KPMG and 3M - Managing a multicountry and multiphase ONESOURCE Indirect Tax Determination deployment

Where can you get tax insight and explore leading tax technology? Managing a multi-country and multi-phase

ONESOURCE Indirect Tax Determination deploymentJUSTIN MCGOUGH – 3M | SCOTT BELDING – KPMG LLP

The following information is not intended to be “written advice concerning one or more Federal tax matters” subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.

Not permissible for KPMG audit clients and their affiliates.

NOTICE

• Currently the Tax Global Process Lead for 3M’s SAP Global implementation and responsible for state income and sales/use tax. Justin started working for 3M in December 2005 as a State Tax Analyst and was later promoted to State Income Tax Manager in 2007.

• In 2000, Justin began his career at Deloitte.

• Received Law degree from the University of Wisconsin, is a member of the Wisconsin State Bar and is the Chair of the Minnesota TEI Chapter’s State Tax Committee.

JUSTIN MCGOUGH

• Senior manager in KPMG LLP’s (KPMG) Transaction Tax Systems practice, leading global complex tax deployments since 2011 in a variety of industries, including automotive, oil and gas, retail, utilities, and manufacturing.

• Worked for the Dow Chemical Company for nine years holding roles in international tax and served as the global tax lead for their global SAP implementation. Also worked for another Big Four accounting firm.

• BBA degree in accounting from Northwood University and is affiliated with the Michigan Institute of Public Accountants and the American Institute of Certified Public Accountants.

SCOTT BELDING

• How to plan for large-scale global tax engine deployments

• How to assemble a team to support large tax engine deployments

• Key challenges associated with global tax engine deployments

OBJECTIVES

• Introduction

• 3M Project Overview

• Project Preparation

• Building a Support Plan

• Project Challenges

AGENDA

INTRODUCTION

• Justin McGough, 3M – tax global process lead

• Scott Belding, KPMG – senior manager, Transaction Tax Systems practice

INTRODUCTION

• 3M is a global innovation company that never stops inventing. We have made driving at night easier, made buildings safer, and made consumer electronics lighter, less energy-intensive and less harmful to the environment. We even helped put a man on the moon.

• 3M at a Glance (Year-end 2014):Global sales: $31.8 billion.International (non-U.S.) sales: $20.1 billion (63 percent of company’s total).Operations in more than 70 countries.3M products sold in nearly 200 countries.89,800 employees globally.2014 3M gives cash and product donations totaled $77 million.

3M

3M PROJECT OVERVIEW2011–CURRENT

• A business transformation project called Polaris started in the beginning of 2011; 3M selected SAP as their global ERP.

• Tax completed a software selection for tax engines in 2011, ultimately selected ONESOURCE Indirect Tax Determination (a.k.a. Sabrix at the time).

BACKGROUND

TIME LINE

Swiss Hubco (10 VAT

registrations) GermanyCanada

Polaris project started

2014 2015 20172016

Tax engine

selected Sabrix

2011Beyond

Taiwan pilot

Russia | Indonesia | Philippines

The Netherlands | Belgium | FranceDenmark | Norway

| Finland | Sweden

Panama Mexico United States

Poland | Italy

United Kingdom |Ireland

2018

Spain | Portugal

50+ countries to go

Austria | Switzerland

20132012

PROJECT PREPARATION

• Selected an internal project lead

• Evaluated and selected KPMG as a business advisor for the project

• Developed a long-term project plan

• Evaluated local tax needs within the project

PROJECT PREPARATION

• Ideal resource:

- Tax technical

- Technology savvy

- Innovative

- Thinks outside the box

- Outgoing personality

TAX PROJECT LEAD

• Maintain a strong understanding of the indirect tax engine’s integration with ERP system(s). Understand how processes and data within the ERP system effect the indirect tax results.

• Guide and educate business teams and tax professionals on the indirect tax process within the tax engine and/or ERP.

• Maintain and monitor the tax policy within the tax engines including standard tax content updates from the tax engine vendor and custom configurations.

• Manage stakeholder relationships with tax managers, IT application owners, quote-to-cash, and procure-to-pay. When indirect tax changes or defects are identified, liaise between IT, procure-to-pay, order-to-cash, and the tax department to coordinate tax-driven changes to the ERP system.

• Provide requirements, business justification, and technical guidance to IT and business teams impacted by indirect tax changes.

• Develop detailed business and functional requirements for use by IT developers. Validate indirect tax results in user acceptance and integration tests.

• Build relationships with tax technology vendors to ensure the company’s project time lines are understood and enhancements are prioritized accordingly.

TAX LEAD JOB DESCRIPTION

• Evaluate different certified partners.

• Key drivers:

- Global experience

- Tax engine expertise

- ERP expertise

- Team size

- Partnership with software vendors

FIND THE RIGHT IMPLEMENTATION PARTNER

• Evaluate project time line.

• Be flexible.

• Consider outsourcing items (compliance, etc.).

• Build end-state tax department to support new technology.

DEVELOP A LONG-TERM PLAN

• Large U.S. department

• Global VAT lead in Singapore

• Europe | Latin America | Asia

- Overall VAT manager in each region

- Local country experts (some in finance not in tax)

CURRENT TAX DEPARTMENT

BUILDING A SUPPORT PLAN

• As technology evolves, our tax resources need to evolve with it.

• Integrating a tax engine with your ERP requires more tax departments involved than in the past:

- Old-environment accounts payable/receivable teams handled most of the tax issues.

• There is a need for global coverage.

• Great opportunities for career growth arise.

SUPPORT PLAN

3M TEAM BUILT

Green – Lead team

Blue – Regional support

Red – Local support

• Overall project lead with prior global SAP | ONESOURCE experience

• U.S.-based team with broad backgrounds and experiences (local language support)

• Local European team to assist with local testing

• Local office VAT technical support

PARTNER TEAM

• Designate a tax focal point for handling tickets

• Leverage the partner to support tickets while current implementations are occurring

• Build a model to have a service center manage tickets:

- Resources used within implementations will be the expertise to support tickets after completion of project.

PRODUCTION SUPPORT

PROJECT CHALLENGES

• Supporting multiple initiatives at once:

- Countries that are already live

- In-flight projects in testing phases

- In-flight projects in blueprint phases

• How was it handled?

- Divide and conquer

- Leverage the partner

CONCURRENT PROJECTS | SUPPORT

SUPPLY CHAIN COMPLEXITY

Data Drivers:

• Locations of all parties involved• VAT registration numbers• Product information

Technology:

• ERP = SAP• Tax engine = ONESOURCE

Indirect Tax Determination

• Intercompany sale• Customer sale• Physical and virtual plants• STO and fulfillment• Goods flow and invoice flow

5. InterCo STO and invoice created

4. InterCo invoice created

3. Outbound delivery created

6. InterCo invoice created

2. Purchaseorder createdwith COE

7. InterCo STO and invoice created

1. Sales order created

8. Customerinvoicecreated

Center of excellence

MFG GBSales

representativeSI

Third-partycustomer SI

SF != Sales representative

SF != ST

Inv3

Inv2Inv1

Seller primary= ST

Goods direct ship

• The project team is not always on board for using a global tax engine.

• Europe is used to native ERP tax.

• How to mitigate?

- Education

- Collaboration

GLOBAL TAX ENGINES ACCEPTANCE

THANK YOU