As sales and use tax compliance becomes more challenging, software vendors are beefing up their offering for tax practitioners.
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by Carly Lombardo
Sales and use taxes are imposed by more than 7,500 state and local authorities, each with its own set of rules that business owners and their accountants are expected to learn, understand, and comply with, wherever they have customers.
With the increased complexity of state taxes, aggressive state auditors, changes in corporate structure, and decreased staff sizes, even more challenges are surfacing.
These challenges are sparking many accounting professionals and their clients to utilize the technology offered by vendors such as RIA, Vertex, CCH, Velosant, BNA Software, and AccountantsWorld. In turn, vendors are working hard to better serve professionals by forming alliances and enhancing their current products.
For example, New York-based RIA and San Ramon, Calif.-based Sabrix recently announced the integration of RIA's InSource Sales and Use Tax return compliance software with Sabrix's Application Suite. The integration allows companies to initiate a financial transaction in legacy or ERP systems; have the Sabrix system perform all sales and use tax determination, calculation, and reporting; and complete the tax filings with a direct connection to the InSource compliance software. "Sabrix is generating an extracted file of transaction data from their program to feed InSource. The integration will allow our joint clients to take advantage of the functionality for tax determination and return compliance," says Robert Irving, product manager at Thomson/RIA.
Top 10 Most Curious Sales Tax Laws|
Salem, Mass.-based Velosant, formerly TaxWare, has created a Top 10 list of sales tax laws.
However, the Taxware product suite's main goal remains the same--to keep up with all law changes and accommodate all rules and rates.
"Accountants need to keep up with all changes and rules because when they miss them states can come in with audits," says Jon Abolins, vice president of government affairs at Velosant. "We strive to accommodate all law changes and rules." He provides this example of supporting specific tax rules: Clothing in many cases is exempt from state and local taxes. However, in Massachusetts, only clothing items costing up to $175 are exempt from sales tax; any item costing more is subject to a 5 percent state sales tax.
Taxware's Sales and Use had two components. The first is STEP, the Sales Tax Exemption Processing System, an exemption certificate management and tracking system that helps businesses avoid costly exemption errors through automatic handling and documentation of tax exempt sales and purchases. The second, the VeraZip module, determines taxing jurisdiction assignments. Based on ZIP codes, the system matches state, ZIP code, city, and county information to tax jurisdictions.
Berwyn, Pa.-based Vertex has introduced the Sales Tax O Series, and expanded the functionality of Sales Tax Q Series (formerly known as Quantum for Sales and Use Tax), by adding Vertex Analysis and Planning Solutions.
The O Series is built on a platform that supports multiple environments including Web Services, which simplifies integration to financial systems by using Extensible Mark-up Language standards.
"We wanted to make it easier for our customers to integrate the product with ERP applications as well as have a consistent user interface, which makes it easier for them to learn and operate the full suite of O Series products that include Sales Tax, Consumer Use Tax, and Value Added Tax," says product manager Keith Reiner.
The O Series automates tax processes through the use of integrated taxability management tools. It also maintains rates and rules used for calculation and offers enhanced jurisdiction identification capabilities.
Improving the tax calculation process is just the beginning with the client/server product, the Q Series, which provides customers with analysis and planning tools and exemption management tools to help set up business requirements.
For example, many companies cannot present a valid certificate on audits, and thus risk penalties. The Vertex Exemption Certificate Manager, a Web-based storage tool, automates the collection and maintenance of the sales tax exemption certificates. "We're always trying to save our users time, and once they save time, they need to show their clients what they can now do with the time. The addition of our value-added products not only helps our customers, but it reduces their clients' audits and penalties," says Mike Breeze, product manager.
Another factor that differentiates the company is Vertex Services, which provides consulting, training, and product support focused on aligning customer tax and technology resources to help minimize the time to production.
Mark Sergas, market development leader, says, "Customers often have never had to have that much interaction between tax and technology stakeholders prior to implementing tax automation products." Services include installation and testing of tax applications, configuration, and customization of tax tools and applications, along with project management and system process flow analysis, integration of tax applications with client financial systems and documentation of system configuration and internal controls.
Keeping Up with Compliance
Kim Wilmoth, a CPA at Jacksonville, Fla.-based Wilmoth and Associates, says, "Sales and use tax compliance is challenging, as it demands consistency, accuracy, and timeliness. "As companies expand their sales and operations into more states, compliance costs grow.
Also, when the economy is on a downward trend, states audit even more aggressively, which translates into an increased number of notices a company receives each month. Wilmoth also notes, "states are insisting that tax returns be submitted via electronic data interchange and tax payments via electronic fund transfer."
Sales & Use Tax Software Vendors|
BNA Tax Management
CCH Sales Tax Group
Wilmoth breaks the process into the following 10 areas:
* Creation and management of the taxability matrix.
* Determination and preparation of state and local registrations.
* Determination of available technology.
* Structuring and testing of data feeds.
* Preparation of the tax returns and payments and remittance of each.
* Management of resale and exemption certificates.
* Management of tax notices.
* Creation of an audit trails.
* Management of the tax function.
* Management of audits.
BNA Software agrees that accounting firms support end users in number of ways, and not just with rates and compliance. According to Susan Jones, marketing communications manager, consulting is an important way for firms to help their clients.
"Accounting firms often do a nexus, taxability, and risk analyst on sales and use tax, and they advise clients where to locate and how to set up financial systems for their business," Jones says. Also, accounting firms advise clients about how to integrate sales tax rates into point-of-sale systems, and often keep clients abreast of sales and use tax issues of importance.