The monthly sales tax compliance process is highly dependent on the available data. 

This data should be consistent from month to month.  The data consistency I’m referring to is the format of the report each time it is generated.  Of course there will be new source systems (new billing systems or new ecommerce applications) occasionally, but the data format each month should be the same. 

Sometimes in the sales tax world, tax and finance departments need to rely on their IT department to get sales tax added to an invoice correctly or to get reports for various reasons. 

Ensure solid execution of your outsourcing transition by managing common challenges.

Data mapping can be a requirement as part of managing your sales tax process.

 Data mapping involves creating a specification that shows how data from one system maps to data from another system. 

• This can be due to a system data migration where data is moved from one database to another. 
• It can also be due to an integration where data from one database is regularly moved to another database.

At TaxConnex, we believe that sales tax compliance is more art than science.

When we say this, we are referring to the fact that sales tax cannot be fully automated due to the abundance of “gray” areas that require real-time decision making by a human. This sets TaxConnex apart from other technology-centric sales tax compliance vendors.

If you’ve outsourced your sales tax compliance work, or are considering outsourcing it, you should determine the best way to transfer your tax data to your service provider each month.

The two main criteria to consider are the size of the file(s) and the sensitivity of the data in the file(s). Many companies that have smaller file sizes (< a couple of MB’s) and aren’t concerned with the sensitivity of the data can utilize traditional email to transfer their file(s) each month. However, certain file sizes will be rejected by an email server and the data security can be lacking via a traditional email transfer.

For many businesses, when it comes to sales tax compliance, they must deal with data that is sourced from multiple systems.  Businesses often have e-commerce sites and legacy invoicing systems that are configured differently. Any type of acquisition may introduce additional systems – all with different methods of tracking sales tax. The differing systems can result in data that is inconsistent in format and content.

Sales and use tax compliance can be a tricky business and your data is a critical part of the process. Last month I wrote about the importance of establishing an effective data management plan as part of your overall sales tax compliance process.   Today I want to discuss the importance of formatting your files so that your data is mapped correctly.

As part of an overall sales tax compliance process, effective data management along with a current tax calendar  are two of the more critical aspects. What exactly is data management? As I define it here, it should be a written plan that includes the following components:

Many of us use zip codes to determine the sales and use tax rates to apply to an invoice for tax calculation purposes.  However because some local jurisdictions can cross zip code boundaries, using just the 5 digit zip code may not be the most accurate method for sales tax rate determination purposes.

Document, document, document!  The best way to manage risk associated with potential disruptions (turnover, personnel changing roles, or acquisitions) within your sales tax department is to maintain thorough documentation of your department’s compliance processes.