Perhaps you have already done some research, and know that a sales & use tax software solution is right for your organization. Now what? How do you prove to your stakeholders that a software solution will reduce your risk, and ease the burden of your employees, which equates to value added tasks for your organization?
To build your business case, you should consider the following information:
- Know your risk factors. If your business handles cash, you are likely already on the recurring audit list. If your business is registered in a state, but fails to remit or remits the wrong form, you have probably been flagged. If your business is highly visible to consumers, then you are probably targeted. Know what makes you a target by reading the state’s annual reports and audit information packets.
- Quantify the risk. Un-Collected/Under-Collected Sales & Use Tax Audit Revenue is approximately $24 billion dollars annually. Many states report their sales & use tax audit revenue in their annual reports. You should check your states department of taxation website for the latest annual report, and analyze any information provided for sales & use tax audit revenue. Some states also offer specific breakdown’s in which errors account for the most revenue, for example; the California Board of Equalization reported in its 2013 annual report that 17% of its audit revenue relates to untaxed purchases from out-of-state vendors (use tax).
- Estimate the Implementation Costs. Software licenses, implementation project management and consulting with or without travel expenses, IT architecture, internal and external IT project costs, hardware procurement, estimated staff hours are all considerations that should be reasonably estimated and presented in your business case.
- Estimate the on-going Costs. Annual software license renewals, annual software support fees, internal or external IT support are also readily estimated and should be a consideration of your business case.
- Estimate the solution benefits. The benefit’s to implementing a software are generally the most difficult to quantify. An attempt should be made to quantify the factors that are known to improve with similar implementations, but remember – complying with sales & use tax law is not an option – it is a requirement. Reducing risk alone, though difficult to quantify can be benefit enough. If your company has any recent sales & use tax audit history, this will be a good indication of the risk reduction to be had by an implementation and streamlined process.
- Identify your internal stakeholders & partners. The tax department does not work in a vacuum, typically the sales force or the procurement teams will be heavily involved in the implementation of the solution. Be prepared to discuss who internally will be involved, ultimately responsible and who will sponsor or champion your project.
 Shane Ratigan, JD. “The Slippery Slope of Sales Tax: Get firm footing with these 8 audit-ready best practices.” May 2014.