Taxation - and tax compliance - can be a confusing and time-intensive but necessary burden for any accounting/finance team, regardless of the size of the organization.

Often, the task of taxation is left to companies outside of the organization that are familiar with all of the tax rates associated with the countries, states or provinces, counties, and cities and towns.

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Tax regulations vary greatly by jurisdiction, country, industry, and service type. Successful organizations often build revenues on more than one product or service offering and in more than one region/tax jurisdiction. Bundled products, each potentially with unique tax regulations, can be difficult for tax managers to account for in a subscription revenue model. Companies unable to apply taxes appropriately risk revenue leakage and regulatory scrutiny.

Savvy tax engines enable companies to calculate tax for customers and services, which can be presented clearly and accurately on a customer statement.

Such offerings can be packaged inside the billing engine or provided by a third party that utilizes API integration to pass customer and tax information quickly and securely from one system to another. Some companies use a mix of tax services and the basic tax calculations available in CPQ and Billing platforms. Ideally, tax calculation would be an integrated component in all transactions. To achieve the best taxation function, it is critical to collect requirements for tax at the beginning of a CPQ project.

Key Taxation Terminology

Nexus

The contact defined by a tax authority that is required between a seller and a state to trigger a requirement for the seller to register, and then collect and remit sales tax in the state.

Tax Code

Can also be known as a “goods and services type” is a code that determines the taxability of your products and services. For example, a tax code exists for “Restaurant industry – bar supplies” as well as “Advertising - public relations” and thousands upon thousands of other products and services. 

Legal Entity

A company (or organization) with taxation responsibilities, such as tax filings, created under one of a variety of options for structuring corporations (Sole proprietorship, C Corp, etc.) Legal entities can be known by many different terms, for example, named differently in various vendors’ systems. An example of this could be ATG US vs. ATG Canada vs. ATG London.

Tangible Personal Property

Property that can be moved or touched, for example, inventory and business equipment. It is important to understand how the state defines TPP and IPP.

Intangible Personal Property

Non-physical/intangible inventory such as stocks, bonds, or intellectual property. It is important to understand how the state defines TPP and IPP.

Estimated Tax vs. Actual Tax

Estimated tax is typically calculated to appear on the Quote, while Actual tax during the time of sale and is presented on the Invoice.

Exemption Certificate

When a jurisdiction’s rules allow for a sale to be tax-exempt, this certificate validates the tax-exempt purchase to the seller. 

Notice & Reporting Requirements

Require out-of-state sellers that are not currently collecting and remitting applicable taxes to report sales information for tax purposes to the state (through registration for a sales/use tax permit in that state) or to the consumer (each one... and to provide a list of your customers to the state). 

Remittance

Sending the tax collected from the customer to the appropriate party with a local or federal tax authority. 

Taxation Components

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Rate Calculation

Determining the correct tax rate is a challenge, as taxability and rates can differ across a multitude of factors such as, tax nexus, which is determined by customer, vendor, distributor locations, and even server location (could be international or domestic), software versus services, including recurring/subscription selling models for tangible and intangible personal property, transactions taxable in separate locations based on the sourcing or method of delivery, and sales tax holidays or tax-exempt transactions.

Over time, there will be several factors that are likely to add additional complexity to calculating your business’ tax obligations. Rules and regulations are regularly subject to change and as the business expands, higher volumes will need to be accommodated with speed and scale.

Estimated tax can be calculated and provided during quoting or ordering, while actual tax will be available upon invoicing. This is just another effect of the frequency of changes in tax rates.

Tax engines will require data points such as product tax code and account shipping address (or other relevant tax calculation address), legal entity, etc. to correctly calculated tax obligations and amounts. Based on the system’s configuration options, these attributes can usually be used to create tax treatments and rules for standardization.

File & Remit

Companies are required to register to file and remit tax with a local or federal tax authority where they have nexus. The responsibility to file, and to determine where to file, lies with the business. Businesses must also plan for a variety of filing schedules based on jurisdiction or holidays, and different jurisdictions will have variations in their methods for filing.

Certificate Management

If certificates expire it may result in the business being liable for paying an uncollected tax as they would be unable to prove tax was not due on a particular sale. An organization must monitor the renewal periods of their exemption certificates and implement a process to mitigate this risk.

There are different types of exempt organizations, and under a state’s statutes, different purchasers may and may not be exempt. Common examples of exemptions are:

  • The federal government (states are prohibited from taxing direct sales)
  • State/local governments and government contractors
  • Non-profits (including hospitals) and charitable organizations
  • Schools, churches, PTAs

Tax Compliance

What triggers a tax nexus for your business? It is advisable to assess your business’ risk of owing taxes well in advance to manage compliance. Particularly for businesses utilizing recurring billing, there is a repeated source of sales tax risk associated.

People, Process, and Technology of Taxation

People

Taxation is a domain primarily owned by the Finance organization, while three other company orgs directly touch taxation processes.

FINANCE

Finance - Billing

Operations

I.T.

Process

Twenty-three of ATG's 99 Key Monetization Processes fall within the Taxation domain. Below is a list of those processes, grouped by the org primarily responsible for stated process:

FINANCE

Tax Processing & Filing

Methods used to streamline complicated taxation rules and regulations, including the accurate filing of corporate income and sales tax information.

FINANCE

Actual Tax Calculation

The process of calculating the actual tax to charge the customer, at the time of invoice.

FINANCE

Exception Certificate Management

The methods of managing registration, storage, and renewal of all applicable exemption certificates, preventing the company from paying taxes where they aren’t owed.

FINANCE

Tax Determination

The method to define how tax will be applied and where for each entity.

FINANCE

Financial Statement Preparation

Production of accurate, auditable, and presentable financial statements in the most efficient manner possible.

FINANCE

Currency Conversion

The point within a multinational company's sales cycle where currency is converted. This conversion may occur at the transaction or during the commissioning process, and must be carefully monitored to ensure accurate conversion rate and payment amount, and to enable standardized reporting.

FINANCE

Update Tax Rates

Refers to updates to tax rates with regulation changes at local and federal levels.

FINANCE

Assign Nexus

The process of determining the contact required between a seller and a tax authority has occurred, assigning the appropriate jurisdiction or nexus for taxation regulation.

FINANCE

Tax Filing & Remittance

The methods used to track filing requirements, complete filings, and remit taxes to the appropriate tax authority as determined by nexus.

FINANCE

Jurisdiction Registration

The process of registering for the identified tax authority as determined by nexus.

FINANCE

Estimated Tax Calculation

The reference to the calculating of the estimated tax during the sales cycle, typically during quoting.

SALES / FINANCE

Sales Reporting

Collecting and analyzing data to inform on key sales and company performance metrics, including revenue and cost analyses, individual and team performance, employee churn, and sales to business model alignment.

FINANCE - BILLING

Bill Day Usage Processing

The process of invoicing usage that has been accumulating since the previous statement/invoice period. Bill day usage processing includes calculation of charges, potential overage, decrementing credit balances, and managing rollover and pooled usage constructs.

FINANCE - BILLING

Bill Run Operations

Tasks and functions associated with initiating and maintaining the billing process, including bill cycle management, usage file management, payment batches, credit card rejects, etc.

FINANCE - BILLING

SOX/Regulatory Compliance

The ability to provide proof of internal controls to prevent fraud and material misstatements.

OPERATIONS

Order Management - Orchestration

The business processes related to customer orders for products or services. Typically important when there are complex products and services that span multiple provisioning and fulfillment options. Bundling of disparate products, or bundling of products and services (PS, Training, etc.) can add to the need for Order Management.

I.T.

Cross-Training of Monetization Ecosystem Components

Process for training organizational resources

I.T.

Data Stewardship Across Monetization Ecosystem

Process of assigning ownership and sources of truth for data within the organization.

I.T.

Maintenance & Oversight of Monetization Ecosystem

Process around assuring that all touchpoints and connections in the ecosystem are optimized and working to their full potential.

I.T.

Monitoring & Testing of Vendor Functional Releases

As ecosystem components release updates and patches, each is checked and tested to confirm all systems are working together as required by the business' requirements.

I.T.

Security Oversight of Monetization Ecosystem

Process for maintaining and controlling access and permission to ecosystem components.

I.T.

Vendor Management of the Monetization Ecosystem

Management of ecosystem component vendors including proactive communication of changes and general relationship nurturing.

ALL

Daily, Periodic, or Ad Hoc Reporting (ETL, Report, Dashboard)

Movement of data between domains to create a single source of truth for reporting and dashboarding. Includes key metrics such as revenue analytics and other KPIs

Technology

The solutions found in the Taxation domain consist of internal, OOTB, or custom tax engines (such as in Salesforce Billing), and third-party tax engines with integrations. Prebuilt integration to these tax services with your quoting and billing systems is a critical consideration. Custom integrations are costly and negatively impact timelines and risk. Prebuilt integrations also bring benefits like access to a supported database of millions of tax rates and rules.

Key Taxation Vendors

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ESSENTIALS

Founded: 1979
HQ: New York, NY
Company Type: Public
Website: www.chasepaymenttech.com
Delivery Method: Cloud

OVERVIEW

Chase Paymentech is a web-based merchant service allowing retailers to accept payments in store, online, or on the go. Paymentech also provides web-based access to transaction data, advanced web-based reporting, an online chargeback interface, and optional fraud management tools.

PRODUCT FEATURES:

This offering allows the user to:

  • Reconcile payment operations using daily, weekly, or monthly financial reports
  • Manage chargeback online with 24/7 access to comprehensive transaction data
  • Reduce errors resulting in chargebacks
  • Control employee access to customer and business-related information
  • Create customized fraud filters to manage risk

Paymentech screens for high-risk transactions, electronically captures, stores, and exchanges chargeback documents, and provides direct contact numbers for card issuing banks.

TARGET MARKET

Chase Paymentech tends to target companies of all sizes, including enterprises, which are in need of data management tools.

CUSTOMERS

  • Valley Ranch Pet Clinic
  • David Mayhew Photography
  • Skin Sanctuary
  • Irina's Alteractions
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ESSENTIALS

Founded: 1994
HQ: Foster City, CA
Company Type: Privately Held
Website: www.cybersource.com
Delivery Method: Cloud

OVERVIEW

CyberSource is a Visa, Inc. company providing an e-commerce credit card payment gateway. This company works with over 400,000 medium-to-large sized merchants worldwide to process online payments while utilizing fraud and security management.

PRODUCT & SERVICES:

Featured solutions include:

  • Global Expansion
  • Mobile and Cross-Channel Payments
  • Streamlining PCI Management
  • Optimizing Fraud Management

CyberSource also provides implementation and maintenance support, as well as merchant and partner payment management solutions.

TARGET MARKET

CyberSource tends to target enterprise companies such as manufacturers, service businesses, and education and e-government entities, as well as medium-sized businesses.

CUSTOMERS

  • Traveloka
  • LINE Thailand
  • China Eastern
  • Qunar
  • Television Broadcasts Limited (TVB)
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ESSENTIALS

Founded: 1981
HQ: Newcastle, UK
Company Type: Public
Website: www.sage.com
Delivery Method: Cloud

OVERVIEW

Sage Payment Solutions is a payment solutions and payment processing company allowing customers to pay via debit/credit card, electronic check and ACH, gift card, and mobile processing.

PRODUCT & SERVICES:

Additional processing solutions include:

  • Payment Card Industry (PCI) certification, merchant validation/certification, and PIN transaction security
  • Electronic entry of one-time or recurring payments through a virtual terminal
  • Processing and depositing of business and consumer checks at Point-of-Sale
  • Design and customization of pre-designed gift and loyalty cards

Sage Payment Solutions also enables integration with accounting and ERP software, while providing service and support for loss prevention and charge back assistance, underwriting, and more.

TARGET MARKET

Sage Payment Solutions tends to target small to medium sized businesses of every industry, from retail to healthcare.

CUSTOMERS

  • VGloryBee
  • Power Distributing
  • Merit Electric
  • Tanamera Construction
  • Harpoon Brewery
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ESSENTIALS

Founded: 1971
HQ: Symmes Township, OH
Company Type: Public
Website: www.vantiv.com
Delivery Method: Cloud

OVERVIEW

Vantiv acquired privately held Litle & Co. in December 2012. Vantiv is comprehensive in-store and online solution for merchants and financial institutions of all sizes. In-store technologies range from stand-alone devices to integrated POS solutions for credit cards, mobile payments, and ACH and checks. Online capabilities include credit, debit, and prepaid card acceptance as well as international payments.

PRODUCT FEATURES:

Vantiv has features that include:

  • Fraudulent and card data protection
  • Payment security threat protection
  • Current and historical reporting insights
  • Customer and technical support
  • Integrated payment processing

Vantiv provides application, contract, underwriting, and provisioning solutions, chargeback analysis and reporting, and at-risk merchant monitoring and support. Additional services include gift and prepaid cards processing, and merchant financing.

TARGET MARKET

Vantiv tends to target enterprise merchants, financial institutions, government entities, and payment facilitators, as well as small-sized businesses in retail, restaurant, and service industries.

CUSTOMERS

  • Rabobank N.A.
  • USPS
  • Ingenico Group
  • Centier Bank

Taxation Vendors 

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ESSENTIALS

Founded: 2004
HQ: Seattle, WA
Company Type: Public
Website:  www.avalara.com
Delivery Method: Cloud

OVERVIEW

Avalara lives and breathes tax compliance, so its customers don’t have to. Avalara is building a cloud-based tax compliance solution to handle every transaction in the world. Avalara’s customers experience demanding tax obligations that are imposed by state, local, and other tax authorities around the world, they use Avalara for efficient and more accurate solutions to manage those requirements.

PRODUCT & SERVICES:

  • Sales Tax Automation
  • Sales Tax Compliance
  • Tax Return Filing Services
  • Exemption Certification Management
  • Ecommerce Integrations
  • Tax Insights

TARGET MARKET

Avalara’s target market are companies of all sizes that face tax challenges such as company growth, tax complexity, compliance risk, process inefficiency, employee burnout, and much more.  

CUSTOMERS

  • Zillow
  • Roku
  • Converse
  • Thule
  • ThinQ
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ESSENTIALS

Founded: 1987
HQ: Alphen aan den Rijn, Netherlands
Company Type: Public 
Website: www.wolterskluwer.com
Delivery Method: Cloud and On-Premise

OVERVIEW

Wolters Kluwer is a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. Wolters Kluwer enables customers to make critical business decisions by providing expert solutions that combine extensive domain knowledge with specialized technology and services. They enable tax and accounting professionals and businesses of all sizes to drive productivity, navigate change, and deliver better outcomes.  

PRODUCT & SERVICES:

  • CorpSystem
  • Accounting Publications
  • Accounting Research Manager
  • IntelliConnect
  • Tax Solutions
  • Audit Services
  • TaxWise

TARGET MARKET

Wolters Kluwer target market includes a wide range of industries that include many fortune 500 companies.

CUSTOMERS

  • Nissan
  • United Airlines
  • Walmart
  • Novartis
  • Dell
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ESSENTIALS

Founded: 2013
HQ: Woburn, MA
Company Type: Privately Held
Website: www.taxjar.com
Delivery Method: Cloud

OVERVIEW

In June of 2021 TaxJar was acquired by Stripe, with the vision of uniting commerce and compliance to help grow the GDP of the internet. With over 20,000 companies that rely on TaxJar to stay tax compliant they are an industry leader. Founded on the basis of helping ecommerce merchants spend less time on sales tax and more time on growing the business.  

PRODUCT & SERVICES:

  • Sales Tax Complicance
  • Tax Filing Remittance
  • Tax Calculation
  • Ecommerce
  • Accounting
  • API
  • Nexus Insights

TARGET MARKET

TaxJar's target market extends through small businesses to mid-size and large enterprises, with a focus on those who take part in Ecommerce.

CUSTOMERS

  • Land Rover
  • Shein
  • Curology
  • Quip
  • Mailchimp
  • Eventbrite
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ESSENTIALS

Founded: 1978
HQ: Kind of Prussia, PA
Company Type: Public
Website: www.vertexinc.com/
Delivery Method: Cloud

OVERVIEW

Vertex – with more than 40 years of experience they are pioneers in tax automation. They provide customers worldwide with distinction and provide comprehensive tax solutions that enable global businesses to transact, comply and grow their business with confidenceVertex integrates with key technology partners that span ERP, CRM, procurement, billing, POS and e-commerce platforms. 

PRODUCT & SERVICES:

  • Sales Tax Automation
  • Sales Tax Compliance
  • VAT
  • Managed Services
  • Implementation
  • Corporate Tax

TARGET MARKET

Vertex's target market is mid-size to large enterprises in a wide range of industries with complex tax needs.

CUSTOMERS

  • Patagonia
  • Walmart
  • Lego
  • Toyota
  • Starbucks
  • Bright Computing
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ESSENTIALS

Founded: 2008
HQ: Toronto, ON
Company Type: Public
Website: www.thomsonreuters.com
Delivery Method: Cloud

OVERVIEW

Thomson Reuters streamlines accounting, tax filing and reporting process to mitigate the risks of audits and penalties with the industry's most powerful portfolio of tax and accounting software for corporations. Thomson Reuters ONESOURCE tax software helps you stay up to date with corporate tax and trade compliance amid regularly changing state, federal and international tax laws and regulations. Boost collaboration with departments and partners and ensure seamless corporate tax and trade compliance, no matter where your company does business. 

PRODUCT & SERVICES:

Thomson Reuters OneSource for Tax: 

  • Corporate and Indirect Tax
  • Statutory Reporting
  • Tax Provisioning
  • Workflow Manager 
  • Integrations

TARGET MARKET

Thomson Reuters primarily targets legal firms, accounting firms, corporations, and governments.

CUSTOMERS

  • Endeavor
  • Target Corporation
  • Levi Strauss
  • Amazon
  • Netflix
  • The Hershey Company
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ESSENTIALS

Founded: 1979
HQ: Wilmington, MA
Company Type: Private
Website: www.sovos.com
Delivery Method: Cloud

OVERVIEW

SOVOS provides complete, continuous, and connected solutions. SOVOS provides solutions for tax determination, continuous transaction control compliance, and tax regulatory reporting. 

PRODUCT & SERVICES:

  • Value-Added Tax
  • Sales and Use Tax
  • Tax and Regulatory Reporting
  • Shipping Compliance
  • Integrations

TARGET MARKET

SOVOS targets organizations primarily in the Retail, manufacturing, Financial Services, Digital Services, Insurance, and New Economies Industries.

CUSTOMERS

  • Microsoft
  • The Home Depot
  • Phillips 

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