Sales tax automation has come a long way since the Quill vs. North Dakota case in 1992. Now, even the smallest multi-state businesses and startups have access to sales tax automation options that lower costs and ease the burden of compliance. AI is even making it’s way into the sales tax world, but how much do you trust an automated bot or machine with your sales tax obligations?
With the evolving rules and regulations across states and jurisdictions for sales tax in the U.S., we get that in an ideal world, there would be an easy button, or a “simple solution” to managing sales and use tax it. But automation is a technology tool and not a “set it and forget it,” catch-all for sales tax compliance.
Sales tax automation provides the most value at the point of sales tax calculation. An automated solution is able to understand the taxing rules and tax rates and apply these rules and rates in real-time to determine the applicable sales tax. But even in this situation, a business cannot take a set-it-and-forget-it approach as the nexus footprint can change, new products/services can be launched, taxability rules change and other changes within your the business may impact the sales tax process and need to be manually updated within your automated solution. Sales tax automation and technology fall short in these areas.
Sales tax automation has less (but still some) value in the returns filing process. The technology helps to map the sales tax data to the proper lines on the return and can even generate EDI uploads to send to the jurisdictions. However, it lacks the ability to know when a jurisdiction requires a filing frequency change, and it lacks the ability to quickly follow-up on a notice from a jurisdiction. Both of which create risk to the business and need human touch to manage.
The sales tax automation solution paired with an in-house team or an outsourced compliance partner can prove to be a valuable option.
Technology definitely has its place in the compliance process, but the reality is, there is no EASY button for sales tax. Many of the “automated” sales tax compliance solutions end up being a DIY project requiring you to make the sales tax decisions, guide the technology company, and tell them what to do. But why would you pay for a service if you still have to manage it and adjust it when necessary? Why would you want to hold the risk of non-compliance if you don’t direct the technology company correctly?
Why are so many people still leaning on the supposed, one-sizes-fits-all-solution? If you’d like to work with a dedicated sales tax expert and gain the support needed to keep your business compliant, contact TaxConnex. When you work with us, you get all the know, all the back-up and none of the risk.