Manually managing tax compliance is a tedious, error-prone process that takes up time and manhours that could be put to much better use. These manual workloads only increase as organizations grow, regulations change and data mistakes are made. Tax laws change constantly and vary across jurisdictions, for example, and missed deadlines often result in late fees, penalties, additional scrutiny and potential fines.
The Wayfair ruling (South Dakota v. Wayfair, Inc.) by the U.S. Supreme Court in 2018 was one regulation that significantly impacted the landscape of sales tax collection for any company that sells its products online. According to tax automation solution provider Avalara, the Wayfair decision overruled a long-standing physical presence rule that allowed states to require remote sellers to collect and remit sales tax.
Since Wayfair, most U.S. states adopted new rules defining what establishes a sales and use tax obligation, also known as “nexus.” Unfortunately for businesses, no two state sales tax nexus laws are alike—a reality that makes sales tax compliance that much more difficult to manage without the help of a sales tax automation solution.
Here are five more reasons why companies are investing in tax automation software:
1. Tax laws aren’t getting any easier to decipher and adhere to. These regulations change constantly and vary by location, which means any company that sells to customers outside of its jurisdiction is a target for potential fines, penalties and other problems. While the e-commerce boom has effectively leveled the playing field and made it possible for companies of all sizes to compete on a global scale, it has also introduced new tax complexities along the way. Right now, in fact, new federal legislation is pending that will impact most businesses—not to mention the hundreds of different rate and taxability changes that occur every year at the state level.
2. Manual tax compliance is costly and may expose your company to more fines and penalties than you ever thought of. Consider these facts:
• There are currently 11,000+ taxing jurisdictions in the U.S.
• 45 states currently have state sales taxes.
• Businesses selling into multiple states face exposure of hundreds of thousands of dollars.
• Midsized businesses spend an average of $50,000 annually on sales tax management, and these companies shell out an average of $50,000 in penalties for every failed audit.
3. Siloed and manual systems don’t provide visibility into tax-related data. If your company is still using disparate systems, spreadsheets and email to store and share tax data, it’s losing time and money in the process. It’s also setting itself up for potential audits, which won’t be easy to comply with if you have to produce data that’s stored on multiple different systems, at different locations or on spreadsheets on someone’s computer. Transactional tax compliance is the individual business’ responsibility, and states that need more revenue continue to hire more auditors (more audits and reviews = higher tax revenues).
4. Your company and/or its customer base are expanding. This is great news for your organization, but it can also create changes in nexus (physical presence in a state). Acquiring new companies, expanding into new states and introducing new product lines can all trigger changes in your company’s tax compliance requirements. If you have a customer that’s doing business in more than three states—or, in one of the “complicated” tax states (AL, AZ, CA, CO, KS, IL, LA, MN, NY, TN, TX or WA) your own tax complexities will also change. With a sales tax automation platform in place, you can automate and simplify the process. For example, Avalara’s flagship AvaTax software calculates accurate sales and use tax rates based on real-time location, item and regulations, while factoring in state, county and city tax rates, and any laws, rules and jurisdiction boundaries.
5. Your CFO, controller and/or accounting staff are all “overtaxed” and ready for a change. Repetitive tasks like data entry, calculation and filling out forms are all time-consuming and error prone. And because incorrect tax reports often lead to fines and penalties, related errors can also be expensive. Whether you’re onboarding a new CFO, making changes to your accounting team or looking for new ways to free up these valuable human resources to focus on more strategic work, tax automation software will support your team through these transitions. The software automates processes, improves accuracy, manages tax prep quickly, enhances compliance and reduces risk. Because it removes the need for manual effort across myriad different tax-related tasks, the software also creates significant cost savings over time.
Save Your Sanity With Tax Compliance Automation
ScaleNorth partners with Avalara to help companies save time and money while eliminating the tedious work and complexity that goes into manually calculating and reporting sales taxes. The cloud-based system manages all tax rates, rules and boundaries and keeps them updated right in the cloud. Controllers can rest easy knowing that their organizations’ tax reporting is accurate and that costly, negative audit results are a thing of the past.
Isn’t it time to put an end to the manual tax management mayhem, streamline your tax compliance, improve accuracy and save both time and money in the process? Get in touch with ScaleNorth today to learn more about Avalara and getting it integrated with NetSuite.