The National Retail Federation (NRF) predicts a one percent drop in sales this holiday season, putting further pressure on recession-pinched retailers. Now more than ever, retailers must identify new ways to cut costs – including tax. The complexities of tax impact retailers’ profits in many ways, and a better understanding of the potential pitfalls can help boost a retailer’s bottom line.
John Cowan, Vertex Director of Retail Solutions Practice, provides insight into some of the ways tax can cut into retailers’ profits:
At the Register
- Manually entering multiple tax changes is not only time consuming, but fraught with potential errors. If a retailer is under-charging tax, they will have to make up the difference. These mistakes could also lead to class action lawsuits, which are costly and damaging to a corporate brand.
Processing Merchandise Returns and Send Sales
- Tax gets complicated when customers return items to a store located in a different jurisdiction from where it was purchased, purchase an item in-store and have it shipped to another destination, or return internet purchases instore.
Addressing Multi-Channel Complexity
- Many companies manually enter tax rates into each channel of operation, which may include back office operations, storefronts, eCommerce, catalog, and wholesale business. This requires time and manpower during resource-intensive time of year. There are also many confusing tax implications specific to online retailing, exposing retailers to costly mistakes.
Lowering High Cash Reserves
- Retailers’ bottom line profits are reduced when they need to set money aside in preparation for audit penalties or class action lawsuits associated with noncompliance.
Preparing for Audit Defense
- Increasing complex jurisdictional requirement can result in sales tax mistakes and open the door to potential tax compliance issues resulting in out-of-pocket expenses related to costly audits.
In a time when retailers’ profits are already under enormous pressure, tax automation is often overlooked as a logical area where money can be saved. Proactively addressing problematic tax complexities can help significantly boost the bottom line.
For more information, please visit Vertex Retail Solutions, or to set up an interview with John Cowan, contact Brigitte Geiss at Brigitte.Geiss@vertexinc.com (484.595.6142) or Cindy Spiecker at cspiecker@gafieldgroup.com (215.867.8600 x255).