Latest / Bennett Thrasher Presents: Beyond The Ledger / Why Your Sales Tax Software Isn’t Enough: The Hidden Risks Costing Businesses Thousands

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Why Your Sales Tax Software Isn’t Enough: The Hidden Risks Costing Businesses Thousands · Bennett Thrasher Presents: Beyond The Ledger

0:08
SPEAKER_02: Welcome back to Beyond the Ledger.
0:10
SPEAKER_02: I'm your host, Shard A Layfield.
0:12
SPEAKER_02: Today we're discussing a topic that many growing businesses overlook.
0:16
SPEAKER_02: What happens after sales tax automation is implemented?
0:20
SPEAKER_02: Many companies invest in platforms like Avalera or ANROC, expecting them to solve their sales tax challenges.
0:27
SPEAKER_02: Only to discover that missed filings, unresolved notices, credit balances, and nexus issues can still create significant compliance risk without the right processes and oversight in place.
0:42
SPEAKER_02: Joining us today is a salty lawyer herself, Dee Green, partner in Bennett Thrasher's state and local tax practice.
0:48
SPEAKER_02: Dee helps businesses navigate complex sales tax compliance challenges, manage multi-state obligations, and develop practical strategies that reduce risk while improving operational efficiency.
1:01
SPEAKER_02: Thank you for being back on the show.
1:03
SPEAKER_00: I'm happy to be back here with you.
1:05
SPEAKER_00: You make it very easy.
1:06
SPEAKER_00: Thank you.
1:07
SPEAKER_00: Thank you.
1:08
SPEAKER_00: As fun as I do.
1:09
SPEAKER_00: Oh, ooh.
1:10
SPEAKER_02: Okay.
1:11
SPEAKER_02: Okay, I'll take that.
1:12
SPEAKER_02: Okay, so today we'll discuss why automation alone isn't enough, the procedures businesses should have in place to stay compliant, and how outsourced sales tax services can help organizations avoid costly surprises.
1:26
SPEAKER_02: Yes, yes, yes.
1:27
SPEAKER_02: So you ready to give us some insights today?
1:29
SPEAKER_02: I sure am.
1:30
SPEAKER_02: All right.
1:31
SPEAKER_02: So sales tax automation has become a standard tool for many growing businesses, but automation isn't the whole solution.
1:38
SPEAKER_02: So why do you think companies still experience compliance issues even after implementing platforms like Avalera or ANROC?
1:47
SPEAKER_02: But also, what's the biggest misconception about what these tools can really do?
1:52
SPEAKER_00: Oh, so I would start with a one phrase or one liner.
1:55
SPEAKER_00: All right.
1:55
SPEAKER_00: Everybody thinks it's set it and forget it.
1:57
SPEAKER_02: Okay.
1:58
SPEAKER_00: Automation is not set it and forget it.
2:00
SPEAKER_00: It's not like you can configure something one time and you can walk away from it and it's gonna run on its own.
2:05
SPEAKER_00: That's what we like to think, right?
2:07
SPEAKER_00: Especially with the advent of AI and automation.
2:10
SPEAKER_00: Right.
2:10
SPEAKER_00: Both very different things that people confuse.
2:13
SPEAKER_00: But automation and the platforms are only as good as the person who has configured it.
2:19
SPEAKER_00: And it also, just like your phone needs to be rebooted and restarted, you have settings, you know, sometimes you have to do a factory reset.
2:26
SPEAKER_00: Right.
2:27
SPEAKER_00: Automation, the platform, the platforms are great.
2:29
SPEAKER_00: And and um the salt practice, our goal is to get all of our clients on an automated solution, especially if you're in multiple states.
2:36
SPEAKER_00: Because manual, gone are the days of manual and trying to do that.
2:39
SPEAKER_01: Yeah.
2:40
SPEAKER_00: But you need oversight and management of that solution.
2:43
SPEAKER_00: And so we want our clients to buy these platforms, and our partners are the Avalares, the Anrocks, the Vertex, those people.
2:50
SPEAKER_00: But we need to manage the software for our clients, and we want them to focus on the business they created.
2:56
SPEAKER_00: Let us focus on the business of compliance.
2:58
SPEAKER_00: So usually people, that's exactly why.
3:00
SPEAKER_00: Yeah, they'll set it up and say, I bought the platform, it's gonna do returns for me.
3:05
SPEAKER_00: And it's gonna do everything for me.
3:06
SPEAKER_00: It's a computer, right?
3:07
SPEAKER_00: It should be able to just do it.
3:08
SPEAKER_02: Yeah.
3:09
SPEAKER_00: But you have to tell a computer what to do, no matter how smart we think it is.
3:12
SPEAKER_02: Yeah, and to get, well, I'm sure we'll get into this later, but your processes and the information that you're putting is it's not always accurate or right, then no matter what you automate, it's not right.
3:25
SPEAKER_02: It's not gonna give you what you really need.
3:26
SPEAKER_02: So I'm sure we'll dive into that a little bit later.
3:28
SPEAKER_02: But many sales tax issues remain hidden until they become costly.
3:33
SPEAKER_02: So, what are some early warning signs that businesses should be paying attention to when they finally recognize hidden risk?
3:39
SPEAKER_00: Yes.
3:40
SPEAKER_00: So, for instance, with platforms, as that's what we're talking about, yeah.
3:43
SPEAKER_00: Usually when you're configuring or implementing this uh automated sales tax solution, you're connecting it with your ERP system.
3:51
SPEAKER_00: So that's your internal accounting.
3:52
SPEAKER_00: Think QuickBooks Online or whatever you're using to do your accounting internally.
3:58
SPEAKER_00: So what that ERP does is sends in, without to nerd out too much, because I promise y'all that I'm an attorney, but I had to teach myself these things because of working with my clients.
4:09
SPEAKER_00: But what your ERP system does is send an API call to that automated solution that says an invoice has been Sardet bought something from me and I want to charge sales tax or not charge sales tax.
4:22
SPEAKER_00: To your point, let's say that you have made something non-taxable that should have been taxable, or vice versa.
4:28
SPEAKER_00: Let's go with a it's taxable, um, it's non-taxable.
4:32
SPEAKER_00: They get the invoice, their client has tax on it.
4:34
SPEAKER_00: Your client is gonna call you like, hey, we've been doing business a while and you've never charged me sales tax.
4:42
SPEAKER_00: Why is there sales tax on my invoice?
4:45
SPEAKER_00: That'll make you say, Man, is something configured properly?
4:48
SPEAKER_00: Right.
4:49
SPEAKER_00: Um in an automated solution, we have what we call product mapping.
4:52
SPEAKER_00: You get all of your products and you're supposed to assign it a uh code that Avilera has a list of codes, and Rock has codes.
5:00
SPEAKER_00: You're supposed to map it when you're first configuring it.
5:02
SPEAKER_00: Okay.
5:03
SPEAKER_00: And it those codes denote whether they're taxable or non-taxable.
5:06
SPEAKER_00: Let's say you put the wrong code in there.
5:08
SPEAKER_00: Now all of a sudden, all your invoices have tax or don't have tax where they should have tax.
5:13
SPEAKER_00: Got it.
5:13
SPEAKER_00: So indicators on your invoice are, or if a return is not filed.
5:19
SPEAKER_00: So let's say you go onto a state portal and you see a note or a notice comes to you saying you haven't filed a return in three months.
5:26
SPEAKER_00: You then are gonna go to your software and say, Hey, software, caller is this thing on?
5:31
SPEAKER_00: I thought you were collecting sales tax for me.
5:33
SPEAKER_00: I thought that you were remitting it for me as well.
5:36
SPEAKER_01: Right.
5:36
SPEAKER_00: That lets you know something is amiss.
5:39
SPEAKER_00: Okay.
5:40
SPEAKER_00: One of the things we do on our team, if we're the implementer for you connecting your ERP to your automated solution, is we run test transactions.
5:48
SPEAKER_00: For instance, Avalera has what you call a sandbox environment or ANROC, and we send dummy transactions, maybe three, four, or five.
5:56
SPEAKER_03: Okay.
5:56
SPEAKER_00: And we see what it spits out.
5:58
SPEAKER_00: If it comes back, we know whether it should be taxable or non-taxable.
6:02
SPEAKER_00: If it comes back anything otherwise, at the beginning, before you go live, yeah, we know that something isn't working properly, either internally in your ERP system, or we didn't configure or switch something on properly.
6:16
SPEAKER_00: Or whoever, not we, whoever set up the implementation process for you.
6:21
SPEAKER_02: Got it.
6:22
SPEAKER_02: Okay.
6:22
SPEAKER_02: I was a mouthful, but that's no, no, but it's good information.
6:27
SPEAKER_02: So let's use a real word example here.
6:30
SPEAKER_02: So one client believed its sales tax process was running smoothly until it recently uncovered more than 20K in tax penalties and interest.
6:40
SPEAKER_02: Can you walk us through how a situation like that develops and a few lessons other businesses can take away from a scenario like that?
6:47
SPEAKER_00: Yes.
6:48
SPEAKER_00: So before you even get to automation, I know that we're here talking about automation, but before you even get there, you shouldn't put, you know, the cart before the wheel, the chicken before the egg, however you want to describe it, you should always go through a Nexus taxability analysis to see where you where you owe something, is it taxable?
7:09
SPEAKER_00: Because once you get to the automated solution and you go to configure things, you're gonna turn on Nexus wherever you have Nexus.
7:17
SPEAKER_00: You're going to know where things are taxable and you're gonna product map it.
7:21
SPEAKER_00: So if a client is getting a$20,000 notice, something we don't either know proper nexus or we don't know taxability.
7:29
SPEAKER_00: Okay.
7:29
SPEAKER_00: So when was the last time you checked your physical presence, your economic nexus threshold?
7:34
SPEAKER_00: When was the last time you checked to see if your product is taxable?
7:37
SPEAKER_00: For instance, using real world again, California and Colorado are states that didn't tax SaaS at the state level.
7:47
SPEAKER_00: Colorado taxed it at locality, California didn't.
7:52
SPEAKER_00: Now they're gonna start taxing it in January, right?
7:55
SPEAKER_00: January 1st, 2027.
7:57
SPEAKER_03: Okay.
7:58
SPEAKER_00: A client who doesn't know that or is not paying attention, doesn't have an advisor, is not getting notices, not reading tax notes, they're not gonna know that that changed and they're not gonna be charging people tax.
8:10
SPEAKER_00: Boom, you're in the state, you have economic nexus, but you didn't know to switch it to taxable.
8:16
SPEAKER_00: Yeah.
8:16
SPEAKER_00: So now all of a sudden you have an issue.
8:18
SPEAKER_00: That's why you need an advisor.
8:20
SPEAKER_00: Now your automated solution should send notices to let you know these tax alerts, much like how we send these blogs and these tax alerts to let our clients know.
8:30
SPEAKER_00: Again, everything is complimentary.
8:32
SPEAKER_00: It's people and platforms.
8:34
SPEAKER_00: So the software should tell you, but it's not gonna configure it for you.
8:37
SPEAKER_00: So it's it might Avalair or Anrock might send you a notice saying, hey, you need to be on the lookout for this.
8:42
SPEAKER_00: Yeah.
8:43
SPEAKER_00: But somebody needs to configure that system.
8:45
SPEAKER_00: So that's how penalties, interest, now all of a sudden your clients calling you, like, why are you talking taxing me?
8:51
SPEAKER_01: Yeah.
8:52
SPEAKER_00: So that's how these things bubble up at the surface.
8:54
SPEAKER_00: Not having regular checks of Nexus.
8:58
SPEAKER_00: People think, I I checked my Nexus a year ago.
9:02
SPEAKER_00: Or, but a lot can change in that year.
9:05
SPEAKER_00: Yeah.
9:05
SPEAKER_00: So you need to be in and running periodic, um, not a true audit in the sense, but an audit uh or an analysis or review of your software.
9:15
SPEAKER_00: Like when was the last time that I checked my ANROC environment to see if I'm in all the states?
9:20
SPEAKER_00: So that's how things bubble up at the surface.
9:22
SPEAKER_00: And you should periodically be doing this Nexus and taxability study and reconfiguring your software if you need to.
9:28
SPEAKER_02: Okay.
9:29
SPEAKER_02: Thank you.
9:30
SPEAKER_02: So filing returns is only one piece of the compliance process.
9:34
SPEAKER_02: So let's go beyond that.
9:35
SPEAKER_02: What are some ongoing housekeeping procedures that companies should have in place each month?
9:40
SPEAKER_02: And you kind of insinuate a little bit, um, to help identify issues before they become larger problems.
9:46
SPEAKER_00: Yes.
9:47
SPEAKER_00: So a couple of them are reconciliation.
9:49
SPEAKER_00: So how I said your ERP system is connected to your uh your software uh platform, ideally, your ERP system should be the driver of everything and they should match each other.
10:03
SPEAKER_00: Yeah.
10:03
SPEAKER_00: Whatever you do in that ERP system should flow to your Avalero, the ANROC.
10:07
SPEAKER_00: But every now and then we must do reconciliation on a monthly basis to say, before I file the return, in your system you show you sold a million dollars.
10:17
SPEAKER_00: In my system, I show you sold a million dollars.
10:19
SPEAKER_00: But sometimes clients issue refunds that they didn't let somebody know, or we didn't configure that.
10:25
SPEAKER_00: They issued a credit memo.
10:26
SPEAKER_00: It didn't properly flow.
10:28
SPEAKER_00: So then the systems are off.
10:29
SPEAKER_00: So reconciliation is one.
10:31
SPEAKER_00: The configuration, like I said, um, and most of the platforms, Avalera and Anrock, they have procedures on their websites that you should be doing on a monthly, quarterly, and annual basis, like reviewing your credit for it.
10:44
SPEAKER_00: Because some of the systems, like let's say you have a refund that you know I have a$10,000 refund that I can use on a future return.
10:54
SPEAKER_00: Was that adequately applied?
10:56
SPEAKER_00: Or are you st are we still withdrawing from your bank account?
10:59
SPEAKER_00: So is somebody checking those things to say because those add up too, where you're like, why are y'all still taking this out of my account?
11:06
SPEAKER_00: Yeah.
11:07
SPEAKER_00: Because by a funding power of attorney, they get to you have a return, says you owe$100,000, they're gonna take that out of your account.
11:14
SPEAKER_00: But you're like, I got this credit over here.
11:17
SPEAKER_00: Right.
11:17
SPEAKER_00: Why isn't anybody using?
11:18
SPEAKER_00: And sometimes systems will say if it's not the exact amount.
11:22
SPEAKER_00: Okay.
11:22
SPEAKER_00: So let's say you owe$100,000, but you have a$10,000 credit, they're gonna be like, we're not applying that.
11:28
SPEAKER_00: It doesn't match.
11:29
SPEAKER_00: Even though you're thinking in your head logically, no, use that credit to dwindle down.
11:33
SPEAKER_00: Now I should only owe$90,000.
11:35
SPEAKER_00: Right.
11:35
SPEAKER_00: So you need somebody checking those things.
11:37
SPEAKER_00: There are a whole host of things.
11:39
SPEAKER_00: We have created process and procedures based off the hiccups, the hurdles, or just what each of these platforms have said that you should be doing on a monthly, quarterly basis.
11:50
SPEAKER_00: There are a ton of them.
11:51
SPEAKER_00: Exemption certificates.
11:53
SPEAKER_00: If your client says they're exempt from sales, are you collecting the exemption certificates?
11:58
SPEAKER_00: Are you validating?
11:59
SPEAKER_00: And if you have bought a product in this automated solution, is somebody updating the system to show that that client is?
12:07
SPEAKER_00: It's things like that.
12:08
SPEAKER_00: Like I said, credit forwards, those are the big things.
12:10
SPEAKER_00: The configurations, there's a whole host of things that you should be checking by different periods.
12:16
SPEAKER_00: And we've learned from those mistakes, um, from costly mistakes, like you said.
12:21
SPEAKER_00: We've learned from just keeping up with the reading to say we've identified these procedures based on the software that you had.
12:28
SPEAKER_00: That's where the management comes up again.
12:30
SPEAKER_00: And not to overburden our clients.
12:32
SPEAKER_00: We don't want them to have to focus on those things.
12:34
SPEAKER_00: That's not their specialty.
12:36
SPEAKER_00: You got a client who sells a tangible good, they don't want to be worried about all the things I just told you.
12:42
SPEAKER_00: ERP, right?
12:45
SPEAKER_00: Whatever.
12:46
SPEAKER_00: I don't know.
12:46
SPEAKER_00: I don't know.
12:47
SPEAKER_00: And I don't want them to worry about that.
12:49
SPEAKER_00: Like, we're not trying to sell anything, but your trusted advice should be comprehensive, consulting and compliance.
12:54
SPEAKER_00: Get this software, people and platforms all working together.
12:58
SPEAKER_02: Got it.
13:00
SPEAKER_00: Wow.
13:03
SPEAKER_02: So there's an often emphasis reconciling invoicing systems with tax software.
13:09
SPEAKER_02: Why is reconciliation such an important control and what kinds of issues can it uncover?
13:14
SPEAKER_00: So I think we kind of talked about that already about it's just somebody, and here's the thing: different people control different things in your um in the business.
13:24
SPEAKER_00: So for instance, like I mentioned exemption certificates.
13:27
SPEAKER_01: Yeah.
13:28
SPEAKER_00: The onboarding team of that company, the sales team, they might be like, Oh, yeah, we got an exemption certificate, but did they tell the tax team?
13:36
SPEAKER_00: And then the tax team know to market in the ERP system.
13:39
SPEAKER_00: If they didn't market in the ERP system, and that's what's controlling the sales automated solution, reconciliation is gonna be off.
13:48
SPEAKER_01: Yeah.
13:48
SPEAKER_00: Because let's say out of two million sales, uh, a million should have been exempt, but somebody has to market to let the system know.
13:57
SPEAKER_00: So that's why reconciliation is important.
13:59
SPEAKER_00: And you always want to reconcile it before you do the actual filing because once the return is filed, then you're gonna have to amend a return to say, whoa, whoa, whoa, whoa, transaction came up like, hey, why did y'all file this return for this amount?
14:13
SPEAKER_00: So there should be a process where some back and forth, which is why most automated solutions will say will lock the system at a certain date.
14:22
SPEAKER_00: They will lock all your whatever transactions are in there at this date, those are locked and loaded.
14:28
SPEAKER_00: Those are the ones we're looking at because you have to file your return on the 20th.
14:31
SPEAKER_00: So most of them lock it like the 10th or something of the month.
14:34
SPEAKER_00: We usually work with our clients the 5th through the 10th through the 15th to clean up to do all this reconciliation.
14:40
SPEAKER_00: We want to make sure they're aligned.
14:41
SPEAKER_00: And if they don't align, we want to make sure that there's a conversation where you can tell me, oh D, it's it's$100,000 off because this client just gave me their exemption certificate, or we refunded them, we did a credit memo, but we didn't mark it in the system.
14:55
SPEAKER_00: We're gonna catch that.
14:56
SPEAKER_00: You know, how they keep their books, right?
14:59
SPEAKER_00: How is their accounting year?
15:01
SPEAKER_00: All those kind of things kind of matter.
15:02
SPEAKER_00: So that's why reconciliation.
15:04
SPEAKER_00: You don't want to overpay.
15:05
SPEAKER_00: You don't want to underpay.
15:07
SPEAKER_00: You definitely don't want to overpay.
15:10
SPEAKER_00: Either of them will give you an issue.
15:11
SPEAKER_00: Either way will give you an issue, but that's why reconciliation.
15:14
SPEAKER_00: And it's like, are all hearts and minds clear?
15:16
SPEAKER_00: Are we all in line?
15:17
SPEAKER_00: Right.
15:18
SPEAKER_00: And then sometimes there's a rounding up issue.
15:21
SPEAKER_00: We are worried about the correct tax rate, but sometimes they'll round up, uh, you know, people won't make pennies anymore.
15:28
SPEAKER_00: So a lot of things are rounding up, but reconciliation is important to make sure that you're adequately reporting the money you should have.
15:37
SPEAKER_02: Got it.
15:38
SPEAKER_00: Per your system.
15:38
SPEAKER_00: And everything, you got 10 transactions, this many invoices, what's in the ERP should mount appear.
15:45
SPEAKER_00: It's not, we got a problem.
15:47
SPEAKER_02: We got a problem.
15:48
SPEAKER_02: Houston.
15:48
SPEAKER_02: Houston, we got a problem.
15:53
SPEAKER_02: That was funny.
15:54
SPEAKER_02: Okay.
15:55
SPEAKER_02: As businesses expand into new states, how can they effectively monitor economic nexus thresholds and avoid unexpected registration and filing obligations to keep up with the pace of growth?
16:08
SPEAKER_00: Yes.
16:08
SPEAKER_00: So a lot of systems now have um coding or heat maps that will highlight, because again, I'm gonna keep coming back to this.
16:18
SPEAKER_00: ERP is connected to the automated sales tax solution.
16:23
SPEAKER_00: Based on your sales volume, most of them have a code that's alerting you beep, beep, beep, beep, per your sales.
16:30
SPEAKER_00: We think you have economic nexus.
16:32
SPEAKER_02: Got it.
16:32
SPEAKER_00: Um, now again, some of these software solutions only monitoring economic nexus.
16:37
SPEAKER_00: But nexus is either derived through physical presence where you have boots on the ground, uh, employees, inventory.
16:44
SPEAKER_00: So your heat maps or whatever they have to let you know you've hit those thresholds are a gut check.
16:50
SPEAKER_00: It's kind of like when your check engine light comes on.
16:52
SPEAKER_00: So you should see that.
16:54
SPEAKER_00: We should see that if we're managing the software for you, those are gut checks to let you know.
16:58
SPEAKER_00: We think you approach Nexus, somebody needs to look at it on it.
17:02
SPEAKER_00: Don't necessarily go register because your product might not be taxable.
17:06
SPEAKER_00: But most to answer your question, most of the software solutions have something that is monitoring your economic nexus based on your dollar amount.
17:14
SPEAKER_00: Okay.
17:14
SPEAKER_00: Or your transactions.
17:15
SPEAKER_00: They have triggers inside the system.
17:18
SPEAKER_00: But again, remember, we went, I said you should have your consultant doing an actual full nexus and taxability study every six months or every 12 months.
17:28
SPEAKER_02: Okay.
17:30
SPEAKER_02: Thanks for adding the timeline because a lot of people, you can't assume everybody knows all this information and the timelines that they need to probably adhere to to avoid a lot of issues.
17:39
SPEAKER_00: Yeah, and you hit on the head, a lot of businesses are expanding.
17:42
SPEAKER_00: That's a good problem to have, right?
17:43
SPEAKER_00: Rapidly, right?
17:44
SPEAKER_00: So they're like, man, when I started off, I was only on in two states, but then you're taking on these big clients, and we have a lot of clients who they don't necessarily have a lot of customers, but they have huge invoices.
17:54
SPEAKER_00: Yeah.
17:55
SPEAKER_00: So they might have five, but if they exceed, if they're selling huge uh software or parts that like they're selling it for a hundred thousand dollars, that adds up pretty quickly.
18:06
SPEAKER_00: So you have to have some oversight.
18:08
SPEAKER_00: But the heat maps are very good gut checks and your service engine lights.
18:12
SPEAKER_02: Okay.
18:13
SPEAKER_02: So let's segue into managing notices, credits, and refunds for a bit.
18:18
SPEAKER_02: So tax notices, credit balances, and refund opportunities are often treated as an administrative task.
18:25
SPEAKER_02: So why are these areas so frequently overlooked and what risk or opportunities businesses tend to miss?
18:31
SPEAKER_00: Yes.
18:31
SPEAKER_00: So, like I said again, sometimes your notices will be sent to your state portal.
18:36
SPEAKER_02: Okay.
18:37
SPEAKER_00: And they'll be hidden in there.
18:38
SPEAKER_00: But if you don't have anybody outlining those process and procedures, like we said, or making a checklist to say, you should be checking the portal to see if the state sent you anything.
18:48
SPEAKER_02: Yeah.
18:48
SPEAKER_00: Then these notices are building up.
18:50
SPEAKER_00: Or you should be having somebody checking your mailbox to see if you got these notices.
18:54
SPEAKER_00: Or there's a lot of this going on.
18:56
SPEAKER_00: I thought y'all were checking notices.
18:58
SPEAKER_00: I thought you were checking notice.
18:59
SPEAKER_00: Now nobody's checking.
19:00
SPEAKER_00: Right.
19:00
SPEAKER_00: Like you said, the administrative headache of it, because it can be a headache.
19:03
SPEAKER_01: Yeah.
19:04
SPEAKER_00: Or somebody saying, I got a notice, but I didn't.
19:06
SPEAKER_00: They get the notice, they push it to the side.
19:08
SPEAKER_00: But they should open that notice, read it, and at least, if they're not going to handle it, send it to their their consultant to read it.
19:14
SPEAKER_00: Okay.
19:15
SPEAKER_00: Because sometimes that notice is telling you the alert, like California in, or it's telling you, hey, we noticed you had an employee because you registered for payroll.
19:24
SPEAKER_00: Yeah.
19:24
SPEAKER_00: We now know you're in the state, girl.
19:26
SPEAKER_00: Right.
19:27
SPEAKER_00: So it's about, and what we're talking about, that outsourcing, it's about outlining what needs to be done and who's going to do it.
19:36
SPEAKER_00: Because the company might not have the bandwidth to handle it, which is why they have to, if they're working with a Bennett Thrasher or whoever they're working with, they need to say, Bennett Thrasher, you're going to do these five, six things for us on a monthly, quarterly, or annual basis.
19:50
SPEAKER_00: So we know exactly what we're going to be doing.
19:52
SPEAKER_00: Yeah.
19:52
SPEAKER_00: Refunds, like I said, if they've issued a refund in their ERP system and it didn't flow over properly, then nobody knows that that once$100,000 bills, now$50,000, nobody reconciled that.
20:05
SPEAKER_01: Yeah.
20:06
SPEAKER_00: So somebody might be like, yeah, we issued the client the refund, but we forgot to make a credit memo.
20:11
SPEAKER_00: Then we forgot to put it over in Avalera.
20:13
SPEAKER_00: So you did write by the by your customer, but you have to follow the transaction all the way through.
20:19
SPEAKER_00: We issued this.
20:21
SPEAKER_00: What do we do to make it?
20:22
SPEAKER_00: You want to make sure it all makes sense.
20:24
SPEAKER_00: Like whatever I did, there was an equal opposite reaction for it, if you will, for that.
20:31
SPEAKER_02: Got it.
20:32
SPEAKER_02: Okay.
20:32
SPEAKER_02: So let's talk about an outsourced sales tax model that you just brought up.
20:36
SPEAKER_00: Yes.
20:36
SPEAKER_02: What does a typical engagement look like?
20:39
SPEAKER_02: And which businesses benefit the most from this type of support?
20:42
SPEAKER_00: I would say all businesses, especially if you're in a lot of states, you know that you have.
20:48
SPEAKER_00: We have a lot of clients, some of that are not on automated solutions.
20:51
SPEAKER_00: The ones who are on the automated solution, much of what we just talked about before, people think they have a set in and forget it system.
20:58
SPEAKER_00: Once you've configured it once, it's configured forevermore.
21:01
SPEAKER_00: So I think the clients who are in multi-states, who have undergone VDAs, who um know they're expanding, they need to outline every and they can't think of every procedure, which is why even our list is expanding.
21:16
SPEAKER_01: Yeah.
21:16
SPEAKER_00: But that's why, and we created a robust list, like I said, and then we walk our clients through um, never to sell, but to help.
21:24
SPEAKER_03: Yeah.
21:24
SPEAKER_00: And to say these are the things we identified that needs to be done.
21:28
SPEAKER_00: Who is going to do them?
21:29
SPEAKER_03: Right.
21:30
SPEAKER_00: Happy to even walk y'all through to say, even if we don't do those, these are what you need to do.
21:35
SPEAKER_00: So I think it's about understanding, looking back at your system and saying, also talking internally, like nobody knows what you need done internally more than you, right?
21:45
SPEAKER_00: So if you know your accounting team is set up a certain way, those procedures need to be set out.
21:50
SPEAKER_00: Like many people, they say they have exempt customers, but they don't have a procedure in place about collecting um exemption certificates, or let's say the tax.
22:00
SPEAKER_00: Tax accounting department of a business said, no, we have a procedure, but did you tell the onboarding team?
22:05
SPEAKER_00: Because the onboarding team should be the one.
22:07
SPEAKER_00: Otherwise, sales tax is going to be charged.
22:09
SPEAKER_00: Yeah.
22:09
SPEAKER_00: So it's about knowing what needs to be done and identifying who's going to do those things.
22:15
SPEAKER_00: And there's, like I said, we don't have to do all the things.
22:18
SPEAKER_00: Companies prioritize what they they might be like, uh, we're going to check that on a quarterly basis.
22:23
SPEAKER_00: If we check it at least at some point in the year, if they wait to check it to the end of the year, knowing because I had some clients like that too who say, Yeah, we'll do all those things at the end of the year, D.
22:33
SPEAKER_00: And if we have a big balloon of uh penalties and liabilities, then so be it.
22:36
SPEAKER_00: You have other ones who say, Well, if y'all are checking this for us, the notices, yeah, the reconciliation on a monthly basis, there should be very little that we didn't we didn't catch, right?
22:46
SPEAKER_00: Yeah.
22:47
SPEAKER_00: And inevitably you're gonna something is gonna be missed.
22:50
SPEAKER_00: But if you have procedures in place, checklist that you're doing, you should have somebody running through that.
22:56
SPEAKER_02: Got it.
22:57
SPEAKER_02: Okay.
22:58
SPEAKER_02: So let's talk about the cost of being proactive because business leaders are always weighing costs against value.
23:04
SPEAKER_02: Yes.
23:04
SPEAKER_02: So how should companies think about investing in proactive compliance compared to the potential cost of penalties, audits, and missed opportunities?
23:12
SPEAKER_00: So I always tell people it'll cost you more on the back end than the front end.
23:17
SPEAKER_00: So somebody might look at the sticker shock of a taxability study or doing a voluntary disclosure agreement.
23:23
SPEAKER_00: But what those things do is they give you as much peace of mind as they can give you.
23:28
SPEAKER_00: So even with a BDA, um, you rather be proactive and control the course of action rather than when somebody's coming at you, you're on the defense.
23:40
SPEAKER_00: So now if you're proactive, you're eliminating the penalties and liabilities as best as you can.
23:46
SPEAKER_00: When you're reactive, man, you know you missed the filing.
23:50
SPEAKER_00: You know you didn't configure something properly.
23:52
SPEAKER_00: Yeah.
23:52
SPEAKER_00: So now you owe some penalties and interest.
23:54
SPEAKER_00: And oh, by the way, if they reach out to you, segues to what we talk about a lot, voluntary disclosure agreements, those are off the table.
24:01
SPEAKER_00: Yeah.
24:02
SPEAKER_00: So things can be costly.
24:04
SPEAKER_00: So, but that's why you look at different systems.
24:08
SPEAKER_00: Um, you look not only at what the cost of buying that platform, so like Avalera and Rock might charge you a price to um buy the software, just a subscription to it.
24:19
SPEAKER_00: But what are the professional fees for either internally?
24:23
SPEAKER_00: How long is Sardin gonna spend doing a return manually versus us doing it with with your firm?
24:28
SPEAKER_00: So professional fees, but I always say, and here's the thing, there's always a risk tolerance or a materiality.
24:36
SPEAKER_00: So some companies that I work with, they might say, okay, we're gonna go after all the big boys first.
24:41
SPEAKER_00: And they might set a threshold internally to say anything above this amount, we're attacking.
24:46
SPEAKER_00: We're gonna attack all of this because the goal is to always be compliant.
24:50
SPEAKER_00: Right.
24:50
SPEAKER_02: But it might not be that first, those are the first.
24:53
SPEAKER_00: Yes.
24:54
SPEAKER_00: And so, but I do feel like, but once the state comes after you, now you got to do some negotiating.
24:59
SPEAKER_00: Now you gotta have you have late penalties, failure to file, you have interest all building up.
25:04
SPEAKER_00: But if you would have had a salt process in place to periodically monitor your nexus, your taxability are automation.
25:13
SPEAKER_00: Um, and a lot of people, again, are relying on AI now, and they might say, AI told me it's not taxable, AI told me I don't need automation.
25:21
SPEAKER_02: So But it's only reliant on the data that you give it, and your data might not always be accurate.
25:27
SPEAKER_00: Exactly.
25:28
SPEAKER_00: And AI, as as good as it's getting, it's like you said, it's pulling from multiple sources and it's making it up as it goes.
25:38
SPEAKER_00: And that's why you'll continue to hear me say, people and platform together.
25:43
SPEAKER_00: One you can't have one without the other, the way that the world is moving with technology.
25:48
SPEAKER_00: But I most times handling it up front is gonna save you way more money.
25:54
SPEAKER_00: Um like I said, it takes tools off the table if you wait for the state to recognize you and come a call and give.
26:01
SPEAKER_02: Okay.
26:02
SPEAKER_02: So so looking ahead, the sales tax rules continue to evolve as businesses grow across more jurisdictions.
26:08
SPEAKER_02: What trends are you currently seeing and what should businesses be doing today to stay ahead of tomorrow's compliance challenges?
26:15
SPEAKER_00: Yes.
26:15
SPEAKER_00: So again, using the California and Colorado things of old are not the same.
26:21
SPEAKER_00: States are looking for more revenue.
26:23
SPEAKER_00: So what does that mean?
26:24
SPEAKER_00: They'll tax more things.
26:26
SPEAKER_00: So you have to stay abreast of the laws and the law changes.
26:30
SPEAKER_00: Um might even give you a break.
26:32
SPEAKER_00: Not all states are coming after you.
26:34
SPEAKER_00: Um so you have to, that's one for looking who's monitoring the law changes, right?
26:39
SPEAKER_00: Somebody internally, somebody externally.
26:41
SPEAKER_00: How often are we looking at that?
26:43
SPEAKER_00: Um you get what you pay for, right?
26:46
SPEAKER_00: So if you're like, we're gonna do this on this point, then you might miss a whole six months of alert changes.
26:53
SPEAKER_00: Um monitoring, frequent monitoring, like I said, making sure that you're reviewing this and making sure you're letting the subject matter experts handle that business.
27:03
SPEAKER_00: Like um, especially like I said, with AI, somebody might be like, oh, I know enough to be dangerous about so I don't need to go to D because she's gonna cause me this, but it shouldn't be thought.
27:13
SPEAKER_00: You should be thinking about from an MA perspective.
27:17
SPEAKER_00: Even if you don't plan to sell your business in the near future or anytime, you should always have that lens though.
27:24
SPEAKER_00: What if I ever decide to sell my business?
27:27
SPEAKER_00: Yeah, I want it as clean as possible.
27:29
SPEAKER_00: Right.
27:29
SPEAKER_00: That way when we go through due diligence, they don't see anything on sales tax, income tax, salt related.
27:35
SPEAKER_00: I kept my business in a state that was had a clean bill of help.
27:40
SPEAKER_00: Like I said, every now and then some things are gonna slide in.
27:42
SPEAKER_00: So I think you should have an MA lens, whether you're gonna sell or not, to say, yeah, I don't even you go to sell.
27:48
SPEAKER_00: Hey, I don't even have to worry about that, guys, because I regularly did my Nexus checks.
27:53
SPEAKER_00: Absolutely I have an automated solution.
27:54
SPEAKER_00: So even if you do go due diligence, you can say, Oh, we can go to Avalair or ANROC and we could pull those records, and I have returns for the last six years.
28:03
SPEAKER_00: That's a good thing about automated solutions.
28:05
SPEAKER_00: They are repositories.
28:06
SPEAKER_00: No longer are you looking through the cabinet, like, man, didn't file that return.
28:10
SPEAKER_00: I think I saved it in my my website.
28:12
SPEAKER_00: I mean, here, here.
28:13
SPEAKER_00: So automated solutions, configurations, having regularly checkups.
28:18
SPEAKER_00: Think of everything like I said about your like you like you do your body or your car.
28:22
SPEAKER_00: Is my check light on?
28:24
SPEAKER_00: Yeah.
28:24
SPEAKER_00: Do I need to go get my physical?
28:26
SPEAKER_00: Um, all of these things are interchangeable.
28:28
SPEAKER_00: So MA lens, frequent monitoring, getting a subject matter expert to say, even if it's we're not gonna go with you to do this work, but at least you get them to consult to say, here, I'm giving you the lay of the land.
28:43
SPEAKER_00: This is where you have Nexus, this is where you have a taxable product, this is how much you owe.
28:48
SPEAKER_00: This is how much this is what we think you should do.
28:51
SPEAKER_00: Yeah.
28:51
SPEAKER_00: Now, how do we do those things?
28:52
SPEAKER_00: We get an automated solution.
28:54
SPEAKER_00: Now, once we have this solution, who's gonna drive this thing?
28:57
SPEAKER_00: Right.
28:58
SPEAKER_00: The process and the procedures, what things do we need to do and who was gonna do them?
29:02
SPEAKER_00: So that's a forward thinking company.
29:05
SPEAKER_00: Yeah, especially if you're over your skis.
29:08
SPEAKER_00: Um, and I look, I get it.
29:10
SPEAKER_00: People want to save money as best as they can, but consider their cost.
29:14
SPEAKER_00: What is saving money now gonna cost them for you in the future?
29:19
SPEAKER_00: Yes in place ahead.
29:21
SPEAKER_00: Yes.
29:22
SPEAKER_02: Okay, well, thank you, Dee, for the amazing conversation and insights.
29:26
SPEAKER_02: Hopefully, our audience, I'm sure, are gonna take a lot um into consideration and hopefully they put some plans in place.
29:32
SPEAKER_02: So I hope to see you again soon.
29:34
SPEAKER_00: I do too.
29:35
SPEAKER_00: And remember, guys, to stay salty.
29:37
SPEAKER_00: The salt, salt is always the condiment should be on the table.
29:40
SPEAKER_00: So we're always here to help you talk about again.
29:43
SPEAKER_00: Sardet used the word outsource.
29:45
SPEAKER_00: We want to be the outsource people that you come to, that you have confidence in, is looking at all the things we talked about, the notices, managing your software compliance for you, but really being your partner as well.
29:57
SPEAKER_00: Absolutely.
29:57
SPEAKER_00: We don't want to drive it without riding along with you.
30:00
SPEAKER_00: Uh, you know, so there's a driver and a guide.
30:03
SPEAKER_00: So we want to make sure that we're working together with you to have a clean bill of help.
30:08
SPEAKER_02: Thank you, Dave.
30:11
SPEAKER_02: Today's conversation highlights an important reality for businesses.
30:15
SPEAKER_02: Sales tech software is a powerful tool, but it's only one piece of a successful compliance strategy.
30:22
SPEAKER_02: The right processes, oversights, and ongoing monitoring can make the difference between staying ahead of issues and discovering them after they become costly problems.
30:33
SPEAKER_02: Thanks for tuning in to Beyond the Ledger.
30:35
SPEAKER_02: For more insights and expert perspectives, visit BTCPA.net and explore our latest resources.
30:41
SPEAKER_02: And don't forget to like, follow, share, and subscribe.
30:44
SPEAKER_02: Until next time, I'm Sharday Layfield, and we'll see you for the next conversation.