Sales tax compliance within Microsoft Dynamics is a huge pain. The rates and rules vary greatly across more than 12,000 different taxing jurisdictions, and they are constantly changing to help fill in the gaps of state budget deficits. Plus, despite all the hard work you might put into staying on top of current regulations, your only reward is that you won’t get penalized after an audit. This means you are dedicating precious time to a process that does not add to your bottom line in any way. That’s why we recommend our clients look into outsourcing sales tax compliance to focus resources more effectively.
When we think about sales and use tax compliance, multiple processes could be bogging you down, depending on the type of business your company does. Here are three of the main processes that many businesses can automate with a sales and use tax compliance solution in Dynamics software:
1 Getting the Right Tax Rate
If you do business across multiple states (or even just one of the more complicated states), you are likely aware of the thousands of different variations of tax rates, if and how specific products are taxed and whether or not you have an obligation to collect and remit taxes in a given state.
Since those factors change so often (in fact, a new set of changes just rolled out earlier this month), you may have new obligations that you don’t know about yet. You shouldn’t have to spend your time researching these rates and taxability rules. You can automate that process to ensure the correct tax rate gets applied directly to the transaction wherever the sale is being processed.
2 Managing Tax Exemptions
Depending on the type of business you’re in, you may work with other companies that are exempt from sales tax. In this case you need to make sure you have a valid exemption certificate on file for each of those companies. Right now you likely have those certificates somewhere around the office in paper form hidden away in a drawer or box. If one expires and you sell to that customer, you put your company at risk of suffering heavy penalties in the case of an audit. The process of managing exemptions can be automated by electronically collecting, storing and managing the certificates so that you have access to reporting and visibility to upcoming expiration dates.
3 Remitting Taxes Properly
Ultimately you have to take the funds you’ve collected and remit them to each of the proper taxing jurisdictions during the time period they require them to be returned by along with the unique documentation. Again, if you’re dealing with multiple states (or complicated states), this process of reporting on the right data to complete the proper documentation and remit payment could be time consuming. With an automated solution, you can have the reports ready to go and the proper forms filled out for you. All you need to do is compare the data against the general ledger in your Dynamics software, approve it and send it on its way.
Those are just three of the ways you can automate tax compliance to make your job easier. There are many other components that go into making sales tax confusing, like economic nexus, click-through nexus, sourcing rules and more, but we’ll save that for another day.
To learn more about sales tax compliance automation, register for our upcoming webinar, Simplifying Sales Tax Compliance for Dynamics, on July 19.