements. From a single centralized point of control, you could configure all your systems to calculate your taxes in a particular tax jurisdiction.
That’s what an automated tax engine integrated with your enterprise resource planning (ERP) system provides: scalability and the capability to modify the system to add new jurisdictions or support new requirements in minutes rather than days or even months. You make the necessary changes once, and the tax engine automatically applies them throughout the integrated systems. There’s no need to sweat the details of calculating sales tax, filing tax returns, or managing real-time reporting requirements because the engine does the heavy lifting automatically — and correctly — in the background of every taxable transaction and for end-of-month reporting.
You can look across your entire organization to gather and report the required information with ease, allowing you to unearth the insights that provide value to your company. This capability also unlocks the real-time reporting you need to comply with e-invoicing requirements.
The result is a better, more compliant tax solution that moves at the speed of your business.
The benefits of an automated, integrated tax engine include the following:
|
Choosing the right end-to-end indirect tax solution takes careful consideration
Third-party tax solutions based in the cloud are more affordable and easier to implement than in-house IT tax systems. They also offer the speed and flexibility needed to meet the growing demands of modern business taxation.
Capabilities you should seek in a tax management solution:
- Automation of the entire indirect tax process from end to end to ensure consistency and compliance
- Integration with your ERP system to enhance workflow and data accuracy through consistent, repeatable, and scalable tax calculations
- Real-time tax determination for both sales and purchase transactions
- E-invoicing compliance and transaction controls (CTC) model capabilities
- Geographical compliance that includes information systems that define jurisdictions, plus address validation and cleansing to give you significantly increased accuracy
- The ability to “re-determine” the tax for error-prone transaction systems via a scheduled batch process
- An easy method to maintain exemption certificates for the customers to which they pertain
- Detailed audit reports each month via web portals, enabling you to quickly analyze tax results for defending against audits
- Compliance with SSAE 18 and ISAE 3402 standards
- Continuous tax updates supported by trusted researchers with industry experience to let you stay ahead of global tax legislation without spending time on research and code adjustments
- Robust reporting capabilities that aid in financial planning to reduce the workload required for multijurisdictional compliance
- A cloud-based solution that utilizes a highly rated, global cloud-based platform to ensure accessibility, scalability, and data security
- A comprehensive disaster recovery plan to safeguard data integrity
- High system availability to handle large transaction volumes and maintain business continuity
However, not all tax calculation or e-invoicing software is the same, and the difference often lies in the quality of the partnership a business develops with its chosen tax software vendor. Indeed, the level of experience and support a tax software vendor provides is just as important as the software itself because the two are inextricably linked.
The best approach to change management
Remember the first time you used some basic software, like a spreadsheet or word processor? Remember how strange and unfamiliar it seemed? But with a bit of training, the strange and unfamiliar soon became quite comfortable and productive. The training was vital to maximizing the benefits of the software. The same applies to complex software solutions, such as indirect tax technology.
Change management and indirect tax software integration involve a systematic approach to transforming an organization’s tax function. Process mapping and standardization are essential, as is system compatibility for integration. However, the best implementation results occur when people who invest in training implement and maintain tax technologies.
Providing the necessary training and support for the initial setup is critical to ensuring the long-term success of any indirect tax implementation. People tend to resist change when they don’t fully understand something, especially when it’s new technology. Ongoing training can help mitigate this resistance by familiarizing employees with new processes and minimizing the intimidation factor. Access to support is essential when new laws and regulations can affect your company’s tax policies.
That’s why your choice of vendor is critical to the implementation’s success. After all, selecting a vendor that makes it easy to provide the training and support your people require increases the likelihood of a successful implementation. Plus, it also makes your life much less stressful.
The right partner — one with years of experience implementing cloud-based tax solutions for businesses around the globe — will make it easier for you to integrate your solution fully with your existing processes. Your partner should provide a robust integration program that provides support whether you choose to handle the integration in-house or through a third party. To further minimize risk and ensure that the solution aligns with your needs, they should also help you thoroughly test and verify each integration before it goes to market.
The right solution and partner
Thomson Reuters ONESOURCE Indirect Tax Determination empowers you to automate transactions in the cloud without all the time and headaches of managing and maintaining an in-house tax engine or reporting system. It creates an end-to-end indirect tax solution designed to efficiently address the needs of organizations with national or global reach: its engine determines the rates for 193 countries and territories and every tax jurisdiction in the United States to smoothly handle any tax calculation.
Built to accommodate constant change, ONESOURCE adapts to new rates and requirements, so there’s never any need to spend time and money manually updating multiple systems. The solution integrates with all your systems, operates seamlessly with them, and can scale quickly to the size of your company for less cost.
The solution offers:
- A unique patented process. ONESOURCE provides the only patented, end-to-end automated solution on the market for sales, use, and excise tax; GST; and VAT.
- Powerful integration. Connect to ERP, financial, billing, and e-commerce systems through prebuilt and custom integrations.
- Trusted tax information. Stay current on global tax changes through in-house expertise backed by SSAE 18-certified and ISAE 3402-certified processes.
- Powerful personalization. Ensure you meet all your tax liability needs with our patented process that handles corporations of every size and geographic reach.
If you’re ready for an end-to-end, automated system for indirect tax compliance, learn more about ONESOURCE Indirect Tax Determination.
Refine global sales tax compliance with a single software solution, ensuring accurate tax returns and filings for sales tax, GST, and VAT