The Bottom Line on Procurement-Tax Automation

The cost of mismanaging procurement and tax

For every $1 billion in transactions, organizations can lose more than $6 million each year to inefficient procurement-tax processes. That figure comes from Six Sigma research, and it reflects what happens when indirect tax calculations, validations, and reporting are handled manually or with the wrong tools.

Add rising indirect tax complexity (spanning sales tax, use tax, VAT, and GST across multiple jurisdictions) and the risk grows fast. Use tax alone is notoriously difficult to manage, requiring self-assessment based on layered rules that vary by location and transaction type. For procurement and accounts payable teams without dedicated tax expertise, that complexity creates real exposure.

Where procurement and tax intersect

This white paper, developed with KPMG, maps out five key touch points where procurement processes and indirect tax obligations meet:

1. Master data and vendor setup: accurate addresses and commodity codes are the foundation.
2. Requisition and purchase order: identifying the who, what, where, when, and how of each transaction determines taxability.
3. Goods receipts: indirect taxes can be embedded and are easy to overlook.
4. Invoice verification: vendor-charged taxes need validation against defined tolerances.
5. Invoice posting: approved tax data must flow accurately into your ERP and general ledger.

Missteps at any of these points can block invoice processing, create back-and-forth with vendors, and trigger penalties during audits.

Three automation options, and how to choose

Organizations typically evaluate three approaches to managing procurement-tax automation. The paper breaks each one down clearly.

The first option, no tax validation, keeps implementation simple but leaves you exposed to vendor tax errors and use tax accrual gaps. The second option, native tax functionality built into your procurement platform, works well for lower-complexity environments, such as purchasing in a single country with a limited number of VAT rates. The third option, a third-party tax engine, is the most accurate solution. It pulls inputs from source systems, evaluates each transaction, and produces real-time tax determinations based on current rates and rules.

While a tax engine carries a higher upfront implementation cost, KPMG's experience shows that organizations typically recover that investment within two to three years. From that point on, the savings are ongoing.

A practical diagnostic for your team

The paper also includes a short Q&A to help procurement and tax leaders gauge how well their teams are aligned today. Questions like:

• Are your suppliers charging you the correct sales tax?
• Do tax issues impede the payment process?
• Is your tax department frequently responding to AP questions?
• Do your AP professionals have the ability to make tax decisions?
• Is your procurement department engaged with your tax team?

Explore the whitepaper for more on the intersection of procurement and tax when it comes to tax automation.