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How to future-proof your sales and use tax team

The high-pressure landscape for sales and use tax departments

Keeping up in today’s tax world is increasingly difficult. Internally, you’re working on repetitive and time-consuming compliance and audit work with little time for strategic and value-add activities. You may struggle to plan responses to market disruptors like changing regulation.  Maybe even your neighboring business units, like finance and marketing, are investing in technology to keep up and stay current — but is tax?

Beyond your business walls, you’re facing increased complexity, because states can make very different requests of a company. Keeping up with thresholds in various states and knowing when to register can be a full-time job. Expanding overseas creates the need to understand GST and VAT – and compliance procedures also vary across jurisdictions.

It’s difficult to guarantee your tax calculation process is keeping pace with the continuously shifting tax regulations.  The process becomes more complicated when taking on new tax jurisdictions.  Your team probably spends a lot of time compiling, adjusting, and reconciling data to make sure your tax returns and statutory filings are accurate. If you're expanding operations, either in the U.S. or abroad, how do you feel confident that you’re considering all of the necessary requirements?

The approach many sales and use tax departments take is using manual processes, which can be time-consuming and unforgiving of human error. High sales volumes and rapid growth can cause higher rates of errors and omissions, and potentially unfavorable tax audits. And any inability to anticipate and respond to new regulations can leave you vulnerable to risk and exposure.

Digitalization: What it means for your tax team

Digitalization is the use of technology to change a business model and provide new revenue and value-producing opportunities. It’s the process of moving to a digital business while improving customer experience and engagement. There are two forces behind tax departments moving to digitalization — customer expectations and government mandates.

Customers desire a fast, frictionless buying experience. As a vendor, not getting tax right the first time creates inefficiencies and bad experiences. In an e-commerce scenario, for example, missing tax or the wrong tax could result in a customer abandoning a purchase. You need to know when, where, and how much sales tax to collect every day of the year, and you need to have a calculation process that keeps up with the pace of digital transactions and additional complexities like exemptions.

In addition, governments are getting smarter with their data by using new technologies. The intense pace of regulatory change coming out of not just Wayfair case but also the digital economy at large adds new pressure from the government side. For tax teams like yours, using technology to keep up is becoming a necessity.

Why you need to re-evaluate the sales and use tax function today

A strategic sales and use tax department has:

  • A consistent approach to compliance to remove risk associated with varied processes across business units and locations
  • A dependable tax position at the time of purchase or sale
  • Reduced dependency on outside help
  • Ensured the right tax considerations have been made for new business opportunities — for new products and services, expanding into new territories or targeting a new customer market

Tax professionals may be hesitant to use technology, such as automation, for fear they will become obsolete. Fear not — technology will always need skilled professionals like you for operation and maintenance for it to be successful. Automation ensures accuracy and a consistent application of tax based on your business requirements. Most importantly, it allows you to focus more on strategic and profitable activities, and to be more proactive about your tax liabilities.  Through automation, your company can improve your operations and processes, save time and money, boost efficiency, and create tremendous value for your business.

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