Five Realities Reshaping the Indirect Tax Landscape

Changes arising from the Supreme Court’s 2018 Wayfair decision were followed by disruptions from the COVID-19 outbreak. For companies that continue to grapple with both, tax technology offers a way forward to more proactive, resilient, as well as insight-driven processes and strategies, according to a Tax Executive article by five members of Deloitte’s US indirect tax practice. The authors emphasize that this transformation calls for a “change of mindset, from “What do I need to do?” to “What do I need to know?”

The article explores several key drivers of change in the current environment that tax leaders should be aware of, including:

1. The future of work is here – and there, and everywhere. Remote work will continue to be a standard feature of the new normal, and the new hybrid workplace will give employees increased flexibility to choose where they work. This raises new challenges for companies “looking to comply with ever-changing tax rules and seeking ways to generate cash savings on their historic purchases as well as additional savings down the road,” the authors report.
2. Nexus still rules, so consider a multiple point of use (MPU) study. Remote workers need digital tools to do their jobs, which complicates nexus questions for multistate businesses. An MPU study can pinpoint locations for software or software-as-a-service usage, increasing the accuracy of sales and use tax calculations and potentially generating refunds.
3. Yes, sales and use tax is time-consuming, but it also presents opportunities. Compliance processes are unwieldy and often manual. But sales and use tax refund reviews may uncover opportunities for cash savings. A tax engine can help companies understand their positions throughout the entire indirect tax life cycle. 
4. Robots are your friends. Robotic process automation can help you corral and control your tax data. Data visualization and dashboards can spark fresh insights, revealing new opportunities for tax efficiencies.
5. AI transforms indirect tax recovery. Artificial intelligence technologies enable you to organize huge volumes of data to identify opportunities, including those related to COVID-19 and the rise of the remote workforce. By reducing your dependence on tax professionals’ ability to recall, interpret, and apply thousands of sales tax rates and regulations, AI enables you to work smarter, not harder.

For more on the changing indirect tax landscape, see this post by Michael Bernard.