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Removing the sting from sales tax audits

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Sales tax audits are on the rise at a time when compliance is more challenging than ever, according to BDO. The reasons behind the uptick in tax return audits include complex economic nexus laws in U.S. states, ambiguous taxability rules and a shortage of internal resources to assist with compliance.

Understandably, an audit notification is not exactly a cause for celebration for tax groups. However, there’s really no reason to view it negatively if you know you have accurate documentation and therefore, no exposure. In fact, why not see it as a positive event – an opportunity to demonstrate to the business that you’re on top of things?

The right tax technology can help you do that. Is your tax engine up to the task of reducing liability and identifying potential exposures? Here are the key questions to ask:

  1. Does my indirect tax solution provide a complete understanding of everything we buy and sell? You’ll want to do regular tax mappings for all products and services bought and sold. Fast access to detailed and summarized transaction data is crucial for audit defense.
  2. Does it provide simple and effective tax exemption management? The ability to quickly pull and send data related to customer exemptions is helpful for internal review and a must-have for outside audits.
  3. Does it provide nexus intelligence? Capabilities that enable you to monitor constantly changing economic nexus thresholds can help you identify potential audit exposures.
  4. Does it help me to automate tax returns? This enables you to streamline the filing process and easily access up-to-date and historical tax filing content.

Every company will have its own definition of what constitutes success in an external audit, whether it’s a zero assessment, identifying a source of error and correcting it or even finding that you’ve overpaid on some purchases or capital projects. Whatever your goals, the right tax technology can help you streamline the process and improve audit performance.

Disclaimer

Please remember that the Vertex blog 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 the Vertex blog are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.

Blog Author

Larry Mellon, Tax Directory, Vertex Inc

Larry Mellon

Tax Director, Chief Tax Office

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Larry Mellon is a Tax Director in the Chief Tax Office, where he is responsible for providing insights, thought leadership and customer-centric direction to Vertex functional groups, supporting the continued expansion of Vertex indirect tax solutions and overall enterprise strategy. He has over 30 years of experience in sales and use tax compliance, risk assessment, jurisdictional audits, administration and management, as well as VAT compliance. Larry joined Vertex in 2005 as a Sales and Income Tax Supervisor and has served as Tax Manager since 2012, where he has played a pivotal role in elevating and advancing the company’s tax management offerings.

Prior to joining Vertex, Larry served as a Senior Tax Accountant and Property Tax Manager at Foamex International, Inc., a polyurethane and advanced polymer foam product manufacturer and marketer. Mellon also held multiple roles at The Franklin Mint and is a member of the Institute of Professionals in Taxation (IPT).