Procurement organizations can drive tax compliance. Tax departments can drive procurement value. Procurement is automating at a rapid clip. Tax, ditto.
Evidence of a strong partnership between tax and procurement functions is increasingly clear, and businesses that get it right can achieve substantial benefits. A new Vertex white paper, The Critical Connection Between Procurement and Tax, explores this important dynamic.
The differences in mindset between the two functions can be significant, making the partnership even more critical. Tax departments are focused on correct transaction tax determination of goods and services purchased by the procurement group. Procurement leaders focus on delivering exceptional experiences to internal customers, enabling them to make important purchases with greater speed and ease. Yet, procurement platforms rarely possess the functionality needed for accurate tax determinations, and procurement teams are not familiar with constantly changing tax rules and rates.
Those issues should stimulate an exchange of viewpoints – a great first step in ramping up this valuable collaboration. The white paper lays out what tax should know about how procurement is evolving. For example:
- The shift to outsourcing that we saw in the early 2000s has reversed as procurement organizations turn to automation to extract more value from their data.
- Efficiency is an increasingly important goal for procurement operations, as they strive to make purchasing processes as easy as they are on the top retail platforms.
- Digital transformation is under way as these organizations move beyond homegrown tools and the procurement functionality of ERP systems.
Procurement teams also need to know some important information about tax challenges, such as:
- Sales tax rules in the U.S. are constantly changing – a good example is the Wayfair decision. Real-time tax reporting requirements are on the rise in many countries.
- Data-intensive compliance requirements are driving more tax teams to implement advanced tax automation, and some of these platforms offer integration capabilities for procurement systems.
A tighter tax-procurement connection can help procurement leaders ensure that the value of their cutting-edge platforms isn’t diminished by tax calculation errors and manual follow-ups that diminish the department’s efficiency. And it can help tax leaders identify and close potential compliance gaps. It’s time to get some great minds thinking alike – a move that will help the organization as a whole prosper over the long-term.
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.