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Sales Tax Exemption Certificates

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Sales Tax Exemption Certificates, 2014 CreditScape, Western Region Credit Conference Seminar Slide Deck, sponsored by Credit Management Association. More information: www.creditmanagementassociation.org

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Sales Tax Exemption Certificates

  1. 1. Oxley and SSAE 16 Type II Compliant Electronic Certificate (ECM) solutions that give you control over your document management governance and processes cost-effectively. 1 Sales Tax Exemption Certificates Larry Powers ISSI/TEAMS ISSI provides industry-leading, Sarbanes Confidential and Proprietary - ISSI
  2. 2. 2 Agenda for Presentation  The Regulatory Challenge for Governance  What is Exemption Certificate Governance Confidential and Proprietary - ISSI Policy?  Assembling the best ”Governance Team”  ECM Governance Metrics  Setting the Mission and Strategy  Best Practice Data Policies  What are my Integration Points?  Technology Enablement Success  Conclusions and Q/A
  3. 3. 3 ISSI/TEAMS Founded in 1994, ISSI conceived and developed imaging software specifically to help corporations get control of the sales tax exemption certificates and tax planning/audit strategy that goes with this process. The decision to use technology to streamline certificate management was made, and TEAMS was developed as an on-premise solution with complementary tools and utilities, then moved to SaaS environment for a more fluid delivery model and to meet industry demand for a hosted model. Confidential and Proprietary - ISSI
  4. 4. 4 The Governance Challenge  Increasing Regulatory Scrutiny.  Transaction Taxability Encompasses:  Today: Sales and Use  Tomorrow: VAT  National and International  Expand Compliance Efforts.  Reduce compliance cost and effort. Confidential and Proprietary - ISSI
  5. 5. 5 Exemption Certificate Governance Policy  Cost Reduction  Risk Reduction  Effort Reduction  Compliance Improvement  Short Term Impact  Long Term Results Confidential and Proprietary - ISSI
  6. 6. 6 Inhibitors - Certificate Governance  Diffused compliance responsibility  No central authority  Many departments play a part  The framework is crucial to success  Lack of visibility  Limited understanding of true risk Confidential and Proprietary - ISSI
  7. 7. 7 ECM Governance Metrics  Reduction in  Assessments, interest and penalties.  Accruals.  Resources spent  Preparing for and defending audits.  Acquiring and reviewing certificates.  Researching and correcting errors. Confidential and Proprietary - ISSI
  8. 8. 8 Percentage of Revenue  A Measure of Relative Impact.  A Means for Audit Assessment.  Statistical Sampling that can hurt or help.  Used as a means to proportionally determine compliance. Confidential and Proprietary - ISSI
  9. 9. exemption certificates as a percentage of the total number of exempt customers and as a percentage of revenue. 9 More ECM Governance Metrics  Number of valid exemption certificates as a percentage of the total number of exempt customers and as a percentage of revenue.  Number missing, incomplete or invalid Confidential and Proprietary - ISSI
  10. 10. Even More ECM Metrics  Response time on certificate acquisition 10 campaigns.  Response levels on certificate acquisition campaigns.  Tax accrual accuracy.  Time spent preparing Tax accrual calculations. Confidential and Proprietary - ISSI
  11. 11. 11 Data Policies  Standardization  Quality Control  Compliance Rules  Data Ownership  Flow of Data  Synchronization Rules Confidential and Proprietary - ISSI
  12. 12. 12 Data Policy Impact Data Sources: Data Uses:  Master Customer File  Master Vendor File  Order Entry  General Ledger  Exemption Certificates  Exempt Status Determination  Sales Tax Calculation  Tax Accruals  Contingent Reserves Calculation  Reverse Audits  Audit Defense Confidential and Proprietary - ISSI
  13. 13. 13 Document Indexing  Customer Name  FEIN  Customer Bill To Address  Customer Ship To Address(es)  Customer E-mail  Customer Phone  Customer Fax  Unique Customer ID  Effective Date  Expiration Date  State Registration Number  Signature  Current Certificate Status Certificate Type:  MTC Multi-State Resale  SSTI Multi-State  State Issued  Blanket Exemption  Single Purchase Exemption  Direct Pay Permits  Exempt Use  Non-Expiring  Limited Life  Description of Purchase Confidential and Proprietary - ISSI
  14. 14.  What happens when customer or vendor 14 Data Synchronization  Which system’s data takes priority?  How, when and at what interval data is exchanged?  How are data conflicts resolved?  Where and when is new customer or vendor data entered? records are deleted? Confidential and Proprietary - ISSI
  15. 15. 15 The Sales Tax Process  Determine tax-exempt status of the customer placing an order.  Calculate sales tax owed.  Collect exemption certificate.  Review certificate for sufficiency.  Reverse audit to determine overall level of compliance and determine specific gaps and audit exposure.  Respond to state audit documentation requests and defend the audit. Confidential and Proprietary - ISSI
  16. 16.  Respond to state audit documentation requests 16 The Use Tax Process  Request determination that a purchase is use tax exempt.  Determine the taxability of said transaction.  Prepare and deliver an exemption certificate to the specific vendor.  Document use tax-exempt transaction for future reference.  Perform periodic Use Tax accrual calculations.  Reverse audit to determine overall level of compliance and determine specific gaps and audit exposure. and defend the audit. Confidential and Proprietary - ISSI
  17. 17. 17 “Gotchas” for Additional Complexity  Drop Shipments  Streamlined Sales Tax Project  Direct Pay Agreements  What is and is not taxable? Confidential and Proprietary - ISSI
  18. 18. 18 Sufficiency Review A minimum set of sufficiency rules would include checking:  That the proper form was used.  That it was signed and dated. And may also include:  A specific seller’s name  A description of purchase  A valid certificate registration number (form and format).  Expiration Dates. Confidential and Proprietary - ISSI
  19. 19. 19 Forms and Statutory Compliance  Each State has their own  May be transaction specific Confidential and Proprietary - ISSI  SSTP  May expire  Change frequently
  20. 20. 20 Certificate Workflow  Transaction inception  Sales taxability  Sufficiency Reviewed  Documented, Stored, Indexed  Searchable  Retrievable  Audit Defense Confidential and Proprietary - ISSI
  21. 21. 21 Document Capture  Paper Delivery  Pot luck  Needs scanning  Easy for customers to fax or mail  Electronic Delivery  Improved document capture  Better indexing  Correct Forms first time  Fewer errors Confidential and Proprietary - ISSI
  22. 22. 22 Technology Enablement  Platform  SaaS  Traditional Self-hosted Delivery  Hybrid Models  Reliability  Transparency  Who has the staff?  Who has the expertise?  When do we need help? Confidential and Proprietary - ISSI
  23. 23. 23 Security  At a minimum, SAS 70 Level II Certified  Multi-tenant versus Single-tenant  Commingling Data:  Instances  Customer Files  Certificates  Single Sign-on  Offshore versus Onshore  Hosting  Services Confidential and Proprietary - ISSI
  24. 24. 24 Benefits of ECM Governance  Reduce the cost to acquire and handle exemption certificates.  Eliminate errors and confusion.  Increase ECM compliance.  Minimize audit risk and exposure.  Satisfy Customers and Staff. Confidential and Proprietary - ISSI
  25. 25. 25 Thank you for your time! Larry Powers Chief Strategy Officer, ISSI/TEAMS http://www.teamscert.com lpowers@issimage.com 650.383.8527 Confidential and Proprietary - ISSI

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