IPT 2015 Sales Tax Symposium Indian Wells, California · PDF filetied to that location in the...
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IPT 2015 Sales Tax Symposium Indian Wells, California Management of Exemption Certificates
Transcript of IPT 2015 Sales Tax Symposium Indian Wells, California · PDF filetied to that location in the...
IPT 2015 Sales Tax Symposium Indian Wells, California
Management of Exemption
Certificates
2
Presenters
Dave Elder Larry Powers McGladrey, LLP Sales Tax Officer
West Palm Beach, FL Sunnyvale, CA 561.699.6451 650.383.8527
3
Agenda for Presentation
Exemption Certificates – Who/What/Why/When
A Critical Business Process Exemption Certificate Metrics Creating Your Methodology Best Practices in Action Integration Technology Enablement Success Workflow for Exemption Documentation Conclusions and Q/A
The Reality of Sales Tax
Tax Rates are rising, resources are limited.
State Tax Revenue is decreasing.
Audits are increasing, both in volume and value.
Concrete Proof of Exemption is critical.
Automation options for the ECM process
4
Exemption Certificates
Who Responsibility for collection Provide customers with certificate State Issued New Forms (SSTP) Combinations Missing certificates=Tax assessment
What
States
Non State Taxing Jurisdictions – Non compliance has little toleration
Knowledge Expectations on Tax Department – Multiple business area – sales, credit, CSR’s, and tax
– Tax is responsible in most cases, especially when
considering the audit or compliance support
Exemption Certificates
Exemption Certificates
Why
Financial Transactions
Provide as Needed
Provide as Required
Provide as Threatened
Customers must provide or pay
Exemption Certificates
When Earlier is Better Transaction Driven Time is Money Risk Increases Over Time if Deficient Process is the Key Sales vs. Tax – Customer service at what cost?
Issues in Collecting Certificates
Diffused compliance responsibility
No central authority
True audit will tell your exposure
Lack of visibility
The framework is crucial to success
Limited understanding of true risk
Presenter
Presentation Notes
Where does responsibility for exemption certificates fall in your organization?
ECM Metrics
Reduction in assessments, interest and penalties.
Resources spent
– Preparing for and defending audits.
– Acquiring and reviewing certificates.
– Researching and correcting errors.
– Response time and levels on certificate acquisition campaigns.
Presenter
Presentation Notes
Metrics to Consider Reduction in assessments, interest and penalties resulting from sales and use tax audits. Reduction in accruals necessary tcover anticipated sales and use tax audits. Resources spent preparing for and defending sales and use tax audits. Resources spent acquiring and reviewing exemption certificates. Resources spent researching and correcting errors resulting from exemption certificate handling. Number of complete, correct and valid exemption certificates as a percentage of the total number of exempt customers and as a percentage of revenue. Number missing, incomplete or invalid exemption certificates as a percentage of the total number of exempt customers and as a percentage of revenue. Response time on certificate acquisition campaigns. Response levels on certificate acquisition campaigns. A/P accrual accuracy. Time spent preparing A/P accrual calculations.
Create Your Methodology
Standardization
Quality Control
Compliance Rules
Data Ownership
Flow of Data
Synchronization Rules
Best Practices
A minimum set of sufficiency rules would include checking: – That the proper form was used. – That it was signed and dated.
And may also include: – A specific seller’s name – A description of purchase – A valid certificate registration number (form and
format). – Expiration Dates.
* States adopting SSTP requirements.
Needs for Forms and Statutory Compliance
Each State has their own
May be transaction specific
SSTP
Expirations vary by location
Change frequently (M&A, updated forms)
Certificate Workflow
Transaction inception
Sales taxability
Sufficiency Reviewed
Documented, Stored, Indexed
Searchable
Retrievable
Audit Defense
• Scheduled Exemption Data • Source for Tax
Exempt Data
Data Feed
• Decision Matrix • Forms Library • Certificate Wizard
Certificate Acquisition
• Repository of indexed documentation
• Warehousing • Analytics
Reports Compliance Campaigns
Exempt Data flow
Technology Enablement
Cloud vs. On Premise environment Remote access 24/7 for images/data Audit tools to support assessments Confidence in your compliance Increased audit support Outsourcing where necessary Working with IT (Web services/data port) Training Credit/Sales/Customer Service
Benefits of ECM Process
Reduce the cost to acquire and handle exemption certificates.
Eliminate errors and confusion.
Increase certificate compliance.
Minimize audit risk and exposure.
Satisfy Customers and Staff while centralizing your process.
Thank you for your time!
Dave Elder, McGladrey [email protected]
Larry Powers, ISSI/TEAMS [email protected]
Tip #1
Understanding your governance policy – Do you have a policy? – Who owns the policy? – Who is accountable for the policy?
Learn the policy and make sure your group can comply with this.
– Many times, some of the practices and policies are put into place without the involvement of credit or IT.
– The most effective way is to make sure when there is any shift in policy or personnel, that you are in the loop and can provide feedback or suggestions.
– CYA
Tip #2
Identify Gaps early on – Data gaps – Process gaps – Resource gaps
Ensure you are documenting as you go – When identifying the gaps, the right person has to be aware
in order for proper fixes, whether tax, IT, sales, customer service
– Many companies do not learn from the mistakes and are prone to repetitive behavior, don’t be that guy!
Tip #3
Get the right certificate, early on and in a customer friendly way
– Credit pack inclusion – As early in the on-boarding process as possible – For the right location by proper form – Let the customer know the importance of this for all
departments standpoint Ship to/Multi/SST/Drop-ship
– Some forms support multiple jurisdictions, and thus ship-to locations, so tracking effectively is key to keeping the customer happy
– Applying Drop-ship scenarios where applicable
Tip #4
Get the aforementioned correct certificate into the right spot
– Where did that thing go? Know where the certificate needs to go and in what format Certificate number If Multi, are there registration numbers for all locations
– In order for it to be reflected properly, the certificate must be tied to that location in the A/R system Indexing by location Indexing by expiration Indexing by document type
This will increase effectiveness down the road!
Tip #5
Communication back to the customer – Expired/Insufficient and why – Make sure there is a good explanation around when
performing this communication, there is much more understanding when a customer understand your policy reasoning or if a date/signature/customer number was an issue
– Work to find a quick resolution, the longer this goes, the more apt the customer is to be moved to taxable and create customer service issues.
– Have a solid “campaign” process to reach out for certificates via your best customer facing/talking folks
Tip #6
Data/IT – How solid is your data?
Bill to Ship to Ship to matching the Bill to, those first two seem easy now
– Interpreting the data IT lunches are a must for a little love
– Downstream data Audit assessments Audit defense Accruals Reductions Interest Customer service
Tip #7
Access – Create the ability to let the folks that need to know have
access Credit Customer Service Sales
– Whether online or via other tools (document management, Excel), keep the most current certificates available Eliminates redundancy across departments and multiple customer
requests. Have a main point of contact if this is unachievable to drive the
process. Running lists, but only one master driven by the latest data
Tip #8
Templates/Intranet – Whether mailing/emailing campaigns or letters included in
the credit documentation, the more effective the language, the higher your result Establish the need via this communication Consider a mailing or contact policy
– 1/2/3 then your taxable Have multiple eyes for review
– Access to an intranet will help others interpret the policy, forms library, sufficiency rules, indexing
– Make sure to segment by entity if different rules/sales methodology
Tip #9
Document for the next guy or when you move up – The ultimate CYA is “What??? I not only did it, I passed it
on for the next guy!” This knowledge is key, especially when states are overly aggressive,
during audit times Adds another great thing to your resume Just makes you feel warm inside
– Having the exposure to the policy makes it much easier for you to interpret the next time or when changes occur
– In cases of M&A, puts a good process on the front end and much more on the data side.
Tip #10
Network – There are a vast sea of folks experiencing exemption
certificate issues Find contacts with similar issues In your vertical In your area for a get together
– Consultants Tax technology folks have a good grasp, but make sure you are
apples to apples with their experience Blending A/R, Tax Calculations, and certificates takes a wide range of
experience – Whether you use a vendor, in-source, or a blend, make sure
the fit is right for your company
Common Certificate State Expiration
State Expires State Expires State Expires AL 3 KY 5 OH 5 AR 1 LA 3 OK 3 AZ 5 MA 5 PA 5 CA 5 MD 5 RI 5 CO 5 MI 4 SC 5 CT 3 MN 3 SD 1 DC 5 MO 5 TN 5 FL 1 MS 5 TX 5 GA 5 NC 5 UT 3 HI 5 ND 1 VA 5 IA 5 NE 3 VT 5 ID 5 NJ 5 WA 4 IL 3 NM 10 WI 5 IN 5 NV 5 WV 1 KS 5 NY 5 29
