Artificial intelligence (AI) applications, Gen A shoppers, smaller footprints, metaverse strategies, blockchain adoption...
Those and many other trends, technologies and opportunities featured prominently among the presentations, demonstrations and offline discussions that took place at The National Retail Federation’s (NRF’s) Big Show in New York in January. Vertex was on hand to talk to attendees about several important themes, each of which has significant implications for tax groups and their supporting technology systems.
Our discussions at the Big Show indicate that tax groups within retail companies share several improvement priorities that they plan to address this year. These include:
- The transformation of tax and finance: Modernizing financial operations will be essential to compete in volatile local, regional, and global markets. It appears that leaders are ready and eager to invest in finance modernization, which includes tax transformation.
- Reducing risk and addressing emerging compliance challenges: Retailers face numerous tax compliance challenges, including accurately determining the tax on every line item of every transaction; managing exemptions; issuing accurate invoices; and accurately satisfying the reporting, filing and remittance requirements in every relevant jurisdiction. At times, these challenges and the risks they pose, can feel overwhelming – which is why more retail tax leaders are investing in end-to-end tax solutions.
- Integrating systems and ecosystems: As retailers continue to grow and expand their sales channels, they are also upgrading and transforming their platforms and infrastructure to add features and capabilities to support that growth. As a result, it is crucial to ensure the consistency of tax calculations across all channels, supporting systems and ERP ecosystems.
The following three retail trends seem certain to define the industry and create tax impacts throughout 2023:
- Frictionless commerce and the ongoing shift toward omnichannel and unified experience
Tax Implications: Ensuring that tax is applied accurately in a timely manner has become a matter of strategic importance to both customers and tax authorities. Meeting this challenge no longer qualifies as a differentiator; it has become an essential expectation.
- Globalization and growth
Tax Implications: As retailers add customers in new geographic regions, their tax groups must address challenges related to working with new tax jurisdictions and adjusting to new regulations, rates and thresholds. All these factors introduce more complexity and risk from a tax and compliance perspective.
- More marketplaces and emerging marketplace models
Tax Implications: The combination of marketplace facilitator requirements (within global, regional, and local tax jurisdictions) and the global nature of digital commerce has made the use of a tax engine a necessity as organizations work to comply with the new regulations and avoid penalties.
A significant expansion of an omnichannel approach to commerce requires tax leaders to be forward thinking with their implementations and integrate the technology tools that drive global commerce and global tax strategy.
If you were unable to attend Retail’s Big Show, a recap from the show can be found here.
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.