Technology can’t fix the underlying problems of self-operating machines, so look to independent thinkers to tackle those issues that technology alone cannot.
The promise of technology that launches fully autonomous cars isn’t all that it’s cracked up to be. That’s what Shira Ovide for The New York Times says in “Tech can’t fix the problem of cars.” That’s because the issues that make cars a problem, like air pollution, traffic, road deaths, sprawl and crowding, won’t be solved by technology. Those issues can only be solved by human beings in their quest to limit reliance on cars.
Similarly, sales and use tax automation alone can’t fix the problem of tax compliance because the underlying issues still need to be dealt with by human beings that understand how to manage the issues, with and without automation.
There is nothing wrong, and a lot right, about aiming higher with high tech. But automation dependency with cars and sales tax intensifies the dangers in underlying issues. These issues need to be fixed by people, not technology.
Put automation in its place
Technology can’t replace humans for everything. The hype around technology solving problems gets monetized and supported even though it rarely succeeds as a standalone solution without significant human interaction, attention and correction.
Technology is only as good as the zero or one coded into the backend, the mapping attached to work flows and the updates provided. Long-term, automation has the power to transform work rather than eliminate the need for human intelligence.
Sales tax automation software does process data faster than human capabilities. But humans possess the analytics, expertise and valuable knowledge required to solve problems and optimize compliance in view of the strategic goals of an organization. This human element can never be automated.
Where sales tax automation is not enough
Like the English language, the number of exceptions and nuances in sales tax compliance from jurisdiction to jurisdiction is mindboggling and requires that decisions be made on how to proceed. Making the decisions necessary to navigate those exceptions requires hands-on attention that technology can enable, but not solve.
These human-directed decisions regulate and factor in potential consequences, including the probability of certain outcomes and costs. In sales tax administration, people are required to reduce exposure by reviewing filings and invoices for accuracy, splitting bills appropriately, applying for licenses and registering for sales tax at the right time as the business footprint expands.
Monitoring nexus and tracking exemption certificates all over the nation and internationally also needs the type of human attention that cannot be managed by technology alone. In New York, for example, a seller using multiple points of use that has buyers across the nation must tell their systems to build an invoice that factors in sourcing issues and exemptions that again, cannot be fully automated. When untended, sales tax automation mistakes can result in overpayments and underpayments, alienate customers and result in penalties.
Another common area where technology gets flummoxed is when a site certain to the source of a sale cannot be easily determined. While vendors can get products to a buyer’s front door when title transfers with an automated solution, technology is less accurate at putting those products at multiple front doors if a human being is not directing how it gets done.
Other common issues with sales tax automation come up in registration and licensing. Sellers who do not understand their business from a tax perspective and have not mapped their scope of operations are at risk of misdirecting automation and getting sales tax rates and filings wrong.
Technology is only as good as the inputs provided and one size does not fit all in sales tax administration. Just like autonomous cars need a human at the wheel to see the entire landscape ahead, sales tax automation needs a human managing exceptions, errors and inputs to stay true to the compliance path.
So, yes, go ahead and add sales tax automation with an experienced tax advisor. But make sure that the technology is viewed as the tool it is and not an end-all-be-all. Provide resources to manage, administer and fix (adding technology means more things can break)! issues as they crop up in a compliant sales tax program supported by automation.
Above all, keep technology in its place when it comes to sales tax compliance: know its limits, what it can and cannot do, and rely on human intel to solve every day problems right.
More Tax News
- Connecting to Your Clients With Stacey Roberts
- A Practical Approach to ASC 740 CPE
- Research and Development Credits CPE: Into the Weeds on Lucrative Credits
- Uncovering the Mysteries of Use Tax CPE: Use Tax Accrual, Validation, and Compliance
- Retailer Sales Tax Challenges and Compliance CPE: Navigating State Nexus Rules, Market Facilitator Laws, and Reporting