1. Audit risk – state taxing agencies have been stepping up audits post Wayfair and this trend will only continue given the budget shortfalls most states are experiencing (shortfalls which are only increasing due to COVID-19). Audit assessments including penalties & interest can run into the seven figures (and that is just for one state!).
2. Process costs associated with inefficient tax management processes & systems – your tax organization may be buried in complex and hard to maintain spreadsheets. High value resources are spending time collecting and wrestling with data (when their time could better be spent on higher-value strategy & planning activities).
3. Insufficient controls & document management of tax exemption certificates. “Wholesaler or distributor who’s never cared about sales tax? While your sales tax collection responsibility may not have changed due to Wayfair, it is critical that you have a solid strategy around managing customer tax exemption certificates or you may still end up with a substantial tax audit assessment.” Ranabargar notes.
“The good news is that there are cost effective solutions out there to address these risks – the return on investment is typically very strong, with payback sometimes occurring within months.”
Ranabargar stresses. Los Angeles based Tax Technology Group is focused on helping clients objectively assess their tax risks, select the right technology solution, and then implement a combination of technology (which nowadays includes RPA components) and process improvements. “Serving as project manager, solution architect, tax policy partner, we generate smart solutions that support your overall business goals to fit within your timeline and budget.” states Ranabargar.
We understand there’s a delicate balance between quality, project schedule and implementation costs.Our solutions concentrate on simplifying the process while reducing the risk and exposure
Ranabargar provides the following high-level roadmap to reduce the risks associated with sales taxes:
1. Work with your internal tax department or external tax advisor to assess where you should be collecting sales tax, current audit risks and tax-related process costs.
2. Develop a simple ROI model to determine if implementing a new tax technology solution makes sense. The inputs are straightforward – average tax audit assessments over the past 3-4 years, quantify hours associated with collecting and sanitizing data for tax compliance & audits. Next, weigh anticipated reductions for those two items against the estimated implementation investment.
3. Implement a third-party tax determination solution. There are technology solutions out there to fit the needs for businesses of any size. For smaller businesses, you can be up and running in just a few days. For more complex businesses, objectively determine the must haves from the nice to haves to avoid a less than optimal return on investment.