SURVIVING A SALES TAX AUDIT AN INSIDER S VIEW

Size: px

Start display at page:

Download "SURVIVING A SALES TAX AUDIT AN INSIDER S VIEW"

Abner Ralph Campbell
6 years ago
Views:

1 SURVIVING A SALES TAX AUDIT AN INSIDER S VIEW ONESOURCE Indirect Tax The Tax & Accounting Business of Thomson Reuters CARLA YRJANSON March 7, 2013

2 Upcoming Events Webinars: March 14, AM PST (2PM EST) ONESOURCE Indirect Tax Latest Features and Functionality of Reporting March 21, AM PST (2PM EST) Managing Complex Indirect Taxation in Brazil s Economic Renaissance Events: March 19 22: SAP Financials March 17 20: TEI Mid-Year Conference 2013 April 7 11: Oracle Applications User Group REUTERS

Financial strength and stability Since formed in

4 Billion Global scale and presence Global

corporations Customer focus Thomson Reuters is

information for businesses and professionals We

technology, Over 50,000 employees in more than

3 THE THOMSON REUTERS ADVANTAGE GLOBAL CAPABILITIES. LOCAL STRENGTH. Financial strength and stability Since formed in 2008 the Thomson Reuters brand is ranked 39 out of 100 in Global Brand Recognition. A recognized company Look at last years annual report 2010 Revenues: US $13.1 Billion 2010 Operating Profit: $1.4 Billion Global scale and presence Global presence to better serve multinational corporations Customer focus Thomson Reuters is the world s leading source of intelligent information for businesses and professionals We do this by investing in state of the art technology, Over 50,000 employees in more than 100 countries designing solutions that integrate with customer workflows, and investing in people so that our solutions are designed by experts like you.

4 BUSINESS OVERVIEW: ONESOURCE INDIRECT TAX Thomson Reuters formed the ONESOURCE Indirect Tax product line from 3 renowned brands to deliver an end-toend automated solution for managing the indirect tax compliance lifecycle: TAX DETERMINATION: Sabrix (Sabrix, Inc. acquired by Thomson Reuters in December 2009) SALES & USE TAX COMPLIANCE: ONESOURCE Sales & Use Tax VAT COMPLIANCE: Abacus VAT

5 INDIRECT TAX SOLUTION OFFERING DOMESTIC COMPLIANCE U.S. AND CANADA Sales & Use Tax Compliance GLOBAL TAX DETERMINATION Sales & Use Tax, VAT Determination Calculation VAT COMPLIANCE Data import and consolidation Regulatory Compliance Global Tax Content & Research Working papers and data analysis Consulting Reporting Reporting ERP Integrations (i.e. SAP, Oracle) Manual adjustments Consulting Services Returns, efiling and reconciliation Tax Certificate Manager

6 Today s Speakers Carla Yrjanson, CPA VP of Tax Research & Content Leads Tax Research & Content Team for Indirect & Property Tax Responsible for delivering Sales/Use Tax and Value Added Tax rates/rules for 175 countries Former Revenue Auditor with Washington Dept of Revenue Former Tax Manager with PWC

7 Agenda Survey results highlighting the average cost of penalties & interest resulting from audit Probability of an audit Current events impacting sales and use tax Top 10 ways you can trigger an audit in your business Minimizing audit exposure Proactive tips for addressing an audit Q&A

want to run the risk of an audit. The reality is, if you do it right, you,, don t have any issues.

8 Small & Mid-market CFO Study 500+ SMB CFOs independently surveyed Respondents came from companies ranging in size from $20 million to just under $1 billion in annual revenue Across a range of industries, We want to be accurate, and don t want to run the risk of an audit. The reality is, if you do it right, you,, don t have any issues. If you don t do it right, it ends up costing you in the long run. Survey conducted by Tallman Insights and fielded by Mindwave Research, 2006

SMB CFO Study Findings Independent survey* of over 500

than $130,000 in annual costs to manage sales and use tax Yet

penalties and interest due to errors and omissions Cost of

costs are so fragmented $10,000 Penalties & Interest $15,000

$130,000 Annual Costs $35,000 Third Party Costs $45,000 Staff

9 SMB CFO Study Findings Independent survey* of over 500 Mid-Market CFOs: Small to mid-sized companies average more than $130,000 in annual costs to manage sales and use tax Yet they still end up paying an average $10,000 each year in penalties and interest due to errors and omissions Cost of compliance has been underestimated by as much as 50% because costs are so fragmented $10,000 Penalties & Interest $15,000 Tax Research Subscriptions $25,000 Tax Advisory & Consulting $130,000 Annual Costs $35,000 Third Party Costs $45,000 Staff Costs Survey conducted by Tallman Insights and fielded by Mindwave Research, 2006

Not If, But When You Will Get Audited Despite best efforts, your errors will be found 100 90% of companies were audited once or more a year, 55% received 5 or more audits Even though 43%

10 Not If, But When You Will Get Audited Despite best efforts, your errors will be found % of companies were audited once or more a year, 55% received 5 or more audits Even though 43% subscribed to tax rate tables, the average penalties and interest amounted to over $10,000 a year or more audits per year At least one or more audits per year

California Door-to-Door Visits Statewide Compliance and Outreach Program (SCOP) California Board of Equalization (BOE) specialists have visited more than 353,000 businesses statewide ensuring that

11 California Door-to-Door Visits Statewide Compliance and Outreach Program (SCOP) California Board of Equalization (BOE) specialists have visited more than 353,000 businesses statewide ensuring that California businesses are properly registered and paying taxes 56 BOE specialists are going door-to-door based on zip code BOE has found that 2% of businesses operating in California do so without permits or licenses.

12 State Tax Revenues Increase Local Tax Revenues Decrease Nelson A. Rockefeller Institute of Government Report State Sales Tax collections in Q showed growth of 2.7% from Q of 45 states with broad-based sales taxes reported growth in sales tax collections for the quarter 4 states reported double-digit growth North Dakota 30.3% Florida 10.3% Texas 13.3% Hawaii 12.8%

13 Top 10 Audit Triggers Nexus but not registered Observation Exempt Sales Use Tax High Net Sales Charging the Wrong Rates History of Assessments Unique Rules and Regulations Whistle-blowers/Referral from other taxpayers Acquisitions/Growth

Understanding Audit Exposure Audit exposure = Potential audit assessment by a tax auditor Audit exposure is caused by: Incorrect tax based on the tax status of the purchaser Incorrect tax based on

14 Understanding Audit Exposure Audit exposure = Potential audit assessment by a tax auditor Audit exposure is caused by: Incorrect tax based on the tax status of the purchaser Incorrect tax based on the type of item sold Incorrect tax rate applied to the purchased items Missing documentation for exemptions/deductions Unreported tax amounts Incorrectly reported tax Weak record-keeping/systems Interpretation of taxability

Reducing Audit Exposure Key resolution - being proactive and doing things right the first time Conduct an internal audit Put yourself in the shoes of the auditor

15 Reducing Audit Exposure Key resolution - being proactive and doing things right the first time Conduct an internal audit Put yourself in the shoes of the auditor Evaluate accuracy and compliance Document strengths and weaknesses Develop a plan to address weaknesses/areas of risk Drive changes towards a world class tax management practice

Proactive Audit Tips Stay Calm & Get Organized Preparation, Self-audit Communication with the Auditor Clear, direct, honest Taxpayers Bill of Rights/Responsibilities Protect the rights, privacy, and

16 Proactive Audit Tips Stay Calm & Get Organized Preparation, Self-audit Communication with the Auditor Clear, direct, honest Taxpayers Bill of Rights/Responsibilities Protect the rights, privacy, and property of taxpayers Register, know tax obligations, keep accurate and complete records Use the Services of a Tax Professional during the Audit Do it Right the First Time Tax automation, return preparation services

17 Question & Answer

18 Contact Information Contact us (888)

Indirect Tax for the Retail Industry. Retailers get tax right. The first time, every time.

Indirect Tax for the Retail Industry Retailers get tax right. The first time, every time. Introduction Preserving revenue and optimizing cash flow are always top priorities for businesses, but achieving