My colleague has already discussed important sales and use tax considerations for manufacturers. In addition to evolving legal requirements and changing business practices, your clients must also have a thorough understanding of the technical requirements for an effective sales tax process. Without the right sales tax software in place, employees will have difficulty maintaining efficiency and ensuring the business stays compliant.
Here are the top technology considerations for keeping sales tax processes running smoothly.
1. Utilize real-time compliance in the cloud
Sales tax can quickly evolve, and your business could suffer if it’s not able to keep pace with those changes. Integrating directly into primary transaction systems can accurately determine rates, regardless of the jurisdiction or product. Being able to have the latest rate and form changes across all jurisdictions is key.
The right platform will ensure there is enhanced address validation for location accuracy while also utilizing an extensive catalog of product codes to map to see all products. Having streamlined reporting capabilities can also help reduce audit risk. Regardless of a business's size, incorrect reporting could lead to hefty financial fines.
2. Improve the procure-to-pay process
Your clients need visibility into tax liability on purchase transactions with control, accuracy, and flexibility. Being able to import and consolidate all purchase data from multiple data sources is key. It’s essential that your clients focus on data, analytics, and reporting. Pre-built reports help manage vendor invoices to ensure proper categorization and reporting, including;
- total tax obligation
- sales tax paid
- use tax accrued
- overcharges by vendor
- tax rate variance by vendor
- other local or industry-specific reporting needs
3. Simplify sales tax exemption certificate management
It’s also critical for your clients to focus on exemption certificate management. This includes collecting, validating, filtering, maintaining, and downloading certificates. Being able to do that in an automated function can proactively send alerts when there are certificates that need updating.
Additionally, storing certificates in a centralized, protected location is key. Your clients need to be able to quickly request new certificates from new customers or replace invalid or expired certificates with current ones. Automating the certificate upload process will help streamline the process, while the ability to produce copies of certificates upon audit with minimal effort ensures the business can keep moving forward.
4. Use technology to ensure accurate sales tax filing
Finally – and definitely not the least important consideration – your clients must easily identify incomplete returns, data errors, or negative returns before filing. Can your clients stay compliant in all jurisdictions with data submission options, including eFile, electronic data interchange (EDI file), and streamlined electronic return (SER file)?
An outsourced filing option can automate the preparation, filing, and remittance process. It will also help with reconciliation against tax general ledger accounts. Having a final process that takes into consideration items like rate/rules, procure-to-pay (P2P), and use tax obligations, and exemptions will help your clients’ businesses keep pace with evolving sales tax obligations and maintain compliance.
On-premise tax engines are not necessarily enough in the current digital environment, especially as businesses expand into new jurisdictions and sales tax obligations change. Your clients will benefit from improved oversight, stronger exemption certificate management, and an automated process to track and update all applicable regulatory changes. This can also reduce the burden on internal IT teams, with fewer tax-related issues pushed onto their list of responsibilities.
Want to learn more about what manufacturers must consider with sales tax? Here are five tips to pass along to your clients when it comes to sales tax management.
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