Sales Tax Jumpstart November 1, 2018 2.4 CPE Credits ...€¦ · CPE Information: Webinar attendees can earn 2.4 hours of CPE credit in the “Taxes” field of study for today’s

Sales Tax Jumpstart

November 1, 2018

2.4 CPE Credits

Presented by the Sales Tax Institute

Speaker:

Diane L. Yetter, Sales Tax Institute

Sales Tax Jumpstart September 13 to November 8, 2018

Before the Class: Please join the webinar 7 minutes before the scheduled time of the call for a prompt start. If you have never used Go To Webinar before please take time today to test your connection before your session here: http://bit.ly/UKElWx . If you have trouble logging on to GoToWebinar, please view the System Requirements: http://support.citrixonline.com/s/G2W/Help/SystemRequirements. We are aware that some past users have had issues logging in using Internet Explorer or if they have an older version of Go To Webinar installed on their machine. If this is the case you can try uninstalling GoToWebinar and reinstalling or you might want to try an alternative browser. If you continue to have trouble logging on, please call in on the phone using the number and passcode provide in your log-in email from GoToWebinar. You can follow the PDF materials which can be accessed at https://www.salestaxinstitute.com/20jumpstart-course-18materials. Day of Class: You will have received a personalized link for each class session to use to log into the webinar. Use this link and do not share the link with anyone else. It helps us monitor attendance and gives us the ability to assist you if there are technical issues. You will be able to listen to the webinar either through your computer or via a telephone connection. This information will also be in your personalized email. If you have not received the dial in information, please contact us immediately at [email protected] for assistance. If you have technical difficulties during the webinar, you will be able to chat online with our technical support through the Go to Webinar application. If you cannot log into Go To Webinar, please call our office at 312-701-1800 x3 for immediate assistance or email [email protected]. Please be aware that it is a violation of our copyright to record the class sessions. CPE Information: Webinar attendees can earn 2.4 hours of CPE credit in the “Taxes” field of study for today’s session. During the webinar, we will use polling questions throughout the scheduled presentation time. In order to receive CPE credit, you will need to participate in the polling questions. After the webinar, you will receive an email from [email protected] containing a link to complete a webinar evaluation form. To receive CPE credit, you will need to complete the evaluation form online and have participated in the polling questions.

The Sales Tax Institute is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of accountancy have final authority on the acceptance of individual courses for CPE credit. Complaints regarding registered sponsors may be submitted to the National Registry of CPE Sponsors through its website: www.learningmarket.org. Other Sales Tax Institute Courses and Webinars Please visit www.salestaxinstitute.com for more information on the Sales Tax Institute’s live and online course offerings and webinars. The following webinars and live courses are currently scheduled. Visit www.salestaxinstitute.com for additional details and registration and additional offerings. Live Webinars:

November 28, 2018 – Manufacturing Sales Tax Exemptions That'll Save December 20, 2018 - Construction & Real Property Sales Tax Deep-Dive

Webinars On-Demand - available anytime: Sales Tax 101 Basic Concepts of Drop Shipments Sales Tax for E-Commerce Effective Audit Defense Techniques Sales Tax Challenges with Services Save Time & Eliminate Guesswork with Effective Tax Research

Diane L. Yetter, CPA, MST Diane L. Yetter is a strategist, advisor, speaker and author in the field of sales and use tax. She is president and founder of YETTER TAX, a sales tax consulting and tax technology firm in business since 1996. She is also the founder of The Sales Tax Institute, a premier think tank that offers live and online courses to educate business professionals about sales and use tax. Diane works with an extensive network of capable partners to deliver a variety of sales tax services ranging from tax technology to tax policy and planning and training. She works with clients of all sizes—from Fortune 10 to small, family-owned companies—in a variety of industries. She is a Certified Implementation Partner and Trainer with Thomson Reuters ONESOURCE Indirect Tax, a Certified Training and TDM Specialist for Vertex, Inc. and a Business Partner of Avalara and VertexCloud. As a speaker, Diane is frequently asked to present to industry groups concerning sales and use tax issues including the Council on State Taxation (COST), Chicago Tax Club, Diversified Communications (IOFM and Accountex), the Institute of Professionals in Taxation (IPT), National Association of Credit Managers (NACM), National Association for Retail Marketing Services (NARMS), Vertex User Conference, Thomson Reuters User Conference, and Avalara. As an author, Diane has written articles concerning sales and use tax issues; was editor for the 1995-1996 edition of the Information Technology Association of America Software & Services State Tax Report and authored Drop Shipments: Taxation, Compliance and Planning and Multistate Guide to Sales and Use Tax: Manufacturing, both published by CCH. She also is the author of the US Sales Tax Chapter for the IBFD VAT Worldwide Research Database. Diane provides answers to sales tax questions on the website www.salestaxsupport.com. She has also appeared as an expert witness. Diane is a member of the AICPA, Illinois CPA Society, Chicago Tax Club, Chicagoland Chamber of Commerce Taxation Committee, Taxpayers’ Federation of Illinois and the Institute of Professionals in Taxation. She is a member of the Practitioner Connection with the Council on State Taxation, and represents client concerns on a number of task forces. Diane was named in Accounting Today’s 100 Most Influential People in Accounting for 2011, 2012, 2017 and 2018. Diane serves on the KU Endowment Association’s Board of Trustees and is a Past Chair of the Dean’s Board of Advisors, University of Kansas School of Business where she is also an adjunct professor, teaching topics on state and local taxation and entrepreneurship. Diane earned a BS in accounting and business administration from the University of Kansas in 1985 and an MS in taxation from DePaul University in 1994. Prior to founding the company, Diane was a state and local tax manager in the Chicago office of Arthur Andersen LLP, the sales and use tax director for the Quaker Oats Company, and a sales and use tax auditor for the Kansas Department of Revenue.

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Copyright © Sales Tax Institute 2018 1

Automation Solutions| November 1, 2018

Copyright © Sales Tax Institute 2018

Sales Tax Compliance Homework Review

Copyright © Sales Tax Institute 1997‐20182

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Compliance Homework

• Did your company already have a tax calendar?

• Did you discover returns you didn’t know you filed?•What challenges did you have completing the tax calendar?


Industry Overview Debrief


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Industry Overviews

• Questions on videos you watched


Tax Automation


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Introduction

• Reasons for automated tools• Quantity of jurisdictions

oBetween 7,500 and 14,000 different authorities impose their own taxes in the U.S.

• Complexity of tax rulesoCritical for businesses that operate in many jurisdictions, selling items that can have different taxability

• Users’ qualificationsoGiven the quantity and variety of users involved in making sales and use tax decisions within a company, automation is critical


Types of Systems


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Types of Systems

• Host systems• Most sales order/billing systems include some level of sales tax processing capability in their system.

• Determining whether to rely on the standard functionality entails an evaluation of the users’ proficiency in making tax determinations, the effort required to maintain the tax rules, and the flexibility in the system.

• Product taxability indicators are usually limited to a single indicator. For products that have different taxability by jurisdiction, this functionality will be insufficient to meet tax calculation requirements.


Types of Systems (cont.)

• Host systems (cont.)• Customer taxability indicators are often tied to an address.

oAs long as unique address records are created for each delivery address and all items sold to the given customer qualify for an exemption these indicators may be sufficient.

• Procurement systems, including purchasing and accounts payable functions also may include some level of tax processing.

oThis is generally limited and in some cases only a taxable or exempt indicator is permitted.


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• Bolt‐on products• For more sophisticated tax processing, there are third party “bolt‐on” products that interface with host systems.

• An interface is required to communicate between the host system and bolt‐on package.

• Full functionality for tax management may require customization of the host system or interface.

• User training may impact effectiveness



• Custom designed systems• Often incorporated into custom billing systems• This often exists for companies in industries with unusual tax requirements or non‐standard sales tax rates such as food, medicine, telecommunications and utilities.

• More difficult to maintain, but can be very sophisticated and accurate.

• In some instances, a third party rate package is incorporated into the custom calculation in lieu of manual rate updating.

• As custom systems are converted to standard billing systems, the custom tax functionality must be replaced with canned programs.


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• Cloud/ASP Hosted Systems• Alternative to on‐premise solutions for tax determination• Can be cost efficient as the provider will manage all updates and provide the infrastructure.

• Arrangements for access to the tax data should be included in the hosting agreement

• Not all businesses will be able to use due to either confidentiality/firewall issues or processing speed and volume of transactions.

• May not be as customizable as full software implementation but allow for easy scalability



• Non‐Interactive Solutions• Simplistic and require manual updating

• Excel and Access can be used to build templates

• Manual maintenance of rules and rates is required to comply with tax changes as they occur.

• May be best suited for companies that have limited billing systems that cannot interface with a standard third party tax package

• In some situations, a combination of a non‐interactive solution with an interactive solution may be necessary.


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Sales & Use Tax Calculation Tools


Sales and Use Tax Calculation Tools

• Address Validation Tools• The accuracy of any tax determination and calculation is primarily based on having the correct address which correlates to a tax authority.

• The more accurate the address (including the +4 in the U.S.), the more accurate the tax determination and calculation.

oUsing the 9 digit zip can result in a tax authority accuracy of over 99% whereas using the 5 digit zip will be about 80% accurate

• Tax engines do not do true address validation but rather do tax authority identification


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Sales and Use Tax Calculation Tools (cont.)

• Rate automation tools• Are used to systematically maintain and apply tax rates

• Should include:oDifferent tax types (sales, seller’s use, consumer’s use, rental)

oSourcing rules for intrastate transactions

oSourcing rules for interstate transactions

oMaximum tax rules for jurisdictional limits

oGeographic linkage to rates using GPS, postal/zip codes or proprietary addressing system



• Rate automation tools (cont.)• Should be updated on a monthly basis as there is a rate change somewhere every month in the U.S.

• Tax calculation tools generally always include a rate tool with their product.


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• Sales tax calculation automation tools• Work in conjunction with billing or order entry systems

• Product offerings differ depending on host system platform

• Interfaces are required between the tax application and the host application.

• Most third‐party tax packages have standard interfaces available to many host systems.

• Often the tax calculation tool has more functionality available than the interfaces allow.



• Procurement tax calculation automation tools• Most sales tax calculation tools can also interface with procurement systems including purchasing and accounts payable.

• Not all of the host systems and tax calculation vendors make significant changes to their billing interfaces when implementing them to work with the procurement modules.

• Not all the cloud solutions can handle procurement tax automation.

• Automation of procurement tax determination is much more difficult than for sales tax determination.


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• Procurement tax calculation tools issues• Verification of tax charged by vendor and the processing of tax differences

• Accurate ship‐from vendor address • Seller paid tax for one level of tax, but self‐assessment by purchaser for alternate level of tax such as for home rule jurisdictions

• Accurate product identification information• Determination of valid data elements to be used to identify use of items with mixed taxability

• Inventory withdrawal and material movement tax determination• Temporary storage of materials and tax determination on subsequent movement



• Procurement tax calculation automation tools (cont.)• There are options for either real time or batch processing for accounts payable tax determination solutions.

oWith real time solutions, the tax amount can be validated and adjusted prior to payment to the vendor.

o In a batch solution, typically, only a use tax accrual on un‐taxed invoices is possible.

• P‐cards, EDI, ERS and data file uploads raise additional challenges


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Sales & Use Tax Compliance Tools


Sales and Use Tax Compliance Tools

• Compliance challenges • Once the sales and use tax amounts have been determined, the liability must be reported and paid to the appropriate jurisdiction.

• The correct return must be filed for the applicable tax on an acceptable medium by the required due date.

• Most returns are due within a 10‐day period • Many taxpayers are required to file electronically• Some states require only their printed forms to be submitted and forms generated from a forms package are rejected if not filed electronically.


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Sales and Use Tax Compliance Tools (cont.)

• Custom Templates• Some companies have created custom templates in Excel or Word to generate returns.

• Often these were created prior to forms packages availability

• Some are very sophisticated and can produce returns

• Others may generate data which is manually populated into returns



• Risks with using custom templates• Maintenance and updates for rate and form changes

• Filing custom generated forms without obtaining state’s approval

• Training new personnel


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• Forms packages• There are a number of sources that provide blank forms that can be used to prepare returns.

• Many states provide blank forms for downloading on their website.

• Some vendors also provide form packages in electronic or paper medium to customers.

• Sometimes State provided forms are required• Some electronic forms provide key entry capability but do not calculate formulas.



• Calculating forms• Provides for entry of information with formula functionality

• Allow the user to enter certain fields and it calculates dependent fields.

oFor example, the user would enter gross sales and deductions. The calculating form then determines taxable sales.

• State acceptance of forms


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• Interactive download forms• Allow the taxpayer to import their data from a calculation system file into the returns preparation package.

• Vendors generally also provide a calculation system that generates a file in the format that interfaces to the return package.

• Packages generally include forms for all states and indicate which forms are not approved for filing by the jurisdiction.

• Generally capable of creating bar codes and other taxpayer identification info required by the state

• Many packages allow an import of third party tax data. However, mapping of the data is required.


Managed Tax Services

•Managed tax services typically offer a suite of compliance software at a price that is more affordable than enterprise solutions.

• Offer a wide range of flexibility, yet do not offer the same level of customization as a full enterprise integration would.

• The applications are hosted by the provider and the billing system would connect to these hosted applications for sales tax calculation on the invoices.

• Compliance process is similar to an outsourced solution.


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Exemption Certificate Management Tools


Exemption Certificate Management Tools

• Forms packages• Blank exemption certificate forms obtainable from a number of sources

• Many states provide blank forms on their website.• There are a number of vendors that provide either form packages in electronic or paper medium to customers.

• Some states authorize the use of the Multi‐Jurisdictional Exemption Certificate. Others require the use of their specific form.

• Some electronic forms packages provide key entry capability.


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Exemption Certificate Management Tools (cont.)

• Validation packages• Some of the more sophisticated systems provide scanning capability and validation of the scanned form and data against state requirements.

• In these types of systems, the specific fields are keyed from the scanned document and validated for the appropriate exemption number format.

• These packages generally also provide significant reporting functionality to assist in the management and updating of certificates received.

oThis can include letter generating and expiration date tracking.



• Validation packages (cont.)• Some of these packages also provide interfaces to tax calculation packages to import the exemption data into the tax configuration section.

• If validation package is used, the data will need to be interfaced into the tax calculation or billing system either through an interface or by an additional manual entry process.


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• Calculation system interactive packages• Most of the tax calculation packages include an exemption certificate entry component in their product.

• In some products, there is the ability to cross reference to a scanned copy of the certificate.

• Limited reporting capabilities

• Many of the calculation systems have validation packages as an additional product offering which would integrate into the calculation system.



• Hosted and Service Solutions• Some providers offer a service component where they will manage the request, renewal and approval processes.

• In this option, the application is usually hosted and maintained on the provider’s servers.

• Customer accesses the software remotely

• Application accessed from any location with network access


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Reporting & Data Management Tools


Reporting Tools

• Used to create financial reports• Common tools are Crystal Reports and Hyperion.

•Major tax calculation systems• Offer more sophisticated reporting tools

• Separate database into two pieces: oProduction (live) transaction database

oReporting database• Updated using a transfer process on a periodic basis.


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Data Management Tools

•Many companies have implemented Data Warehouse applications to help them manage the data that is necessary to prepare a variety of reports.

• In many cases, the data warehouse does not contain all the information required for tax reporting and in particular transaction tax reporting.

• Tax Departments should work with their financial reporting team to ensure sufficient data is migrated into the data warehouse to meet their needs or consider implementation of a specialized tax data warehouse.


Data Management Tools (cont.)

• The tax calculation package audit database may be able to function as a tax data warehouse if the required data elements can be passed as part of the transaction.

• There are a number of specialized tools that are available to assist in managing the transaction tax function.• Tools that bolt onto the tax calculation system to handle specialized needs such as goods movement

• Ancillary reporting tools such as reconciliation tools that help reconcile the tax system audit database to the general ledger

• Intermediary tools needed to translate data between systems.


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Project Planning


Project Planning


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Project Planning (con’t)

• Project Team Members• Tax & Finance with IT

• Project Timeline• Tax can’t be just at the end• Build in enough time for design and testing

• Project Scope and Budget• Define the scope and then set the budget


Vendors Evaluation

• Project Design and key factors (TOOL)• The most important initial step is to fully understand your business needs and select the correct classification of solution.

• Evaluate interaction and ease of integration between solutions


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Vendors Evaluation

• There are a number of vendors that provide tools which have differing levels of capabilities.

• Comprehensive evaluation should include vendor demonstrations using representative data of your business

• Chart of Vendors (TOOL)• Not meant to be all inclusive nor is it a recommendation of products and services by the Sales Tax Institute or any of its faculty.


Questions?


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Next Week


Next Week

• Thursday, November 8, 11:30 – 1:30 EDT• Audit Defense• Sales Tax Processes Work plan

• GRADUATION!


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Thanks to our Sponsors!


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Sales Tax Jumpstart November 1, 2018 2.4 CPE Credits ...€¦ · CPE Information: Webinar attendees can earn 2.4 hours of CPE credit in the “Taxes” field of study for today’s