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The Hidden Costs of Your Manual Sales and Use Tax System

The Hidden Costs of Your Manual Sales and Use Tax System

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Published by avalara
There are many sales and use tax hidden costs that businesses don't realize. And if you use a manual process to manage sales and use tax, your costs may be higher than you think.
There are many sales and use tax hidden costs that businesses don't realize. And if you use a manual process to manage sales and use tax, your costs may be higher than you think.

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Published by: avalara on Feb 06, 2012
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09/30/2013

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The Hidden Costsof Your ManualSales and UseTax System
Sponsored by Avalara, Inc.
Copyright © 2013
 
Page 2 o 8. The Hidden Costs o Your Manual Sales and Use Tax System. © Avalara 2013
I something is hidden, it’s out o sight, and many times, out o mind.Sales and use tax compliance presents risks and costs, o the apparentand the hidden variety, or businesses o all sizes. However, sales and usetax compliance is rarely frst on a business’ radar when the discussion turnsto reducing risks and costs.Unortunately, it sometimes takes a bad experience, like an audit or evena string o notices, to remind business owners o the critical importance o accurate sales and use tax calculation, collection and remittance. Fromthe specialized tax research necessary to maintain rates and taxability, toshiting jurisdictional boundaries, to evolving payment and fling require-ments or even to resale certifcate management, the apparent costs o salesand use tax compliance are easy to spot. Unortunately or business owners,many other costs and inefciencies o sales and use tax compliance arehidden. Hidden costs and hidden sources o risk are oten magnifed in amanual system.Hidden costs associated with a manual sales tax management process arenot always obvious when assessing the costs listed above. Instead, hiddencosts stealthily sap efciency, waste resources and occasionally even createrisk where none existed. The identifcation o hidden costs provides an op-portunity to improve processes and streamline business unction to reduceoverall costs as well as reduce risks in the sales tax arena.Here are fve areas where hidden costs can wreak havoc on your businessoverhead and bottom line:
1. Logistics2. Personnel management3. Reporting and analysis4. Audits5. Credit tracking
What you don’t knowcan’t hurt you, right?
 
Page 3 o 8. The Hidden Costs o Your Manual Sales and Use Tax System. © Avalara 2013
Logistics o managing sales tax compliance include processing mail, maintain-ing copies o invoices, receipts, orms, notices and retention o governmentupdates, bulletins or rate changes. O course, the storage o these items andthe ability to access them adds to a business’ already ormidable paper man-agement eorts.Notices: Processing mail can cause problems i mail is misdirected, returnedor just plain missed. Oten in a manual system, notice management is a singleperson’s responsibility. The time sensitive nature o notices and the cascadingeect o notice mis-management, make this area especially likely to increaserisk o assessments and increase cost in penalties and interest. I a noticeis received and that person is on vacation, no one is available to handle theconcern and respond quickly to the request or inormation or clarifcation romthe state. Delayed responses can place you at risk o being selected or an auditand can expose you to possible penalties and ees or not resolving the notice.The state can restrict your business activities and even halt business untilthe notice is resolved. One company didn’t realize they had received a noticeat their Texas location. The notice languished on someone’s desk unheeded. Thecompany ound out when the state notifed them that their ability to do busi-ness had been shut down in that state. It was a scramble o extra time and costin penalties to bring the business back into active status in the state.Records Retention: In a manually managed sales tax system, mostbusinesses maintain hard copies, as well as electronic copies o sales taxreturns. Reducing manually managed hard copies o returns decreases thedemand on your overhead costs o paper, staples, fles, fle olders and evencopier maintenance.Many companies must rent a storage acility because they do not have ad-equate space to store all their records at a main location, or i they do, it is anextra cost or the additional space required just or storage o records. One com-pany didn’t have to send their records to an outside storage acility, but instead,stored their records on shelves and up in the eaves o their warehouse. Theyexposed their records to rats and other varmints that chewed through the boxesand damaged records. When searching or a specifc time period, they manytimes opened the box labeled or that year or quarter but didn’t fnd the specifcrecords needed and had to search through other boxes or hours. The danger o climbing up ladders to reach the stored boxes up in the eaves was a saety issueor employees and opened the company to potential lawsuits.Other costs associated with maintaining a manual system include the costso labeling, fling cabinets and boxes. Add up these costs and you can seehow streamlining a manual system with digital copies and storage reducesoverhead expenses.
HIDDEN COST #1
Logistics

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