For SAP customers, particularly, the consideration of tax compliance might seem one that only impacts the internal operations of a business. However, with the changing role of tax compliance and the updating of thousands of tax laws and rules in different states, it might also affect consumers. Still, if they do business with a company is a different state, they may be required to pay taxes within that state.
From a business perspective, making life easier for customers requires understanding these tax compliance rules and following them. Nothing turns a customer off more than having to pay tax after a purchase. “Seamless” is a term that’s tossed around often when it comes to businesses and tax documents. It boils down to whether the company tries to keep its tax interactions accurate and invisible when it comes to its clients. Answering a few questions can help you to figure out if your company is remaining seamless and compliant in your tax dealings:
1) How Often are Relevant Compliance Data Updated?
The system should have all taxation data, including domestic and international tax rates, residing in a centralized location for accurate calculation of taxes. Using variables that can be manipulated independently of formulae, a business keeps its taxation calculation system fluid. Thus, only those values need to be edited for the rate to be applied across the entire system.
2) What About Custom Sales Tax Integration?
Ideally, you shouldn’t have to do any work to integrate custom sales tax into a system, but that’s the ideal situation. In reality, the amount of work you dedicate to ensuring that your sales tax calculations are accurate should be minimal. This includes static application security testing (SAST). If you’re wondering, “What is SAST?,” it’s a type of security testing that focuses on source code. Multiple, time-consuming integrations to prepare a complex sales tax calculation should be avoided at all costs.
3) Are You Avoiding Manual Tax Calculations by The Tax Function?
Automatic calculation of tax should be your end goal. Each transaction that occurs on the system should have the correct tax rate applied on the first try without manual intervention for “correction.” Manual interventions cause the system to become unnecessarily complicated and are the first places that errors occur in taxation calculations.
4) Does Sales Tax Calculation Correctly Identify Jurisdictional Rules?
A taxation calculation can only be considered accurate if it successfully uses the taxation rate for a particular jurisdiction. Therefore, the automation process must take into account the jurisdiction or area of each transaction and assign the relevant tax value. If a new customer address is entered, the verification process needs to check and approve the ZIP code or the address to ensure that the tax is being paid for the correct region.
Complex But Necessary
As we’ve noticed before, calculating tax values isn’t an easy task. With thousands of jurisdictions in the US alone, you can quickly see how difficult it would get if this had to take place manually. Companies that use Vertex alongside SAP have an advantage in levying the power of these technologies for their tax calculation and compliance efforts. Vertex tax calculation even integrates seamlessly with SAP Commerce Cloud to help businesses ensure that they are always compliant with the most current tax rates in each locale.