Benefits and Limitations of Sales Tax Automation

by | Mar 17, 2020 | State and Local, Tax News, White Papers | 0 comments

By Judy Vorndran, featured in the Journal of State Taxation

Wayfair caused a shift in thinking about state and local tax (SALT), upping compliance awareness across the nation and internationally. It’s been a wake-up call to the many companies that may already have had nexus associated with multistate sales and were non-compliant due to any number of challenges – the confusion in dealing with over 10,000 taxing jurisdictions, nuanced laws, complicated rate structures, and technology.

With the risk Wayfair and sales tax compliance, in general, now presents, companies have moved quickly to find ways to simplify sales tax with automation. Technology alone lacks the indispensable insights and advice management needs to make these decisions and properly manage sales tax from registration to remittance and audit to penalty resolution. There are limitations as to what sales tax automation can do, necessitating a deep dive into three distinct areas all before a business vets, uses, and thrives with these technology tools in 2020 and beyond:

  • A company’s nexus footprint and approach to compliance as well as internal resources
  • Legal and practical business considerations, including internal resources
  • Any remediation and penalty abatement measures

Role of Automation

Automation is a technology tool and not a “set it and forget it” catch-all for sales tax compliance. Sales tax compliance is complicated and multilayered, requiring management to peel back the onion by jurisdiction (state, municipal, home rule, special district), activity, and type of tax before making key decisions around who you are, where you are, and how best to comply.

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Judy Vorndran can be reached at jvorndran@taxops.com or 720.227.0093. 

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