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Source: Aberdeen Group, May 2017Reducing the Impact of Sales and Use Tax Compliance in the New Retail EnvironmentWHY READ THIS REPORTRegardless of size, today’s retailers are significantly challenged in the quest to achieve Sales and Use Tax (SUT) compliance. Retailers are struggling to adopt new technologies while continually managing a patchwork of legacy systems that can hold them back from focusing on their core business growth strategies. This report features data collected by the Aberdeen Group, revealing complex challenges retailers face today in SUT compliance. It provides a roadmap for navigating the increased difficulty to come in the near future. The risk in not taking a strategic approach to SUT is significant, with retailers facing penalties of $47,063 per audit while spending 1 percent of their revenue on penalties due to filing errors. Retailers must remove the hurdles from SUT compliance, minimizing the time spent on research and tax workflows to keep costs low, reduce penalty risk, maintain accuracy and continue to expand their businesses. REPORT HIGHLIGHTS» The top challenge for retailers in SUT compliance is managing tax over multiple locations.» Leaders achieve 98 percent filing accuracy compared to 86 percent for Followers (Aberdeen’s maturity classes: Leaders: Top 35 percent of respondents based on performance - vs. Followers, bottom 65 percent).» Leaders are 56 percent more likely to have tools that form a complete Sales and Use Tax compliance solution (Determination, Exemption Certificate Management, Filing, Reporting and Audit Defense).» Retailers with SUT solutions saw significant improvements in the amount of time spent on individual tax workflows such as research, filing, and data reconciliation as well as the amount of time it takes to complete an audit.FUNCTION: Tax: 41%Finance: 36%IT: 36%Other: 7%C-Level, VP (Functional Head): 36%$100m - $500m: 16%$50m - $100m: 9%TITLE: REVENUE: Specialist, Analyst, Manger (Department Team Member): 30%More than $2 Billion: 19%$1-2 Billion: 9%$500m - 1 Billion: 12%Director, Manager, Controller (Department Head): 33%Other: 2%Under $50m: 34%FUNCTION: Tax: 41%Finance: 36%IT: 36%Other: 7%C-Level, VP (Functional Head): 36%$100m - $500m: 16%$50m - $100m: 9%TITLE: REVENUE: Specialist, Analyst, Manger (Department Team Member): 30%More than $2 Billion: 19%$1-2 Billion: 9%$500m - 1 Billion: 12%Director, Manager, Controller (Department Head): 33%Other: 2%Under $50m: 34%FUNCTION: Tax: 41%Finance: 36%IT: 36%Other: 7%C-Level, VP (Functional Head): 36%$100m - $500m: 16%$50m - $100m: 9%TITLE: REVENUE: Specialist, Analyst, Manger (Department Team Member): 30%More than $2 Billion: 19%$1-2 Billion: 9%$500m - 1 Billion: 12%Director, Manager, Controller (Department Head): 33%Other: 2%Under $50m: 34%DEMOGRAPHICSINTELLIGENT COMPLIANCEEXECUTIVE SUMMARYRetailers that generate between $100 million and $1 billion in annual revenue are nearly 50 percent more likely to have seen an increase in audit scrutiny and frequency over the past two years. Operating across multiple locations, online sales, and varied and changing mandates across jurisdictions are a recipe for disaster in SUT 3%10%23%28%37%0%10%20%30%40%OtherReputation damage / Lost competitive advantageAudit penalties from not filing (unknown or missed liability)Opportunity cost of the drainon internal teamsAudit penalties from inaccuratefiling (known liability)ManufacturersPercentage of Respondents, n = 79Source: Aberdeen Group, April 2017 to get the full ABERDEEN REPORT for a roadmap to success and to compare how you stack up with your peers. » Centralize compliance. For a geographically dispersedretail organization, centralizing compliance enables yourorganization to leverage a single tax technology to improveaccuracy and enable processes that can be managed withwith fewer employees. It also ensures that data is managedand standards are met across all business systems andtransaction types.» Invest in technology. Through a sales and use taxcompliance solution, you can rely on the expertise andcapabilities of the software vendor to automate complexprocesses and ensure consistency, greatly lessening theburden on compliance and IT teams.» Proactively facilitate change. One of the hardest parts ofmanaging compliance is understanding when tax regulationschange, especially when operating across many jurisdictions.This research can be time consuming. Using a sales and use taxsolution, your organization can have the confidence that it’salways up-to-date with the latest rates and rules.» Automate workflows. Top performers are more likely toutilize technology that automatically calculates sales and usetax to ensure accuracy across all of their transactional systems.Workflows will be performed correctly and immediately.compliance. SUT compliance obligations — known and unknown — and audit issues can hinder growth, as organizations must expend resources that could be better spent elsewhere as well as proactively prepare for unfamiliar compliance obligations that could delay the launch of new products or entry into new markets.Survey takers indicated their top three challenges that make avoiding these risks difficult. These challenges varied from the cost of supporting increased audits to difficulty keeping up with the speed and volume of tax rate and rule changes that impact the business-to-business evolution (mergers, new products and online sales) and the increased penalties from audit or filing/reporting errors.» Support filing. SUT compliance solutions automate filingswith accurate information. This reduces the time it takes to putthem together.» Be prepared for audits. If your organization has acentralized database featuring all necessary transactionalinformation, these processes will go more smoothly and costless. Full data visibility will enable you to easily establish KPIsfor your process performance while simplifying the processof satisfying auditor requests so you can be confident in yourcompliance efforts.OVERVIEWKEY TAKEAWAYS AND RECOMMENDATIONSIncreasing Complexity of the Sales and Use Tax (SUT) Regulatory EnvironmentTime Savings with a SUT SolutionTASK REDUCTION IN TIMEDays to prepare for and complete an audit3%Hours per employee dedicated to researching tax rates16%Hours per employee dedicated to filing / remittance10%Hours per employee dedicated to data reconciliation13%Hours per employee dedicated to technology/infrastructure updates/maintenance53% Source: Aberdeen Group study commissioned by Sovos, May Biggest Risks in SUT ComplianceNext >