4 Reasons for Retailers to Automate the Tax Process
2. Jurisdictional complexity for retailers. Complexity makes it virtually impossible to accurately manage tax exception rules manually. There are a lot of special regulations to keep pace with. Tax automation with a reputable provider ensures the necessary research. Tracking is part of these complexities and is performed to support accuracy and compliance.
3. Changing tax environment. For most companies, the sheer uncertainty of tax changes has only been heightened in recent years. Over 500 rate changes in 2010 alone show that governments are looking to increase tax revenues, some even targeting the retail industry. Managing the volume of new tax rates presents many challenges for retailers who need to focus on other areas in their tax or finance departments. Automation removes this burden and ensures the accuracy of the rate and rule data.
4. Avoid high cash reserves. A retailer's sales tax error can leave them facing potential tax compliance issues and out-of-pocket expenses. Challenged retailers face an unnecessary drain on profits in order to cover audit risk and exposure. The certainty an automated tax technology provides means the need for cash reserves is reduced or eliminated, thus benefitting a retailer’s bottom line.
More compelling than the reasons for retailers to automate their tax process are the significant benefits they reap as a result. These include:
- Consistency: Be confident that your company is in compliance with tax holidays, tiered taxes, thresholds and bracket taxes, just to name a few.
- Cost-effective compliance: Achieve the highest level of compliance at a greatly reduced cost when compared to manual solutions.
- Reduced audit exposure: Automation substantially reduces audit exposure, as well as the associated need for high cash reserves to cover penalties or class-action lawsuits.
- Simplified integration: If the automated solution is compatible with any point-of-sale, e-commerce or back-office system, retailers can be assured that tax is integrated across the enterprise.
- Frees up your tax department: Automation allows your tax department to focus on higher-value activities like tax planning, which yields immediate bottom-line improvements.
As retailers continue to implement new merchandise strategies and seek new revenue streams in an increasingly competitive industry fueled by heightened consumer demand, they face new challenges in the management of tax risk and compliance. The four reasons for tax automation outlined above are strong arguments for implementing an enterprise tax automation solution.