In a white paper by sales tax experts at Avalara in Washington, the authors note Aberdeen Group’s finding that “the errors associated with manual reports and spreadsheets for sales tax compliance have contributed to negative audit results subjecting the companies to fines/penalties and the cost of corrective labor.”
Most companies find that compliance and jurisdictional rules, combined with increased audits, lack of staff with tax expertise and the high cost of negative tax audits are making the tracking of sales and use taxes an increasingly frustrating pain.
Most people still rely on a reactive tax management policy – as in, “We’ll deal with it when we get audited…” They mostly use manual reporting often outside their ERP systems, and rely on spreadsheets and limited internal knowledge. It’s a daunting task to try to keep up with myriad state regulations that are in a steady state of flux, let alone stay ahead of pending tax changes. But the penalties for failing to do so – and having this exposed in an audit – can be costly.
There’s a better way.
With tax formulas changing, jurisdictions confusing and rules changing all the time, it’s wise to consider an automated solution. As the industry’s leading supplier of sales and use tax solutions, the folks at Avalara have done just that for over 40,000 users. Their automated solution files and remits over $10 billion on tax collections every year, while leaving their customers free of audit worries and woe.
These days, you can count on receiving one or more tax audit notices per year, on average, with about 33% of firms receiving 10 or more such notices. As a director of the Ohio Dept. of Taxation was quoted as saying recently on the topic of insufficient or non-payment of ‘use taxes,’ “this is going to be our primary focus. From an audit perspective, 96% of our use tax audits generate liability” – a figure that should make any financial officer want to evaluate the company’s tax compliance process. Some of these liabilities have run into the millions of dollars.
Thus, the folks at Avalara have been making large stride the past few years with their tax automation software. Its automated software integrates with all of the major (and most of the lesser) ERP systems on the market today and automatically maintains all tax schedules, certificates and details.
Basically, with its ERP integration, Avalara will calculate the correct sales tax(es) to be charged for every jurisdiction, ensure the right amount of tax is charged, store and record that transaction, file and remit, and report on it all in the event of an audit, ensuring that the right tax is paid, to the right entity, every time, automatically.
They take care of validation and rate calculations, jurisdiction research, potential nexus issues, exemption certificate management, integration with most ERP systems, all while improving your manpower cost efficiency by reducing work time and costs lost through manual efforts at compliance.
We recommend Avalara to our own clients, and suggest anyone interested in avoiding the cost and nuisance of an audit do the same by visiting their website here.