Effective Sales & Use Tax Management – How Do You Compare with the Best-in-Class?

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When it comes to sales tax management, not all companies are created equal. Companies that are proactive about nexus evaluation, accurate rate calculations, returns filing, and exemption certificate tracking are rewarded with reduced audit risk and increased efficiency. Those that are not proactive often find themselves putting out fires when the auditor arrives.

Aberdeen Group recently published the results of a study entitled: Effective Sales & Use Tax Management: Reducing Errors and Increasing Productivity. The survey, which included over 100 organizations, defined criteria for “Best-in-Class”, “Average”, and “Laggard” maturity classes. Here are some statistics used to differentiate:

-          For Best-in-Class organizations, 86% of government audits in the prior five years yielded positive results. For the Laggards, this number was 34%.

-          For Best-in-Class, there was a 50% decrease in the cost of government audit penalties/fines in the prior two years, while for the Laggards, there was a 17% increase in penalties/fines.

-          For Best-in-Class, only 8% of all internal/reverse audits in the past five years revealed overpayments. For Laggards, 25% of these audits revealed overpayment.

Further comparison showed that the high performers consistently outranked the rest of the pack with respect to providing access to accurate tax rates, conducting internal audits, and automating sales tax management. Some statistics on use of technology in the Best-in-Class companies reveal a strong tendency toward automation:

-          47% reported the use of nexus/taxability evaluation tools

-          56% reported the use of sales and use tax filing solutions

-          50% reported using automated exemption certificate management

Why is automation so important? Because with 11,000+ tax jurisdictions with thousands of rate, rule, and boundary changes every year, keeping up with it can be a full time job. Automation can reduce errors, and thereby reduce audit risk. And as with other forms of automation/outsourcing, automating sales tax management increases staff productivity by allowing your team to focus on their area of expertise, which presumably isn’t sales tax management!

The study concludes with specific recommendations for companies of each maturity level to achieve the necessary performance improvements. 

Find out more about how your organization compares to the Best-in-Class by downloading the Aberdeen research brief: Effective Sales & Use Tax Management: Reducing Errors and Increasing Productivity

And to learn more about sales tax automation solutions for your Microsoft Dynamics GP system, please contact InterDyn Artis. InterDyn Artis, is a Microsoft partner located in the Charlotte, North Carolina holding a Gold Competency in Enterprise Resource Planning and has over 24 years of experience serving the Microsoft Dynamics community.

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