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Thomson Reuters Tax & Accounting - Indirect Tax Seminars
Technology in Indirect Tax Automation
March 2013
Agenda
TAX & ACCOUNTING 2
INTRODUCTIONS AND SEMINAR OBJECTIVES
LUNCH
Q&A, WRAP-UP, CPE SURVEYS
IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION
INDIRECT TAX AUTOMATION –AN INTRODUCTION
Agenda
TAX & ACCOUNTING 3
INTRODUCTIONS AND SEMINAR OBJECTIVES
LUNCH
Q&A, WRAP-UP, CPE SURVEYS
IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION
INDIRECT TAX AUTOMATION – AN INTRODUCTION
Presenters
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Perry Falvo Regional Sales Manager
Thomson Reuters Indirect Tax
(469) 361-6883
Tom Farmer Business Consultant
Thomson Reuters Indirect Tax
(972) 390-7606
Loran Pellegrino Systems Engineer
Thomson Reuters Indirect Tax
(770) 772-8157
Seminar Objectives
Indirect Tax Automation
Answer these questions:
What is indirect tax automation?
Why should I be concerned about automation?
What types of technology supports automated indirect tax
processing?
What types of automation technology can address my current
corporate challenges?
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Agenda
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INTRODUCTIONS AND SEMINAR OBJECTIVES
LUNCH
Q&A, WRAP-UP, CPE SURVEYS
IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION
INDIRECT TAX AUTOMATION – AN INTRODUCTION
Quantifying the Pain
The High Cost of Transaction Tax
In the Global 2000, for every $1 billion in transactions, approximately $6M is wasted in transaction tax costs annually.
Small-to-mid-sized businesses average more than
$327K in annual costs to manage sales and use
tax compliance.
Manual tax processes
Errors in sales & use tax
Errors in output/input VAT
Penalties and interest
Diverted capital
Heavy host system customizations
Source: Independent survey by Tallman Insights and fielded by Mindwave Research
7
Challenges of A Typical Month
SUT Professional
Meet with State
Auditor on Sampling
Method
Research Proposal Structure w Finance
Train New AP Hires with
Updated Matrix
Document Policy
Changes for IT To Implement
Prepare & Review
270 Returns
Prepare PLR Request
• Multiple Tasks to be Managed
• Completion of Returns Required
Each Month – Perpetually
• Reliance on AP, AR, & IT
Necessary to Complete Tasks
• Partial Data Residing within
Multiple Sources
• Manual Review Required For
complex transactions
• Lack of time & planning & analysis
tools to be proactive
8
Juggling Tasks – A Break Out of Effort Monthly
Compliance
59%
Planning, Training
& Management
6%
Audits &
Controversies
24%
Financial
Reporting & Forecasting
11%
11%
24%
59%
6%
Financial Reporting & Forecasting Audits & Controversies
Monthly Compliance Planning, Training & Management
9
Areas of Effort
Monthly
Compliance
Planning, Training
& Management
Audit &
Controversies
Financial Reporting
& Forecasting
1. M&A Planning
2. Training Non-
Tax Personnel
3. Transaction
Structure
Planning
4. Managing Tax
Personnel
5. Non SUT Work:
(Property Tax,
Business
License Tax &
Excise Tax)
1. Tax Reserves &
Provisions
2. Transaction
Analysis & Tax
Credit Studies
3. Sarbanes &
Financial Audit
Reviews
4. Reconciliation of
Tax Accounts
1. Audit & IDR
Management
2. Audit Data &
Document
Retrieval
3. Audit Research
& Negotiation
4. Refunds &
Credits
5. Audit Appeal &
Controversy
1. Data Collection
2. Consolidation &
Reconciliation
3. Exception
Review &
Manual
Adjustments
4. Preparing Tax
Returns
5. Preparing
Payments &
Accounting
Entries
10
Compliance - Opportunity Cost
Are Your Processes Costing You
More Than They Should?
IT Costs Manual Tax Processes
and Tax Errors
Penalties
and Interest Diverted
Capital
Transactions
•Business Region responsible for tax
solution
•Ongoing Custom API Development
•Custom VAT Solution
•Audit Expense
•Tax Research
•Tax Table Maintenance
•Exemption Management
•Tax Rate Lookup/ Errors
•Tax Training 11
Quick review
Transaction TAX Types
Sales Tax
Use Tax
Value Added Tax
VAT, GST, HST, PST
Excise Tax
Fuel Excise
Medical Device Excise Tax
Sin Taxes
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Business Processes
Order to Cash (O2C, Sales, AR)
Procure to Pay (P2P, Purchasing, AP)
Special Taxes and
Transaction Fees
Battery fee
PIF fee
Bag fee
Quick Quiz
What is your definition of Indirect Tax Automation?
Indirect Tax Compliance Reporting
Macros in spreadsheets to collect and analyze data?
Access database?
Logging on to state websites to submit returns?
Requiring the local locations to handle their own compliance so
you don’t have to worry about it?
Educated guesswork?
Pay someone else to do the work?
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Quick Quiz
What is your definition of Indirect Tax Automation?
Corporate Reporting and Audit Defense
Macros in spreadsheets to collect and analyze data?
Access database?
Calling IT on a regular basis to request reports from the ERP
system?
Hanging out in the tax conference room exploring boxes?
Educated guesswork?
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Quick Quiz
What is your definition of Indirect Tax Automation?
Front End Determination, Calculation, Recording
Pay what the vendor charges?
Review every invoice (or at least the big ones) for correctness?
Hire Tax Professionals to be part of the AP/AR department?
Provide “training manuals” to AP and AR so they can properly
pick tax codes and/or taxability?
Manually program the ERP with logic to handle the various tax
laws?
Maintain tables and taxability matrices?
Excel and Access?
Pay someone else to do the work?
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Common Approaches
Manual Processes
Subjective and
error prone
Time-consuming
and expensive
Little control over
the use of policies
Extremely difficult
to scale,
collectively
ERP Applications
Cost-intensive
customization
Difficult to keep
timely, up-to-date
Application- and
platform-
dependent
Poor separation of
IT/Tax duties
Semi Automatic
Processes
Still subjective
and error prone
Still time-
consuming
Hard to maintain
Consumes Tax
Department’s time
Typically the
responsibility of
the Tax
Department to
maintain
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Evolution of Transaction Tax Automation
Manual Calculation
Tax Calculation Engines
Global Tax Solution
Automation With ERP Tax Tables and
Codes
Reduce the Cost of Compliance
Create Complete Audit Trails
Tax Professional Control and Visibility
Integrate Seamlessly into the Business
Respond and Manage Change
17
New Approach Using Automation
1. Centralized Management of Tax Policy
2. Centralized Management of Tax Processes and Data
3. Ability for Tax Professional to Set Tax Policy
4. Single Source Repository of Global Transaction Data
5. Consolidated Business Reporting Mechanism
6. Consolidated Audit Defense Support
7. Consolidated Compliance Reporting Mechanism
18
Key Requirements & Outcomes of True Automation
1. Consistent Accuracy
All tax policies, rates, rules & logic are enforced by a single tax application
2. Consistent Control
Tax professionals control all tax decisions
3. Consistent Efficiency
Single source of record for all transaction tax liabilities efficient monthly
filings, reporting, analysis and audit support.
4. IT Independence
Tax professionals configure, manage and test tax requirements in the tax
application vs. IT coding, programming and testing tax requirements.
5. Business Process, People and Systems Independence
Support automated transaction tax determination, calculation and recording
for all Sales, Purchase & Post-Purchase transactions, and all business
systems & applications.
6. Consolidation
Record historically rather than referentially all transaction and tax details in a
consolidated audit database. 19
Indirect Tax Automation - Process and Technology
TAX DETERMINATION TAX COMPLIANCE
Tax
Engine
Reporting
Solution
Returns
Solution
Filing
Solution
Exemption / Tax Certificate
Management Solution
20 TAX & ACCOUNTING
Sales, Billing, and
Purchasing Systems
Order To Cash Process
Procure to Pay Process
ERP Systems,
eCommerce Systems,
Point of Sale,
Legacy Systems
Content and Tax Research – Rates / Rules / Forms
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ONESOURCE Tax Content – Legal Citations
Invoice
processed in
ERP System
Vendor
tax
correct? No
Tax engine determines tax
Within tolerance?
Yes
Mark invoice as processed
Vendor charged no tax
Accrue correct tax, pay as-is
No
Vendor tax under-charged
Shortpay vendor tax and accrue correct tax
Accrue difference, pay as-is
Vendor tax over-charged
Pay as-is and track
Shortpay and accrue Mark invoice
as processed
Yes
Partial pay
Example of an automated business process
Vendor-billed Tax Verification
with Automatic Accruals
Agenda
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INTRODUCTIONS AND SEMINAR OBJECTIVES
LUNCH
Q&A, WRAP-UP, CPE SURVEYS
IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION
INDIRECT TAX AUTOMATION – AN INTRODUCTION
Agenda
TAX & ACCOUNTING 24
INTRODUCTIONS AND SEMINAR OBJECTIVES
LUNCH
Q&A, WRAP-UP, CPE SURVEYS
IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION
INDIRECT TAX AUTOMATION – AN INTRODUCTION
AUTOMATION - SUPPORTING THE END-TO-END PROCESS
Determination Global Reporting Returns Filing ERP (Oracle, SAP,
PeopleSoft, JDE),
Legacy, eCommerce,
Point of Sale, Home-
grown apps
Tax Request
Tax Result
Tax
Audit
Tax Certs
25
Types of Transactions
Transactions Determination Compliance Reporting
Procure to Pay Purchase Requisition Purchase Order Quote AP Invoicing
Goods/Inventory Movement
Order to Cash Inquiry Quote Order Return Order AR Invoicing
26
What does this mean to ERP functional users?
Transactions Determination Compliance Reporting
Purchasing AP Order Entry AR
27
Oracle PO/AP
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Example Purchasing (PO/AP) Process
using Oracle eBusiness Suite
Oracle PO/AP
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Oracle PO/AP
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Oracle PO/AP
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Oracle PO/AP
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Oracle PO/AP
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Oracle PO/AP
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Oracle PO/AP
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Oracle PO/AP
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No Tax Charged on Invoice -Accrue
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Correct Tax Charged on Invoice –Pay As Is
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No Tax Charged on Invoice -Accrue
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Correct Tax Charged on Invoice –Pay As Is
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Vendor Overcharge Tax –Pay As Is
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Vendor Undercharge Tax –Pay As Is & Accrue
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ONESOURCE ACCRUAL Report
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Oracle PO/AP
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Example AR (Sales) Process using SAP
SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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SAP AR – Sales Order
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TRANSACTION LIFECYCLE
TAX DETERMINATION TAX COMPLIANCE
Tax
Engine
Billing and
Purchasing Systems
Reporting Returns Filing
Determine,
Calculate, Record
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Automation of Tax Content Updates
Business
System
Audit
Database
“The Workbench allows us to simulate business
scenarios – as if we are connected with a live ERP
system”
1-Transaction
Data Elements
2-Tax
“Workbench”
DEMONSTRATING THE ENGINE / WORKBENCH
Tax Department
77
TRANSACTION LIFECYCLE
TAX DETERMINATION TAX COMPLIANCE
Tax
Engine
Billing and
Purchasing Systems
Reporting Returns Filing
Tax Certificate
Management
TAX CERTIFICATE LIFECYCLE
Certificate Received Certificate Reviewed Image Scanned Cert. Data Input
Tax Calc. w/Cert Data
Reports Run
Results Stored
Update Requests Made Status Reviewed
79
Tax Certificate Management - Search
Tax Certificate Management - Reports
Tax Certificate Management – Mail Notification
TRANSACTION LIFECYCLE
TAX DETERMINATION TAX COMPLIANCE
Tax
Engine
Billing and
Purchasing Systems
Reporting Returns Filing
Reconciliation
Reporting
Business
Analysis &
Audit
Reporting
Reporting
Transactions Determination Compliance Reporting
Localized Reports USA Canada VAT
Ad Hoc Reporting
Save Report Definitions
Daily, Monthly, Qrty Reports Audits ERP GL Reconciliation Reports No IT Involvement
Configuration Reports
84
Business Analysis Reporting
Audit Defense
ERP Reconciliation Reporting
ERP Reconciliation Reporting
TRANSACTION LIFECYCLE
TAX DETERMINATION TAX COMPLIANCE
Tax
Engine
Billing and
Purchasing Systems
Reporting Returns Filing
Compliance
Reporting
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ONESOURCE Indirect Tax Compliance
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ONESOURCE Indirect Tax Compliance
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ONESOURCE Indirect Tax Compliance
Compliance Workarea
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ONESOURCE Indirect Tax Compliance
Importing the Data
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ONESOURCE Indirect Tax Compliance Tax reports in the Workpapers section.
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ONESOURCE Indirect Tax Compliance Journal section for adjustments.
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ONESOURCE Indirect Tax Compliance Transfer section.
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ONESOURCE Indirect Tax Compliance Tax Returns section.
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ONESOURCE Indirect Tax Compliance The Tax Returns section. Looking at an Illinois ST-1 form.
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ONESOURCE Indirect Tax Compliance A PDF version of a completed Illinois ST-1 form.
TAX & ACCOUNTING 100
ONESOURCE Indirect Tax Compliance e-filing.
Integration – The Key To Automation
What does integration really mean?
102
Tax Solution
Types of System Integrations
ERP (i.e., SAP, Oracle, PeopleSoft)
XML
.Net
Java
Web Services
Flat File
???
Batch
Real-time
103
Real Example of Global Tax Automation
104
WEB SERVICES – The New Direct Integration
SOAP messaging framework
WSDL for web service consumption
Published and well defined XSDs
Example Tax Calculation Web Service
Call for tax determination, calculation, and
recording
Example Configuration Web Services
User Account Management Web Service
Company (Entity/Merchant) Web Service
Establishment Web Service (Nexus)
Product Mappings Web Service
Customer & Exemption Certificate Web
Service
105
Data File Integration - System Integration
106
• Calculate sales use and value-added taxes or validate
already-calculated taxes using a flat file report (also known as
a CSV, or comma-separated-value, file)
What is the Data File Integration for Indirect Tax?
Date Invoice # Item Customer Ship From Ship To Amount
107
• Calculate sales use and value-added taxes or validate
already-calculated taxes using a flat file report (also known as
a CSV, or comma-separated-value, file)
What is the Data File Integration for Indirect Tax?
Much More
108
Infrastructure?
Options
On Premise
Cloud
Hardware, Software, Network & Security
Minimizes IT Support & infrastructure costs
Upgrades & Updates Handled For You
Disaster Recovery
Minimal licensing costs
SLAs
Systems behind corporate firewall
Corporate data stored local
IT has direct / local control of system
Leverage existing hardware
Leverage existing software licenses
Up front investment recovered over time
110
Agenda
TAX & ACCOUNTING 111
INTRODUCTIONS AND SEMINAR OBJECTIVES
LUNCH
Q&A, WRAP-UP, CPE SURVEYS
IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION
INDIRECT TAX AUTOMATION – AN INTRODUCTION
Customer focus Global scale and presence Financial strength and stability
TAX & ACCOUNTING 112
THE THOMSON REUTERS ADVANTAGE
GLOBAL CAPABILITIES. LOCAL STRENGTH.
• 2012 Financial Results
• US $13 Billion in revenue
• Operating Profit $1.65 Billion
• $2 Billion in cash flow
• Global presence to better serve multi-
national corporations
• Over 60,000 employees in more
than 100 countries
• Thomson Reuter’s mission is to
provide intelligent information to the
world’s businesses and
professionals, giving our customers
competitive advantage.
• We do this by investing
in state of the art
technology,
• designing solutions
that integrate with
customer workflows,
• and investing in people
so that our solutions
are designed by
experts like you.
• 39th in Top 100 Global
Brands
•
• #2 globally for Financial
Data Services in
Fortune
Thomson Reuters Tax & Accounting - ONESOURCE - A Complete Global Tax Solution
TAX & ACCOUNTING 113
Global Tax Solutions
That Lead The Market
Reports
Compliance (Sales,Use)
Determination (Sabrix) i.e., Sales, Use, VAT, Excise, Special Fees
Tax Certificate Manager
Compliance VAT
Connections i.e., ERP, eComm, POS, Compliance, other
Indirect Tax Special Solutions i.e., Goods Movement
Compliance (GST.PST,HST)
INDIRECT TAX
INDIRECT
TAX
ONESOURCE Property Tax
Personal Property Returns
National Asset Classification
Tax Calculations
Up-to-Date Forms & Tables
Tax Bill Processing
Accounts Payable
Assessment Tracking
Valuation Analysis
Appeal Tracking
Automated Workflow
Budgets & Forecasting
Accruals
Deadline Information &
Reminders
Storage of Scanned Images
File Exports
E-mail Alerts
Comprehensive Reporting
SSAE Type II Certification
114
Questions?
Don’t forget to fill out those surveys
…and sign out (CPE Credit)
Thanks for joining us! (and drive safely back to the office)
TAX & ACCOUNTING 115