Indirect Tax Automation Use Case Portfolio

Challenge

A U.S.-based manufacturer of energy products with operations and customers around the world is about to undergo a systems transformation initiative. The company plans to integrate a new enterprise resource planning (ERP) system, consolidating disparate systems as a result of several acquisitions throughout the years. As part of this initiative, the company wants to automate and improve tax process efficiency. 

Response

The company engages BDO’s Indirect Tax Automation team, which works  closely with the client’s Tax, IT, and global finance managers to design future-state indirect tax processes and the seamless integration with order management, AR invoicing, procurement, and AP invoice validation. The outcome accommodates statutory requirements for U.S. sales and use tax, as well as foreign country goods and services tax (GST) and value-added tax (VAT) for tax determination, calculation, and reporting.  

Impact

The result of BDO’s work is a seamless integration to the client’s business processes and more accurate, timely, and transparent indirect tax determination, calculation, and compliance and reporting processes. The company was able to streamline indirect tax processes across global operations into a single source, enabling its tax team around the world to keep pace with the rest of the business. The new processes are scalable and repeatable, giving the company a playbook for integrating future acquisitions or expansions of its operations. Additionally, tax leaders are now building relationships across the business that allow the tax function to further its goal of becoming “best in class.” 

Challenge

A fencing retailer with brick-and-mortar and online presences across multiple U.S. states is acquired by a larger holding company. The retailer and holding company will have two different tax engines on two different ERPs for processing invoices and calculating indirect sales and use taxes. They need a plan for integrating the systems to remain compliant. 

Response

The holding company brings in BDO’s Indirect Tax Automation team, which performs an assessment and develops a plan and timeline for consolidating the disparate tax systems. BDO’s team collaborates with technology and business leaders to align the tax technology plan with the broader integration strategy. 

BDO’s plan includes an interim arrangement to make the necessary tax engine changes such as registrations and exemptions certificates on the acquired company’s tax engine. BDO also works with the holding company to develop a plan for incorporating the new entity into the holding company’s existing tax engine and ERP. BDO works with technology and business leaders to make configuration updates to help ensure the right data flows from the retailer into the central tax engine and ERP, and that all scenarios of sales and transactions are captured and tested. 

Impact

As a result of BDO’s efforts, the holding company integrates the acquired retailer smoothly and they encounter no sales and use tax compliance issues. The companies are also set up for long-term success as they grow and potentially acquire additional companies or expand the business. By coordinating integration with technology and business leaders, tax avoids becoming a planning afterthought. There will also be no need to maintain multiple tax engine configurations and licenses, which would be significantly more costly. 

Having demonstrated the importance of bringing tax into decision making, tax leaders at the new combined entity now have a seat at the table where business decisions are made. The success of this integration endeavor means tax leaders have a stronger voice for future acquisition integration planning and decision making.

Challenge

A U.S.-based national retailer of outdoor products with a presence in multiple states throughout the Midwest and on the East Coast is experiencing persistent sales and use tax reporting and compliance issues. The company has been flagged for audit by a particular state’s tax authority multiple years in a row due to underreporting use taxes, requiring it to pay fines in several cases. The company is also overpaying vendors for tax on certain exempt items. It does not have the in-house capabilities to identify or resolve the issues, which have been ongoing for several years. 

Response

The retailer brings in BDO to identify and address the issues. Through an analysis of the flow of information between the retailer’s ERP and tax engine, the BDO team discovers gaps in information after certain points in the supply chain. Information about where products are sent after certain warehouses does not get passed from the ERP to the tax engine. Consequently, the company was underreporting use taxes for some products, since they could not calculate the appropriate use tax rate based on the destination. Additionally, BDO finds that some products were coded incorrectly, leading the company to overpay vendors for exempt items. 

BDO arms the company’s tax team with this information through dashboards and other tools to help them make the case to the broader business leaders for the resources to resolve these issues. In conversations with technology and business leaders, the tax team learns that the business is planning an ERP upgrade in six months, and the BDO team integrates changes to the ERP-tax engine configuration into that process. The changes to the configuration involve ensuring all necessary information will flow from the ERP to the tax engine and adjusting how products should be coded for tax purposes. The BDO team also implements automations to mitigate overpayments to vendors for specific products in the event any products remain incorrectly coded. 

Impact

As a result of these changes, the business avoids being flagged by state tax authorities for audits and paying fines for underreporting sales and use tax. It also stops overpaying vendors for incorrectly coded items. 

Additionally, the tax team has greater visibility into its operations, and improves the speed and efficiency of compliance and reporting activities. These efforts also help to better align tax with broader business decisions and pave the way for closer collaboration in the future. 

Challenge

A software-as-a-service (SaaS) company grew quickly over a two-year period and now has operations across multiple states in the U.S. As it scaled quickly to keep up with demand, tax was not as prioritized as other areas of the business. As a result, the business has accounts payable (AP) professionals using manuals for handling invoices and transactions, which involve assigning taxable rates and designating which products are taxable versus exempt. The lack of oversight from a tax professional and insufficiency of the manual continue to expose the company to more risk as it further expands. As a result, the company is facing multiple issues including products incorrectly mapped to tax codes, overpayment and underpayment of taxes in certain states, and no way of updating the manual in real time as sales and tax rates change. 

Response

The company engages BDO’s Indirect Tax Automation team for assistance, which performs an assessment of the company’s processes and implements a program for automating, centralizing, and standardizing tax determination to support the fast-growing business. BDO’s plan includes a system that automatically calculates sales tax rates for all products based on location and product type and then aligns those calculations with specific product codes. The system also updates tax rates automatically as regulations change across jurisdictions. Finally, the new tax system is integrated with the systems that AP professionals use so they don’t have to make manual tax-based decisions, and the appropriate vendor charged sales tax information is validated and paid appropriately. 

Impact

The new system results in improved accuracy, consistency, and speed in sales tax compliance and reporting. It allows the company to continue scaling without costly compliance and reporting issues in sales tax and without having to add many more full-time employees.