Procurement and Tax—Time to Integrate

  • September 10, 2020

One of the most important functions at which companies must excel is selling goods and services with as little transactional friction as possible—particularly in today’s world of digital commerce. Vertex Chief Tax Officer, Michael Bernard, details why implementing a third-party tax engine is the best approach to procurement.

For far too long, a struggle has existed between procurement and tax to rate purchases properly. Procurement systems vary widely—from sophisticated enterprise resource planning systems (ERPs) to other home-grown or industry-specific systems. Because these systems are generally built for procurement needs—speed and inventory control—existing tax calculations (which includes built-in and custom functionality that may not be updated) are often treated as “good enough” and may not identify incorrect tax or flag invoices for reissue by the seller.

Historically, when tax is improperly calculated on purchases, the tax department has often borne the responsibility in terms of cost and personnel by researching the correct tax or dealing with use-tax audits. If the invoice is found to be improperly rated at the time of payment, the vendor faces “short paying” or even not paying the invoice. In a VAT or GST transaction a company cannot deduct incorrectly charged taxes.

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