Using Avalara CertCapture to Automate the Exemption Certificate Lifecycle

USING CERTCAPTURE TO AUTOMATE THE EXEMPTION CERTIFICATE LIFECYCLEReduce non-taxed transaction audit risk, increase staff productiv-ity and improve the exempt customer purchase experience

The white paper, “Automating the Exemption Certificate Lifecycle,” described the three main software components—exemption certificate management (ECM), tax decision and enterprise resource planning (ERP) or billing software—in the exemption certificate lifecycle and the benefits of automating, such as reduced nontaxed transaction audit risk, increased staff productivity and improved exempt customer purchase experi-ence. This white paper details how your company can utilize Avalara CertcCapture as the ECM component and how it is critical to successful automation of the exemption certificate lifecycle.

Besides the powerful features CertCapture provides to collect and manage exemption certificates in an automated exemption certificate lifecycle, this white paper also illus-trates how the automated exemption certificate lifecycle can be included with Cert-Capture out-of-the-box using already built connectors. This means your IT department is not needed to integrate the three software components of the exemption certificate lifecycle. However, in cases where prebuilt connectors are not available, this white pa-per also illustrates how the three components can still be integrated using CertCapture Integration Services with the help of your IT department.

Quick FactPaper exemption certificate management methods cost a typical large business $350k/year in sales tax assessments alone.

Primary Reason: missing certificates

Introduction

Using CertCapture To Automate The Exemption Certificate LifecyclePage 2

Overview of the Exemption Certificate Lifecycle

The Exemption Certificate Lifecycle is the recurring process exemption certificates go through from their creation, to their ongoing use in future transactions and audits, to their renewal when they expire or are classified as invalid.

Figure 1

ECM Software

Customer and transaction data

Tax decisions (rules and rates)

Custom

er reco

rdsCertificate data

ERP/Billing Software

Tax Decision Software

Sales and Invoice origination

There are three primary components of the Exemption Certificate Lifecycle (Figure 1): ECM software, ERP or billing software and tax decision software. All three are critical for minimizing non-taxed transaction audit exposure, increasing staff productivity and improving the exempt customer purchase experience.

The Exemption Certificate Lifecycle consists of three primary steps initiated by a sales or invoice origination and certificate request, but thereafter, the cycle really never stops.

The process begins with the customer and the ERP software because this is where sales and invoices originate. When customers are exempt from sales tax, statutorily the seller needs to collect an exemption certificate from them. However, often times customers do not know what documentation to provide and those taking the order do not have the certificate expertise to know which documentation they need. In addi-tion, the certificate collection process itself can be time consuming because of the lack of knowledge on both sides or due to a lack of process on the seller’s side.

CertCapture solves these issues with intelligent automation. In the automated exemp-tion certificate lifecycle, customer data is passed to CertCapture, where certificate requests are generated to customers. CertCapture will track the status of requests and help ensure customers provide only valid certificates for their transactions. CertCapture can also retrieve and provide copies of certificates to auditors.

In addition, CertCapture serves as the “source of truth” for exemption certificates and will manage certificates, including tracking certificate expirations and certificates that have been deemed invalid by the tax department. The management of all certificate data plays a critical role in the tax decision software process.

Certificate data is passed to the tax decision software where sales tax decisions are made for invoicing. At this step, the ERP software also interacts with the tax deci-sion software because it needs to know what tax amount, if any, it needs to apply to invoices. If the tax decision software has accurate certificate data, then customers who are exempt from sales tax will be billed correctly. If not, then exempt customers will be billed incorrectly and the seller’s audit exposure and risk increases.


Automating using intelligent exemption certificate software enables you to:

• Increase speed and ease of certificate collection.• Improve validity of certificates submitted by customers.• Decrease billing errors for non-taxed transactions due to ERP and tax decisio soft-

ware having accurate information of which customers are sales tax-exempt.• Reduce non-taxed audit risk. Auditors end up finding very little to assess against.• Raise staff productivity by automating manual certificate processes.• Improve exempt customer purchase experience.• Eliminate manual entry of certificate data into the tax decision software and the

customer data into CertCapture.

Benefits of an Automated Exemption Certificate Lifestyle

The Automated Exemption Certificate Lifecycle is Built-InOne of the primary advantages of using CertCapture is an automated exemption certificate lifecycle is included out-of-the-box. There is no programming required or IT work needed for connecting the three software systems. This is because Avalara has already built connectors that pass data and operational instructions between the three systems.

With CertCapture, the operational instructions allow ERP users to send a certificate request, display a list of all certificates a customer has on file, view certificate images and display the status of a request, all within the customer record of the ERP.

These same connectors also integrate with the Avalara tax decision software, AvaTax, so the proper tax amounts are applied to invoices originating from the ERP. Since Av-aTax is an Avalara product, CertCapture is seamlessly connected to AvaTax.

The following Avalara connectors operate with CertCapture out-of-the-box: Intuit QuickBooks, Microsoft Dynamics AX, GP and NAV, NetSuite, and Sage ACCPAC, MAS 90/200 and MAS 500. Other connectors are being developed on an ongoing basis. However, using the AvaTax SDK (software developers kit), CertCapture can be integrated with any custom ERP.

Benefits of an Automated Exemption Certificate Lifestyle


If your company uses tax decision software other than AvaTax, like Vertex, Sabrix or Taxware, you can easily use CertCapture to automate the exemption certificate lifecycle. By using CertCapture Integration Services, your company can automate the export of certificate data out of CertCapture into your tax decision software.

CertCapture’ Integration Services accomplishes this through a simple web-based API (application programming interface) which can be accessed by developers using mod-ern programming languages, or by computer administrators using simple tools that are as easy to use as FTP (file transfer protocol). In either case, IT departments can set this up easily.

Using CertCapture to Automat the Exemption Certificate Lifestyle

For tax and credit professionals and other departments that deal with exemption cer-tificates, CertCapture supplies the tools necessary to increase productivity, improve the exempt customer purchase experience and reduce non-taxed transaction risk. Figure 2 lists ECM features rated important by tax professionals and how CertCapture matches up with these important requirements.

The chief advantages provided by CertCapture over standard ECM software and docu-ment management software are described in the following sections.

Central, Digitally Stored CertificatesCertCapture provides digital storage in a centralized database where certificates are easily accessible, enabling staff to quickly locate certificates. Since CertCapture is web-based, certificates can be accessed from any computer that has an Internet connection (no need for VPN), which means any employee with proper access, in any department, in any location around the globe can easily locate certificates. Searching can be con-ducted using a number of different search filters and when certificates are found, they can be viewed, printed or saved to a file.

Automated Collection of Valid CertificatesCertificate collection can be fully automated by CertCapture when integrated with an ERP. Integration enables the automatic importing of customer records and the sending of certificate requests from CertCapture on a schedule you decide. Certificate requests can be sent via email, fax or mail to any customer in the world. The system also allows manual imports of customer records and sending of certificate requests with just a click of a button.

ECM Software Features rated important by Tax Professionals:

Features Requested by Tax Professionals (Avalara CertCapture Features)

• Centralized, digital

• certificate storage

• Easy lookup of certificates

• Automated collection

• of certificates

• Collection of complete and

• accurate certificates

• Automated certificate

• renewal collection

• Review tool to accept or

• reject collected certificates

• Auditor tools

• Integration with ERP/billing

• and tax decision systems

• Productivity and risk reports

• Web-based application

• Collect and manage certificates

• based on bill-to/ship-to or

• job hierarchy

• Data security

1 Avalara survey conducted in March 2009. Businesses ranging in revenue size between $50 million and over $1 billion in annual revenue.

Figure 2

Benefits of Using CertCapture to Automate the Exemption Certificate Lifestyle


By initiating certificate requests through CertCapture, staff can utilize additional powerful functionality described below to help ensure valid certificates are collected quickly:

Customizable Request Letter Templates. CertCapture allows you to customize the language and insert customer and certificate information you want in your cer-tificate requests. Send Certificate Requests Directly from ERP. With the use of Avalara’s connectors, certificate requests can be sent directly from the ERP with a click of a but-ton without the need to be logged into CertCapture.

Automated Retail and Ecommerce Certificate Collection. CertCapture is easily integrated with POS systems and online shopping carts to automate the look up and collection of certificates in these sales channels, while also improving the exempt customer purchase experience.

Web and Rules-Based Certificate Creation Wizard. No other ECM software has a web and rules-based certificate creation wizard. The wizard asks customers a few simple questions to determine the correct form needed for their sales tax exemption. The wizard also ensures that every required field is completed before the certificate is submitted. These best practices ensure you collect valid certificates.

Vast Library of Certificates. CertCapture contains certificates for nearly all sales tax exemption reasons. Avalara also has an ongoing review process that ensures new certificates and changes to existing certificates are quickly incorporated into the Cert-Capture library.

Track Certificate Requests. Staff will know if a customer has started the process of submitting a certificate and if the system has received a completed certificate from the customer.

Send Follow-Up Reminders. The system can send up to three reminders via email, fax or mail to customers who have not yet sent completed certificates.

Electronic Signatures. CertCapture is the only ECM software that enables customers to create and sign applicable certificates online using their mouse. This reduces paper and fax costs and helps ensure that certificates do not get lost. The moment a cus-tomer signs a certificate electronically, the certificate is instantaneously captured in the system and is immediately available for tax department review.

Bar Code Technology. Some requests and generated certificates are given a bar code that associates them with a specific customer record and form. If customers fax their completed certificates, the system will automatically index, image and associate the certificates with the customer records and forms to set the form expiration rules.

Reduced Time Spent Managing CertificatesCertCapture automates and simplifies the workflows associated with managing certificates.

Certificate Review Tool. When certificates are received into the system, they are queued up for review. If needed, staff can review each certificate and decide whether the certificate is accepted/valid or rejected/invalid. If rejected, the system will automat-ically queue a renewal request to the customer including the reason why the certificate was rejected and asking for a corrected certificate.

Built-In Certificate Expiration Rules. CertCapture contains expiration rules for each certificate and can queue renewal requests for certificates before they actually expire. This allows staff to be proactive and collect new valid certificates before exist-ing ones expire.

Automatic Queuing of Certificate Renewal Requests. When certificates are re-jected or have expired or are about to expire, CertCapture will automatically queue re-newal requests to customers asking them to provide corrected or updated certificates. These requests will already have the reasons why certificates need to be renewed and only need to be sent with a click of a button.

Convenient Means of Providing Certificates to Auditors When auditors review sales tax transactions and say they want to see the certificates for specific transactions, CertCapture enables staff to easily locate all requested certifi-cates and either bulk print or save the certificate images for auditors.

Improved Non-Taxed Billing Accuracy. By integrating CertCapture with tax decision and ERP software and automating the exemption certificate lifecycle, CertCapture can significantly improve billing accuracy for non-taxed transactions. Thereafter, non-taxed invoices will use current certificate information, reducing audit exposure and customer complaints due to inaccurate sales tax billings. Even without integration, CertCapture can improve billing accuracy because staff will be able to quickly collect valid certificates and easily find them when needed for billing.

CertCapture prevents short pays, sales tax-only refunds and credit memos because it helps enable correct billing for exempt transactions

Eliminate Non-Taxed Audit ExposureAs already described, CertCapture, built-in intelligence and best practices help ensure you collect valid certificates, bill non-taxed transactions accurately and store all certifi-cates in a centralized location. During an audit, your company will be able to provide all requested certificates and have confidence in the validity of the certificates you provide to an auditor.


Integration with Tax Decision and ERP SoftwareThis is the foundation for automating the exemption certificate lifecycle. As noted earlier, CertCapture is already integrated out-of-the-box with many popular ERPs with no need for programming or IT assistance. In addition, CertCapture is already seam-lessly integrated with AvaTax, regardless of the ERP your company uses. In cases where tax decision software other than AvaTax is used, or where there is not an already built connector to an ERP, CertCapture can still be integrated with these backend systems by using the AvaTax SDK or CertCapture Integration Services.

Eliminates Manual Entry of Certificate and Customer DataWhen new certificates are added or existing certificates are changed in CertCapture, this certificate data is automatically transferred to the tax decision software, eliminat-ing the need to manually enter this data and eliminating data entry errors.

Likewise, when new customers are added or existing customer data is changed in the ERP, this customer data is automatically transferred to CertCapture removing the need to manually enter this data and eliminating data entry errors.

Displays Certificate and Request Information Within ERPThrough the use of the pre-built connectors or through the AvaTax SDK, your ERP can perform various CertCapture operations without the need to be logged into CertCap-ture. These operations are the ability to send certificate requests and display a list of certificates a customer has on file, the certificates images and the status of certificate requests with a click of a button.

Productivity and Risk ReportsCertCapture has several reports that provide an analysis of certificates and potential exposure. For example, which customers and non-taxed transactions do not have valid certificates. CertCapture also includes other reports about certificate requests and staff productivity. These reports provide management an extra lever to reduce non-taxed audit risk and to improve staff productivity.

Increased Staff Productivity Through Automation of Manual Certificate ProcessesCertCapture automates many certificate workflows such as the collection of certifi-cates, tracking of expirations, tracking of requests, importing of customer records from ERP software, exporting of certificate data to tax decision software and renewing of expired and invalid certificates.

In addition, CertCapture, built-in best practices and rules-based certificate wizardprovide the certificate expertise that is needed by customer facing staff like credit,sales and customer service in order for your company to ensure it is always collectingvalid certificates.

Improves the Exempt Customer Purchase ExperienceUsing CertCapture to automate the exemption certificate lifecycle ensures ordersplaced by exempt customers will be processed quickly because your ERP will alwaysknow if there is a valid certificate on file. If no certificate is on file, CertCapture canquickly collect a valid certificate in minutes and then provides the new informationto your ERP system to quickly process the order with the correct sales tax amount.In a retail or online environment, CertCapture improves the customer experiencethrough quick, online certificate collection, and no disruption in the purchaseprocess—customers don’t have to wait.


The retail version of CertCapture allows store personnel to lookup and collect certifi-cates quickly in the store or other places where business is conducted face-to-face with customers. The Retail edition can also be integrated in point-of-sale systems to automate the real-time lookup and collection of certificates in the store. CertCapture Retail edition includes all features and benefits described in this white paper. For more information, visit http://www.avalara.com/products/CertCapture/retail.

Likewise, CertCapture can also be used in ecommercee transactions. This provides shopping carts the ability to automatically lookup and collect certificates in real-time without disrupting the online purchase process. For more information, visit http://www.avalara.com/products/CertCapture/ecommercee.

Retail and Ecommerce Certificate Lookup and Collection

Using AvaTax CertCapture for Retail has reduced one company’s chargebacks, saving over $100K/month after the first few months of using the system.

This translates to over $1 million savings per year, not including cost savings from productivity improvements.

There are many ways that Avalara and CertCapture protects your data.

1. Avalara is SAS-70 compliant which means CertCapture has passed an indepen-dent audit of its processes for security and controls.

2. All transferred data is encrypted with SSL.

3. Data access requires proper authentication.

4. CertCapture enables defined roles which limits staff access to certain areas of CertCapture.

5. All data is stored with redundancy on main and backup servers in separate loca-tions with 24/365 security.

Peace-of-Mind Data Security


CertCapture is flexible and powerful enough to work in virtually any type of industry, business and business process that deals with exempt sales tax transactions. Compa-nies across nearly all industries are using CertCapture today to lower their non-taxed transaction audit risk, increase staff productivity and improve the exempt customer purchase experience.

Manufacturers, Wholesalers, and DistributorsA resale sales tax exemption is the most common exemption reason and since the business nature of manufacturers, wholesalers and distributors is to resell product, the most common usage of CertCapture is within these industries. These businesses range from technology, industrial, medical, consumer, construction and many other types of manufacturers, wholesalers and distributors. Many businesses of all sizes in these industries are using CertCapture.

Retailers, Ecommerce, and Other Point-Of-Sale BusinessesRetailers face a particularly perplexing challenge when it comes to sales tax-exempt transactions and the collection of exemption certificates in the store. How can store personnel efficiently lookup whether a customer has a valid exemption certificate with the company and if not, how can they rapidly collect a valid one and make sure that the paperwork gets sent to corporate headquarters, where it can be stored and managed? As if that is not enough, store personnel must do all this while also trying to process the transaction quickly and satisfy the customer.

One well-known retailer uses CertCapture Retail in over 200 U.S. and Canadian stores. Since using CertCapture Retail, the company has seen their store chargebacks due to incomplete and missing exemption certificates decrease by 80%, saving over $100K/month, after just the first few months of using the system. This is an annualized savings of over $1 million and does not even include cost savings from productivity improvements.

CertCapture Retail accomplishes this because it enables real-time lookup and collec-tion of certificates in the store. It can also be integrated into POS systems to automate the lookup and collection of certificates in the store. The system enables customers to sign certificates with a signature pad or mouse to eliminate the risk of losing paper certificates. Visit http://www.avalara.com/products/CertCapture/retail for more information on CertCapture Retail edition.

Businesses that have ecommercee transactions face the same exempt purchase chal-lenges as traditional brick-and-mortar retailers. CertCapture Ecommerce can be easily integrated with online shopping carts to automate the real-time lookup and collec-tion of certificates. Plus, it can perform these functions without disrupting the online purchase process. Visit http://www.avalara.com/products/CertCapture/ecom-merce for more information on CertCapture Ecommerce.

Common CertCapture Industry Uses

About AvalaraBased on Bainbridge Island, Washington, Avalara is transforming the sales and use tax compliance process for businesses of all sizes. With point-and-click ease, Avalara pro-vides the fastest, easiest, most accurate and affordable way for companies to address their sales and use tax compliance. Avalara is the industry’s most trusted provider of solutions, serving more than 40,000 registered users located throughout the U.S., Canada and abroad, delivering more than 350 million sales tax transactions, and filing and remitting more than $10 billion in tax collections per year.

There are three main software components for automating the exemptioncertificate lifecycle: ECM, tax decision and ERP/billing software. The automation ofthe exemption certificate lifecycle provides the following benefits:

• Increases the speed and automation of certificate collection.• Improves the validity of certificates submitted by customers.• Decreases non-taxed transaction billing errors since ERP and tax decision software

will accurately know which customers are sales tax exempt.• Reduces non-taxed audit risk. Auditors end up finding very little to assess against.• Increases staff productivity by automating manual certificate processes.• Improves the exempt customer purchase experience.• Eliminates manual entry of certificate data into tax decision software and cus-

tomer data into ECM software.

CertCapture is intelligent ECM software, fully enabling all the benefits of an automated exemption certificate lifecycle. CertCapture delivers out-of-the-box integration with the use of pre-built connectors. This means IT departments are not needed to integrate the three software components. In cases where connectors are not pre-built, the exemption certificate lifecycle can still be automated with CertCapture using CertCapture Integra-tion Services or the AvaTax SDK.

Many businesses across nearly all industries have been using CertCapture successfully to reduce non-taxed transaction audit risk, increase staff productivity and improve the exempt customer purchase experience. CertCapture is the only intelligent ECM software flexible and powerful enough to automate the exemption certificate lifecycle for businesses of all sizes and across nearly all industries.

Summary

Getting started with Avalara is easy. Take the next step toward automating your sales tax process.Call: 877-780-4848Visit: www.avalara.com

Using Avalara CertCapture to Automate the Exemption Certificate Lifecycle

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