When you look at the details involved in your sales tax compliance process – preparing and filing returns, updating the filing calendar, managing notices, monitoring nexus thresholds and on and on – it’s easy to see why you need to simplify the process wherever possible. One important factor is consistent, properly formatted data with the necessary data fields.
For sales tax, data consistency is critical because inaccurate or incomplete data can lead to inaccurate return filings and, ultimately, notices and increased risk of audit.
Reports should be in the same format month-to-month. The challenge in achieving this is that source systems change, new billing systems are implemented, e-commerce applications are incorporated into the business, or you may acquire a company with completely different accounting systems.
To ensure consistency:
Automate data file generation. Most billing systems can automatically generate a report in a specific file format. Excel and Access also have macro capabilities that can automate steps to create the files, reducing the risk of errors.
Generate data from a single source. The more sources and formats involved, the higher the risk for errors and inconsistencies.
Tie the data back to the source. For example, if you know how much tax liability is in your GL account, tie the tax in the reports back to the GL. This initial reconciliation of tax data to the GL will ensure you have all the necessary data in the proper format before you start preparing and filing your sales tax returns.
Do these steps consistently each month.
You should introduce consistent naming conventions for data files so everyone in your organization can find the data they need and can understand what each file contains.
Clarity is the first step toward naming consistency. Include sufficient information in file names to identify the data quickly; shorthand should be understood by all employees as quickly as possible. Just like with data, abbreviations in naming are clear only if they’re consistent. Consider using type of data (sales tax or use tax) and its source, version numbers, and other descriptive detail in the file name.
The same holds for naming the folders that contain the files. If you use a date in the file name, make sure users know if it’s the date the data file was created or the date it was updated. (“Date modified” is already often a standard information column in desktop folder panels.)
- Long file names don’t work with all software.
- Avoid spaces and special characters in the file name.
- When numbering files, use leading zeros for clarity and to make sure files sort sequentially: “001, 002, ...010, 011” instead of “1, 2, ...10, 11 ...”
Your data must work for you longer than just today. Consistency is your best friend when using data to fulfill your long-term obligations in the ever-changing world of sales tax.
If you’re looking to reduce costs, increase efficiencies and minimize risk, outsourcing your sales tax obligations may be your best option. Contact TaxConnex to learn how we can help!