In my previous post, I discussed several of the primary challenges that confront retail tax functions. Tax automation can help address these challenges while delivering confidence that requirements are being met, as well as establishing a foundation for more efficient and effective compliance and reducing audit exposure.
However, not all tax automation solutions can address the growing magnitude and complexity of the tax issues within the quickly changing retail industry. To find a uniquely equipped solution that meets these challenges, it helps to ask questions in the following categories:
- Scope and Scale: Does the solution address multiple points of sale for a diverse range of products and services? Does the system have the ability to operate as an enterprise tax solution? Does it also have the ability to grow with the organization in order to support current sales channels, back-office processes, and global expansion? (These questions are important because most tax automation systems have an effective life of five to 10 years.) Also, can the solution accommodate quick and unexpected business growth, including adding new store fronts, expanding into diverse lines of business that generate new tax obligations, and expanding into new global geographies?
- Flexibility: Does the solution offer deployment options that are compatible with existing point-of-sale, e-commerce and/or back-office systems? How effectively can it integrate with all relevant systems? Can it be scaled in a way to mitigate any risk associated with the operation of mission-critical sales processes? Also, can the solution be installed on site as well as in a hosted environment?
- IT impact, performance and fit: How well will the solution complement the IT environment without creating business disruptions? Does it provide options for IT colleagues so they can support a tax automation process that reduces ITs overall maintenance effort?
- Content: Does the solution provide accurate, timely and relevant tax rates, rules, rounding, overrides, reporting drivers, and add-on fees? Does it help address any current tax gaps (e.g., neglecting tax holidays, compound and threshold rates and other rules)?
- Auditability: Can the solution provide convenient, comprehensive access to audit-related data requests?
- Tax function opportunity cost: To what degree can technology help liberate tax professionals from data-collection activities so that they have more time to contribute to higher-value activities?
- Cash reserves: Can the solution help the bottom line by substantially lowering the amount of cash reserves the company maintains to combat risk of non-compliance and tax-audit risks?
It’s a brave, new and uncertain world for retailers right now, and this uncertainty brings new challenges. Knowing the right questions to ask when examining tax technology can help tax professionals add a welcome dose of certainty into their organizations during a period of unprecedented change.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information.