New advancements in tax technology are arriving as appetites for the efficiency and complexity-reducing benefits that cutting-edge tools can deliver intensify.
These advancements can help tax departments optimize their compliance activities, mitigate risks and improve other tax outcomes across the organization – so it’s worth considering the forces driving the need for advanced tax automation. Some of the most noteworthy dynamics include:
Ongoing staffing shortages: Despite short-term cycles in the labor market, it remains difficult to hire and retain accounting and tax professionals. Although the implementation of increased, and more advanced, tax automation cannot completely resolve the talent crunch, the efficiency improvements that these investments produce can help blunt its negative impacts. “Automation can help,” my colleague Larry Mellon, Vertex Tax Director, notes, “by creating roles that are more fulfilling and less intensively manual. Finance leaders have already discovered that leveraging automation can improve the employee experience … Tax leaders can follow a similar approach by leveraging advanced sales tax technologies in ways that enable their teams to focus more of their time and skills on higher-value activities.”
Indirect tax complexity: U.S.-based businesses that sell in global geographies must contend with new e-invoicing requirements in a growing number of countries along with looming VAT reform in the European Union. Additionally, the pace of sales and use tax rates and rules changes in the U.S. – an average of more than 300 combined changes at state and local jurisdictional levels annually during the past decade – remains at or near all-time highs. Also, the use of fees, including environmental and retail delivery fees, is increasing – as is the adoption of sales tax exemptions, which also creates additional compliance complexity.
More e-invoicing requirements: The adoption of e-invoicing requirements by global tax authorities has substantial impacts on finance, accounting and tax technology environments. These indirect tax compliance rules vary by country, but they generally require the automated exchange of invoice data from the supplier in a machine-readable format that can be automatically imported to the buyer’s AP system and the tax jurisdiction’s administrative systems without manual intervention. Complying with these rules requires companies to adjust a broad set of finance, accounting and tax systems.
Recent updates and improvement to tax technology solutions are exciting. New cloud-based data intelligence tools that leverage tax data can equip tax groups with:
Real-time economic nexus monitoring via dashboards;
Real-time and customized reporting;
Refund review studies; and
Omni-channel GL reconciliations.
A new Vertex white paper, created in partnership with Moss Adams and CPA.com, provides a more in-depth look at these and other emerging tax technologies.
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. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.
Lee Irwin is a Solutions Engineer for Vertex. His role centers on collaborating with diverse companies to address the common challenges businesses encounter in the complex indirect tax landscape. With over 20 years of experience in the tax technology field, Lee has contributed to white papers, co-presented at industry conferences and participated on various panels.