TRANSCRIPT 🔗
WEBVTT
00:00:08.960 --> 00:00:10.800
Welcome back to Beyond the Ledger.
00:00:10.880 --> 00:00:12.640
I'm your host, Shard A Layfield.
00:00:12.800 --> 00:00:16.320
Today we're discussing a topic that many growing businesses overlook.
00:00:16.559 --> 00:00:20.160
What happens after sales tax automation is implemented?
00:00:20.399 --> 00:00:27.519
Many companies invest in platforms like Avalera or ANROC, expecting them to solve their sales tax challenges.
00:00:27.760 --> 00:00:39.920
Only to discover that missed filings, unresolved notices, credit balances, and nexus issues can still create significant compliance risk without the right processes and oversight in place.
00:00:42.159 --> 00:00:48.640
Joining us today is a salty lawyer herself, Dee Green, partner in Bennett Thrasher's state and local tax practice.
00:00:48.960 --> 00:01:00.880
Dee helps businesses navigate complex sales tax compliance challenges, manage multi-state obligations, and develop practical strategies that reduce risk while improving operational efficiency.
00:01:01.520 --> 00:01:03.439
Thank you for being back on the show.
00:01:03.759 --> 00:01:05.120
I'm happy to be back here with you.
00:01:05.200 --> 00:01:06.079
You make it very easy.
00:01:06.640 --> 00:01:06.879
Thank you.
00:01:07.200 --> 00:01:07.439
Thank you.
00:01:08.319 --> 00:01:09.359
As fun as I do.
00:01:09.599 --> 00:01:10.239
Oh, ooh.
00:01:10.480 --> 00:01:10.719
Okay.
00:01:11.200 --> 00:01:12.239
Okay, I'll take that.
00:01:12.719 --> 00:01:26.480
Okay, so today we'll discuss why automation alone isn't enough, the procedures businesses should have in place to stay compliant, and how outsourced sales tax services can help organizations avoid costly surprises.
00:01:26.879 --> 00:01:27.359
Yes, yes, yes.
00:01:27.599 --> 00:01:29.359
So you ready to give us some insights today?
00:01:29.599 --> 00:01:30.319
I sure am.
00:01:30.640 --> 00:01:31.040
All right.
00:01:31.120 --> 00:01:38.480
So sales tax automation has become a standard tool for many growing businesses, but automation isn't the whole solution.
00:01:38.799 --> 00:01:47.359
So why do you think companies still experience compliance issues even after implementing platforms like Avalera or ANROC?
00:01:47.680 --> 00:01:51.760
But also, what's the biggest misconception about what these tools can really do?
00:01:52.159 --> 00:01:54.959
Oh, so I would start with a one phrase or one liner.
00:01:55.280 --> 00:01:55.519
All right.
00:01:55.760 --> 00:01:57.599
Everybody thinks it's set it and forget it.
00:01:57.840 --> 00:01:58.159
Okay.
00:01:58.400 --> 00:02:00.400
Automation is not set it and forget it.
00:02:00.480 --> 00:02:05.439
It's not like you can configure something one time and you can walk away from it and it's gonna run on its own.
00:02:05.920 --> 00:02:07.120
That's what we like to think, right?
00:02:07.200 --> 00:02:09.840
Especially with the advent of AI and automation.
00:02:10.080 --> 00:02:10.159
Right.
00:02:10.479 --> 00:02:13.120
Both very different things that people confuse.
00:02:13.199 --> 00:02:18.800
But automation and the platforms are only as good as the person who has configured it.
00:02:19.039 --> 00:02:26.719
And it also, just like your phone needs to be rebooted and restarted, you have settings, you know, sometimes you have to do a factory reset.
00:02:26.800 --> 00:02:26.879
Right.
00:02:27.199 --> 00:02:29.439
Automation, the platform, the platforms are great.
00:02:29.520 --> 00:02:36.159
And and um the salt practice, our goal is to get all of our clients on an automated solution, especially if you're in multiple states.
00:02:36.479 --> 00:02:39.439
Because manual, gone are the days of manual and trying to do that.
00:02:39.599 --> 00:02:39.840
Yeah.
00:02:40.080 --> 00:02:43.520
But you need oversight and management of that solution.
00:02:43.599 --> 00:02:49.919
And so we want our clients to buy these platforms, and our partners are the Avalares, the Anrocks, the Vertex, those people.
00:02:50.560 --> 00:02:55.919
But we need to manage the software for our clients, and we want them to focus on the business they created.
00:02:56.240 --> 00:02:58.000
Let us focus on the business of compliance.
00:02:58.159 --> 00:03:00.159
So usually people, that's exactly why.
00:03:00.240 --> 00:03:04.719
Yeah, they'll set it up and say, I bought the platform, it's gonna do returns for me.
00:03:05.520 --> 00:03:06.639
And it's gonna do everything for me.
00:03:06.719 --> 00:03:07.360
It's a computer, right?
00:03:07.599 --> 00:03:08.560
It should be able to just do it.
00:03:08.719 --> 00:03:08.879
Yeah.
00:03:09.120 --> 00:03:12.560
But you have to tell a computer what to do, no matter how smart we think it is.
00:03:12.800 --> 00:03:25.199
Yeah, and to get, well, I'm sure we'll get into this later, but your processes and the information that you're putting is it's not always accurate or right, then no matter what you automate, it's not right.
00:03:25.360 --> 00:03:26.639
It's not gonna give you what you really need.
00:03:26.879 --> 00:03:28.879
So I'm sure we'll dive into that a little bit later.
00:03:28.960 --> 00:03:33.280
But many sales tax issues remain hidden until they become costly.
00:03:33.599 --> 00:03:39.599
So, what are some early warning signs that businesses should be paying attention to when they finally recognize hidden risk?
00:03:39.840 --> 00:03:40.080
Yes.
00:03:40.240 --> 00:03:43.280
So, for instance, with platforms, as that's what we're talking about, yeah.
00:03:43.599 --> 00:03:51.120
Usually when you're configuring or implementing this uh automated sales tax solution, you're connecting it with your ERP system.
00:03:51.199 --> 00:03:52.800
So that's your internal accounting.
00:03:52.879 --> 00:03:57.840
Think QuickBooks Online or whatever you're using to do your accounting internally.
00:03:58.479 --> 00:04:09.680
So what that ERP does is sends in, without to nerd out too much, because I promise y'all that I'm an attorney,
Load full transcript
but I had to teach myself these things because of working with my clients.
00:04:09.840 --> 00:04:22.319
But what your ERP system does is send an API call to that automated solution that says an invoice has been Sardet bought something from me and I want to charge sales tax or not charge sales tax.
00:04:22.480 --> 00:04:28.720
To your point, let's say that you have made something non-taxable that should have been taxable, or vice versa.
00:04:28.800 --> 00:04:32.240
Let's go with a it's taxable, um, it's non-taxable.
00:04:32.399 --> 00:04:34.639
They get the invoice, their client has tax on it.
00:04:34.879 --> 00:04:41.680
Your client is gonna call you like, hey, we've been doing business a while and you've never charged me sales tax.
00:04:42.160 --> 00:04:44.560
Why is there sales tax on my invoice?
00:04:45.040 --> 00:04:48.639
That'll make you say, Man, is something configured properly?
00:04:48.879 --> 00:04:49.120
Right.
00:04:49.279 --> 00:04:52.560
Um in an automated solution, we have what we call product mapping.
00:04:52.639 --> 00:05:00.480
You get all of your products and you're supposed to assign it a uh code that Avilera has a list of codes, and Rock has codes.
00:05:00.560 --> 00:05:02.879
You're supposed to map it when you're first configuring it.
00:05:02.959 --> 00:05:03.120
Okay.
00:05:03.279 --> 00:05:06.639
And it those codes denote whether they're taxable or non-taxable.
00:05:06.800 --> 00:05:08.639
Let's say you put the wrong code in there.
00:05:08.800 --> 00:05:13.040
Now all of a sudden, all your invoices have tax or don't have tax where they should have tax.
00:05:13.199 --> 00:05:13.519
Got it.
00:05:13.759 --> 00:05:19.199
So indicators on your invoice are, or if a return is not filed.
00:05:19.279 --> 00:05:26.079
So let's say you go onto a state portal and you see a note or a notice comes to you saying you haven't filed a return in three months.
00:05:26.319 --> 00:05:31.199
You then are gonna go to your software and say, Hey, software, caller is this thing on?
00:05:31.360 --> 00:05:33.759
I thought you were collecting sales tax for me.
00:05:33.839 --> 00:05:35.759
I thought that you were remitting it for me as well.
00:05:36.000 --> 00:05:36.319
Right.
00:05:36.560 --> 00:05:39.680
That lets you know something is amiss.
00:05:39.839 --> 00:05:40.079
Okay.
00:05:40.240 --> 00:05:48.560
One of the things we do on our team, if we're the implementer for you connecting your ERP to your automated solution, is we run test transactions.
00:05:48.800 --> 00:05:56.480
For instance, Avalera has what you call a sandbox environment or ANROC, and we send dummy transactions, maybe three, four, or five.
00:05:56.639 --> 00:05:56.800
Okay.
00:05:56.959 --> 00:05:58.399
And we see what it spits out.
00:05:58.639 --> 00:06:02.000
If it comes back, we know whether it should be taxable or non-taxable.
00:06:02.319 --> 00:06:15.920
If it comes back anything otherwise, at the beginning, before you go live, yeah, we know that something isn't working properly, either internally in your ERP system, or we didn't configure or switch something on properly.
00:06:16.079 --> 00:06:21.439
Or whoever, not we, whoever set up the implementation process for you.
00:06:21.920 --> 00:06:22.319
Got it.
00:06:22.399 --> 00:06:22.639
Okay.
00:06:22.959 --> 00:06:27.439
I was a mouthful, but that's no, no, but it's good information.
00:06:27.680 --> 00:06:30.079
So let's use a real word example here.
00:06:30.240 --> 00:06:39.120
So one client believed its sales tax process was running smoothly until it recently uncovered more than 20K in tax penalties and interest.
00:06:40.319 --> 00:06:47.439
Can you walk us through how a situation like that develops and a few lessons other businesses can take away from a scenario like that?
00:06:47.680 --> 00:06:48.160
Yes.
00:06:48.399 --> 00:07:08.879
So before you even get to automation, I know that we're here talking about automation, but before you even get there, you shouldn't put, you know, the cart before the wheel, the chicken before the egg, however you want to describe it, you should always go through a Nexus taxability analysis to see where you where you owe something, is it taxable?
00:07:09.199 --> 00:07:16.959
Because once you get to the automated solution and you go to configure things, you're gonna turn on Nexus wherever you have Nexus.
00:07:17.199 --> 00:07:21.120
You're going to know where things are taxable and you're gonna product map it.
00:07:21.279 --> 00:07:29.439
So if a client is getting a$20,000 notice, something we don't either know proper nexus or we don't know taxability.
00:07:29.519 --> 00:07:29.680
Okay.
00:07:29.839 --> 00:07:34.240
So when was the last time you checked your physical presence, your economic nexus threshold?
00:07:34.399 --> 00:07:37.680
When was the last time you checked to see if your product is taxable?
00:07:37.920 --> 00:07:47.360
For instance, using real world again, California and Colorado are states that didn't tax SaaS at the state level.
00:07:47.519 --> 00:07:51.920
Colorado taxed it at locality, California didn't.
00:07:52.240 --> 00:07:55.199
Now they're gonna start taxing it in January, right?
00:07:55.519 --> 00:07:57.279
January 1st, 2027.
00:07:57.439 --> 00:07:57.759
Okay.
00:07:58.079 --> 00:08:09.839
A client who doesn't know that or is not paying attention, doesn't have an advisor, is not getting notices, not reading tax notes, they're not gonna know that that changed and they're not gonna be charging people tax.
00:08:10.319 --> 00:08:16.079
Boom, you're in the state, you have economic nexus, but you didn't know to switch it to taxable.
00:08:16.160 --> 00:08:16.319
Yeah.
00:08:16.480 --> 00:08:18.639
So now all of a sudden you have an issue.
00:08:18.800 --> 00:08:20.319
That's why you need an advisor.
00:08:20.560 --> 00:08:30.160
Now your automated solution should send notices to let you know these tax alerts, much like how we send these blogs and these tax alerts to let
our clients know.
00:08:30.319 --> 00:08:32.080
Again, everything is complimentary.
00:08:32.159 --> 00:08:33.759
It's people and platforms.
00:08:34.000 --> 00:08:37.360
So the software should tell you, but it's not gonna configure it for you.
00:08:37.519 --> 00:08:42.720
So it's it might Avalair or Anrock might send you a notice saying, hey, you need to be on the lookout for this.
00:08:42.799 --> 00:08:42.960
Yeah.
00:08:43.120 --> 00:08:45.039
But somebody needs to configure that system.
00:08:45.200 --> 00:08:51.679
So that's how penalties, interest, now all of a sudden your clients calling you, like, why are you talking taxing me?
00:08:51.759 --> 00:08:51.919
Yeah.
00:08:52.159 --> 00:08:54.639
So that's how these things bubble up at the surface.
00:08:54.799 --> 00:08:58.080
Not having regular checks of Nexus.
00:08:58.480 --> 00:09:02.480
People think, I I checked my Nexus a year ago.
00:09:02.639 --> 00:09:05.039
Or, but a lot can change in that year.
00:09:05.360 --> 00:09:05.440
Yeah.
00:09:05.600 --> 00:09:15.120
So you need to be in and running periodic, um, not a true audit in the sense, but an audit uh or an analysis or review of your software.
00:09:15.279 --> 00:09:20.000
Like when was the last time that I checked my ANROC environment to see if I'm in all the states?
00:09:20.080 --> 00:09:22.240
So that's how things bubble up at the surface.
00:09:22.320 --> 00:09:28.559
And you should periodically be doing this Nexus and taxability study and reconfiguring your software if you need to.
00:09:28.799 --> 00:09:29.120
Okay.
00:09:29.440 --> 00:09:29.919
Thank you.
00:09:30.720 --> 00:09:33.919
So filing returns is only one piece of the compliance process.
00:09:34.080 --> 00:09:35.600
So let's go beyond that.
00:09:35.919 --> 00:09:40.879
What are some ongoing housekeeping procedures that companies should have in place each month?
00:09:40.960 --> 00:09:46.399
And you kind of insinuate a little bit, um, to help identify issues before they become larger problems.
00:09:46.639 --> 00:09:46.879
Yes.
00:09:47.039 --> 00:09:49.200
So a couple of them are reconciliation.
00:09:49.600 --> 00:10:02.960
So how I said your ERP system is connected to your uh your software uh platform, ideally, your ERP system should be the driver of everything and they should match each other.
00:10:03.039 --> 00:10:03.200
Yeah.
00:10:03.360 --> 00:10:07.679
Whatever you do in that ERP system should flow to your Avalero, the ANROC.
00:10:07.840 --> 00:10:16.879
But every now and then we must do reconciliation on a monthly basis to say, before I file the return, in your system you show you sold a million dollars.
00:10:17.039 --> 00:10:19.279
In my system, I show you sold a million dollars.
00:10:19.600 --> 00:10:24.960
But sometimes clients issue refunds that they didn't let somebody know, or we didn't configure that.
00:10:25.039 --> 00:10:26.399
They issued a credit memo.
00:10:26.480 --> 00:10:28.240
It didn't properly flow.
00:10:28.399 --> 00:10:29.840
So then the systems are off.
00:10:29.919 --> 00:10:31.519
So reconciliation is one.
00:10:31.679 --> 00:10:44.480
The configuration, like I said, um, and most of the platforms, Avalera and Anrock, they have procedures on their websites that you should be doing on a monthly, quarterly, and annual basis, like reviewing your credit for it.
00:10:44.799 --> 00:10:53.919
Because some of the systems, like let's say you have a refund that you know I have a$10,000 refund that I can use on a future return.
00:10:54.559 --> 00:10:56.320
Was that adequately applied?
00:10:56.639 --> 00:10:59.679
Or are you st are we still withdrawing from your bank account?
00:10:59.759 --> 00:11:06.879
So is somebody checking those things to say because those add up too, where you're like, why are y'all still taking this out of my account?
00:11:06.960 --> 00:11:07.120
Yeah.
00:11:07.440 --> 00:11:14.720
Because by a funding power of attorney, they get to you have a return, says you owe$100,000, they're gonna take that out of your account.
00:11:14.960 --> 00:11:16.960
But you're like, I got this credit over here.
00:11:17.039 --> 00:11:17.120
Right.
00:11:17.360 --> 00:11:18.320
Why isn't anybody using?
00:11:18.639 --> 00:11:22.399
And sometimes systems will say if it's not the exact amount.
00:11:22.559 --> 00:11:22.720
Okay.
00:11:22.960 --> 00:11:28.000
So let's say you owe$100,000, but you have a$10,000 credit, they're gonna be like, we're not applying that.
00:11:28.080 --> 00:11:28.720
It doesn't match.
00:11:29.120 --> 00:11:33.519
Even though you're thinking in your head logically, no, use that credit to dwindle down.
00:11:33.600 --> 00:11:35.200
Now I should only owe$90,000.
00:11:35.519 --> 00:11:35.600
Right.
00:11:35.840 --> 00:11:37.519
So you need somebody checking those things.
00:11:37.679 --> 00:11:39.279
There are a whole host of things.
00:11:39.440 --> 00:11:50.240
We have created process and procedures based off the hiccups, the hurdles, or just what each of these platforms have said that you should be doing on a monthly, quarterly basis.
00:11:50.399 --> 00:11:51.519
There are a ton of them.
00:11:51.679 --> 00:11:53.039
Exemption certificates.
00:11:53.279 --> 00:11:57.840
If your client says they're exempt from sales, are you collecting the exemption certificates?
00:11:58.159 --> 00:11:59.279
Are you validating?
00:11:59.519 --> 00:12:07.200
And if you have bought a product in this automated solution, is somebody updating the system to show that that client is?
00:12:07.279 --> 00:12:08.159
It's things like that.
00:12:08.320 --> 00:12:10.720
Like I said, credit forwards, those are the big things.
00:12:10.879 --> 00:12:16.639
The configurations, there's a whole host of things that you should be checking by different periods.
00:12:16.879 --> 00:12:21.679
And we've learned from those mistakes, um, from costly mistakes, like you said.
00:12:21.840 --> 00:12:28.720
We've learned from just keeping up with the reading to say we've identified these
procedures based on the software that you had.
00:12:28.879 --> 00:12:30.399
That's where the management comes up again.
00:12:30.879 --> 00:12:32.720
And not to overburden our clients.
00:12:32.799 --> 00:12:34.720
We don't want them to have to focus on those things.
00:12:34.960 --> 00:12:36.320
That's not their specialty.
00:12:36.480 --> 00:12:42.240
You got a client who sells a tangible good, they don't want to be worried about all the things I just told you.
00:12:42.480 --> 00:12:43.200
ERP, right?
00:12:45.600 --> 00:12:45.840
Whatever.
00:12:46.080 --> 00:12:46.480
I don't know.
00:12:46.639 --> 00:12:47.039
I don't know.
00:12:47.200 --> 00:12:48.960
And I don't want them to worry about that.
00:12:49.120 --> 00:12:54.720
Like, we're not trying to sell anything, but your trusted advice should be comprehensive, consulting and compliance.
00:12:54.879 --> 00:12:58.240
Get this software, people and platforms all working together.
00:12:58.559 --> 00:12:59.360
Got it.
00:13:00.080 --> 00:13:00.720
Wow.
00:13:03.440 --> 00:13:09.279
So there's an often emphasis reconciling invoicing systems with tax software.
00:13:09.600 --> 00:13:14.480
Why is reconciliation such an important control and what kinds of issues can it uncover?
00:13:14.720 --> 00:13:24.559
So I think we kind of talked about that already about it's just somebody, and here's the thing: different people control different things in your um in the business.
00:13:24.799 --> 00:13:27.679
So for instance, like I mentioned exemption certificates.
00:13:27.840 --> 00:13:28.240
Yeah.
00:13:28.480 --> 00:13:36.080
The onboarding team of that company, the sales team, they might be like, Oh, yeah, we got an exemption certificate, but did they tell the tax team?
00:13:36.240 --> 00:13:39.200
And then the tax team know to market in the ERP system.
00:13:39.440 --> 00:13:48.399
If they didn't market in the ERP system, and that's what's controlling the sales automated solution, reconciliation is gonna be off.
00:13:48.480 --> 00:13:48.639
Yeah.
00:13:48.799 --> 00:13:57.279
Because let's say out of two million sales, uh, a million should have been exempt, but somebody has to market to let the system know.
00:13:57.519 --> 00:13:59.440
So that's why reconciliation is important.
00:13:59.600 --> 00:14:13.679
And you always want to reconcile it before you do the actual filing because once the return is filed, then you're gonna have to amend a return to say, whoa, whoa, whoa, whoa, transaction came up like, hey, why did y'all file this return for this amount?
00:14:13.840 --> 00:14:22.399
So there should be a process where some back and forth, which is why most automated solutions will say will lock the system at a certain date.
00:14:22.480 --> 00:14:27.919
They will lock all your whatever transactions are in there at this date, those are locked and loaded.
00:14:28.080 --> 00:14:31.759
Those are the ones we're looking at because you have to file your return on the 20th.
00:14:31.919 --> 00:14:34.480
So most of them lock it like the 10th or something of the month.
00:14:34.639 --> 00:14:39.919
We usually work with our clients the 5th through the 10th through the 15th to clean up to do all this reconciliation.
00:14:40.080 --> 00:14:41.679
We want to make sure they're aligned.
00:14:41.759 --> 00:14:55.279
And if they don't align, we want to make sure that there's a conversation where you can tell me, oh D, it's it's$100,000 off because this client just gave me their exemption certificate, or we refunded them, we did a credit memo, but we didn't mark it in the system.
00:14:55.360 --> 00:14:56.559
We're gonna catch that.
00:14:56.879 --> 00:14:58.960
You know, how they keep their books, right?
00:14:59.120 --> 00:15:00.799
How is their accounting year?
00:15:01.039 --> 00:15:02.720
All those kind of things kind of matter.
00:15:02.799 --> 00:15:04.480
So that's why reconciliation.
00:15:04.559 --> 00:15:05.519
You don't want to overpay.
00:15:05.600 --> 00:15:06.399
You don't want to underpay.
00:15:07.279 --> 00:15:09.519
You definitely don't want to overpay.
00:15:10.000 --> 00:15:11.120
Either of them will give you an issue.
00:15:11.600 --> 00:15:14.320
Either way will give you an issue, but that's why reconciliation.
00:15:14.399 --> 00:15:16.320
And it's like, are all hearts and minds clear?
00:15:16.399 --> 00:15:17.279
Are we all in line?
00:15:17.600 --> 00:15:17.840
Right.
00:15:18.000 --> 00:15:21.759
And then sometimes there's a rounding up issue.
00:15:21.919 --> 00:15:28.799
We are worried about the correct tax rate, but sometimes they'll round up, uh, you know, people won't make pennies anymore.
00:15:28.960 --> 00:15:37.279
So a lot of things are rounding up, but reconciliation is important to make sure that you're adequately reporting the money you should have.
00:15:37.519 --> 00:15:37.919
Got it.
00:15:38.159 --> 00:15:38.799
Per your system.
00:15:38.879 --> 00:15:45.360
And everything, you got 10 transactions, this many invoices, what's in the ERP should mount appear.
00:15:45.600 --> 00:15:46.639
It's not, we got a problem.
00:15:47.200 --> 00:15:47.759
We got a problem.
00:15:48.159 --> 00:15:48.320
Houston.
00:15:48.559 --> 00:15:51.039
Houston, we got a problem.
00:15:53.360 --> 00:15:54.159
That was funny.
00:15:54.320 --> 00:15:54.639
Okay.
00:15:55.840 --> 00:16:08.080
As businesses expand into new states, how can they effectively monitor economic nexus thresholds and avoid unexpected registration and filing obligations to keep up with the pace of growth?
00:16:08.320 --> 00:16:08.639
Yes.
00:16:08.799 --> 00:16:18.480
So a lot of systems now have um coding or heat maps that will highlight, because again, I'm gonna keep coming back to this.
00:16:18.559 --> 00:16:22.399
ERP is connected to the automated sales tax solution.
00:16:23.200 --> 00:16:29.840
Based on your sales volume, most of them have a code that's alerting you beep, beep, beep, beep, per your sales.
00:16:30.000 --> 00:16:31.840
We think
you have economic nexus.
00:16:32.000 --> 00:16:32.399
Got it.
00:16:32.559 --> 00:16:37.120
Um, now again, some of these software solutions only monitoring economic nexus.
00:16:37.279 --> 00:16:43.919
But nexus is either derived through physical presence where you have boots on the ground, uh, employees, inventory.
00:16:44.240 --> 00:16:50.320
So your heat maps or whatever they have to let you know you've hit those thresholds are a gut check.
00:16:50.399 --> 00:16:52.639
It's kind of like when your check engine light comes on.
00:16:52.879 --> 00:16:54.000
So you should see that.
00:16:54.240 --> 00:16:58.720
We should see that if we're managing the software for you, those are gut checks to let you know.
00:16:58.879 --> 00:17:01.919
We think you approach Nexus, somebody needs to look at it on it.
00:17:02.080 --> 00:17:05.759
Don't necessarily go register because your product might not be taxable.
00:17:06.000 --> 00:17:13.920
But most to answer your question, most of the software solutions have something that is monitoring your economic nexus based on your dollar amount.
00:17:14.079 --> 00:17:14.240
Okay.
00:17:14.559 --> 00:17:15.680
Or your transactions.
00:17:15.759 --> 00:17:18.000
They have triggers inside the system.
00:17:18.240 --> 00:17:28.559
But again, remember, we went, I said you should have your consultant doing an actual full nexus and taxability study every six months or every 12 months.
00:17:28.960 --> 00:17:29.279
Okay.
00:17:30.000 --> 00:17:39.039
Thanks for adding the timeline because a lot of people, you can't assume everybody knows all this information and the timelines that they need to probably adhere to to avoid a lot of issues.
00:17:39.359 --> 00:17:42.079
Yeah, and you hit on the head, a lot of businesses are expanding.
00:17:42.160 --> 00:17:43.359
That's a good problem to have, right?
00:17:43.519 --> 00:17:44.079
Rapidly, right?
00:17:44.400 --> 00:17:54.720
So they're like, man, when I started off, I was only on in two states, but then you're taking on these big clients, and we have a lot of clients who they don't necessarily have a lot of customers, but they have huge invoices.
00:17:54.799 --> 00:17:55.039
Yeah.
00:17:55.200 --> 00:18:06.559
So they might have five, but if they exceed, if they're selling huge uh software or parts that like they're selling it for a hundred thousand dollars, that adds up pretty quickly.
00:18:06.640 --> 00:18:08.480
So you have to have some oversight.
00:18:08.559 --> 00:18:12.480
But the heat maps are very good gut checks and your service engine lights.
00:18:12.720 --> 00:18:13.039
Okay.
00:18:13.599 --> 00:18:17.920
So let's segue into managing notices, credits, and refunds for a bit.
00:18:18.160 --> 00:18:24.720
So tax notices, credit balances, and refund opportunities are often treated as an administrative task.
00:18:25.200 --> 00:18:30.960
So why are these areas so frequently overlooked and what risk or opportunities businesses tend to miss?
00:18:31.279 --> 00:18:31.519
Yes.
00:18:31.680 --> 00:18:36.720
So, like I said again, sometimes your notices will be sent to your state portal.
00:18:36.880 --> 00:18:37.119
Okay.
00:18:37.279 --> 00:18:38.400
And they'll be hidden in there.
00:18:38.480 --> 00:18:48.079
But if you don't have anybody outlining those process and procedures, like we said, or making a checklist to say, you should be checking the portal to see if the state sent you anything.
00:18:48.240 --> 00:18:48.640
Yeah.
00:18:48.799 --> 00:18:50.319
Then these notices are building up.
00:18:50.400 --> 00:18:54.400
Or you should be having somebody checking your mailbox to see if you got these notices.
00:18:54.799 --> 00:18:56.559
Or there's a lot of this going on.
00:18:56.720 --> 00:18:57.839
I thought y'all were checking notices.
00:18:58.000 --> 00:18:58.880
I thought you were checking notice.
00:18:59.359 --> 00:19:00.079
Now nobody's checking.
00:19:00.319 --> 00:19:00.480
Right.
00:19:00.559 --> 00:19:03.519
Like you said, the administrative headache of it, because it can be a headache.
00:19:03.599 --> 00:19:03.759
Yeah.
00:19:04.000 --> 00:19:05.839
Or somebody saying, I got a notice, but I didn't.
00:19:06.079 --> 00:19:08.000
They get the notice, they push it to the side.
00:19:08.240 --> 00:19:14.559
But they should open that notice, read it, and at least, if they're not going to handle it, send it to their their consultant to read it.
00:19:14.720 --> 00:19:14.880
Okay.
00:19:15.039 --> 00:19:23.920
Because sometimes that notice is telling you the alert, like California in, or it's telling you, hey, we noticed you had an employee because you registered for payroll.
00:19:24.079 --> 00:19:24.240
Yeah.
00:19:24.480 --> 00:19:26.400
We now know you're in the state, girl.
00:19:26.559 --> 00:19:26.799
Right.
00:19:27.039 --> 00:19:35.920
So it's about, and what we're talking about, that outsourcing, it's about outlining what needs to be done and who's going to do it.
00:19:36.240 --> 00:19:49.759
Because the company might not have the bandwidth to handle it, which is why they have to, if they're working with a Bennett Thrasher or whoever they're working with, they need to say, Bennett Thrasher, you're going to do these five, six things for us on a monthly, quarterly, or annual basis.
00:19:50.000 --> 00:19:51.920
So we know exactly what we're going to be doing.
00:19:52.000 --> 00:19:52.240
Yeah.
00:19:52.400 --> 00:20:05.839
Refunds, like I said, if they've issued a refund in their ERP system and it didn't flow over properly, then nobody knows that that once$100,000 bills, now$50,000, nobody reconciled that.
00:20:05.920 --> 00:20:06.240
Yeah.
00:20:06.480 --> 00:20:11.200
So somebody might be like, yeah, we issued the client the refund, but we forgot to make a credit memo.
00:20:11.279 --> 00:20:13.279
Then we forgot to put it over in Avalera.
00:20:13.599 --> 00:20:19.680
So you did write by the by your customer, but you have to follow the transaction all the way through.
00:20:19.839 --> 00:20:20.880
We issued this.
00:20:21.039 --> 00:20:22.319
What do we do to make it?
00:20:22.559 --> 00:20:24.640
You want to make sure it all makes sense.
00:20:24.880 --> 00:20:31.440
Like whatever I did, there was an equal opposite reaction for it, if you will, for that.
00:20:31.680 --> 00:20:32.240
Got it.
00:20:32.400 --> 00:20:32.720
Okay.
00:20:32.880 --> 00:20:36.319
So let's talk about an outsourced sales tax model that you just brought up.
00:20:36.480 --> 00:20:36.720
Yes.
00:20:36.880 --> 00:20:39.119
What does a typical engagement look like?
00:20:39.200 --> 00:20:42.480
And which businesses benefit the most from this type of support?
00:20:42.799 --> 00:20:47.920
I would say all businesses, especially if you're in a lot of states, you know that you have.
00:20:48.000 --> 00:20:50.960
We have a lot of clients, some of that are not on automated solutions.
00:20:51.200 --> 00:20:58.319
The ones who are on the automated solution, much of what we just talked about before, people think they have a set in and forget it system.
00:20:58.480 --> 00:21:01.519
Once you've configured it once, it's configured forevermore.
00:21:01.920 --> 00:21:16.000
So I think the clients who are in multi-states, who have undergone VDAs, who um know they're expanding, they need to outline every and they can't think of every procedure, which is why even our list is expanding.
00:21:16.160 --> 00:21:16.400
Yeah.
00:21:16.559 --> 00:21:24.240
But that's why, and we created a robust list, like I said, and then we walk our clients through um, never to sell, but to help.
00:21:24.319 --> 00:21:24.480
Yeah.
00:21:24.640 --> 00:21:28.240
And to say these are the things we identified that needs to be done.
00:21:28.559 --> 00:21:29.759
Who is going to do them?
00:21:29.920 --> 00:21:30.000
Right.
00:21:30.319 --> 00:21:35.200
Happy to even walk y'all through to say, even if we don't do those, these are what you need to do.
00:21:35.359 --> 00:21:45.519
So I think it's about understanding, looking back at your system and saying, also talking internally, like nobody knows what you need done internally more than you, right?
00:21:45.680 --> 00:21:50.799
So if you know your accounting team is set up a certain way, those procedures need to be set out.
00:21:50.960 --> 00:21:59.440
Like many people, they say they have exempt customers, but they don't have a procedure in place about collecting um exemption certificates, or let's say the tax.
00:22:00.160 --> 00:22:05.039
Tax accounting department of a business said, no, we have a procedure, but did you tell the onboarding team?
00:22:05.279 --> 00:22:07.119
Because the onboarding team should be the one.
00:22:07.200 --> 00:22:09.039
Otherwise, sales tax is going to be charged.
00:22:09.119 --> 00:22:09.359
Yeah.
00:22:09.599 --> 00:22:15.359
So it's about knowing what needs to be done and identifying who's going to do those things.
00:22:15.519 --> 00:22:18.559
And there's, like I said, we don't have to do
all the things.
00:22:18.880 --> 00:22:23.599
Companies prioritize what they they might be like, uh, we're going to check that on a quarterly basis.
00:22:23.839 --> 00:22:32.880
If we check it at least at some point in the year, if they wait to check it to the end of the year, knowing because I had some clients like that too who say, Yeah, we'll do all those things at the end of the year, D.
00:22:33.039 --> 00:22:36.640
And if we have a big balloon of uh penalties and liabilities, then so be it.
00:22:36.799 --> 00:22:46.160
You have other ones who say, Well, if y'all are checking this for us, the notices, yeah, the reconciliation on a monthly basis, there should be very little that we didn't we didn't catch, right?
00:22:46.319 --> 00:22:46.640
Yeah.
00:22:47.119 --> 00:22:49.920
And inevitably you're gonna something is gonna be missed.
00:22:50.079 --> 00:22:56.480
But if you have procedures in place, checklist that you're doing, you should have somebody running through that.
00:22:56.720 --> 00:22:57.279
Got it.
00:22:57.519 --> 00:22:57.839
Okay.
00:22:58.079 --> 00:23:03.920
So let's talk about the cost of being proactive because business leaders are always weighing costs against value.
00:23:04.079 --> 00:23:04.319
Yes.
00:23:04.480 --> 00:23:11.839
So how should companies think about investing in proactive compliance compared to the potential cost of penalties, audits, and missed opportunities?
00:23:12.160 --> 00:23:17.359
So I always tell people it'll cost you more on the back end than the front end.
00:23:17.519 --> 00:23:23.440
So somebody might look at the sticker shock of a taxability study or doing a voluntary disclosure agreement.
00:23:23.599 --> 00:23:27.680
But what those things do is they give you as much peace of mind as they can give you.
00:23:28.079 --> 00:23:40.000
So even with a BDA, um, you rather be proactive and control the course of action rather than when somebody's coming at you, you're on the defense.
00:23:40.160 --> 00:23:46.160
So now if you're proactive, you're eliminating the penalties and liabilities as best as you can.
00:23:46.400 --> 00:23:50.160
When you're reactive, man, you know you missed the filing.
00:23:50.240 --> 00:23:51.920
You know you didn't configure something properly.
00:23:52.000 --> 00:23:52.160
Yeah.
00:23:52.319 --> 00:23:54.319
So now you owe some penalties and interest.
00:23:54.480 --> 00:24:01.680
And oh, by the way, if they reach out to you, segues to what we talk about a lot, voluntary disclosure agreements, those are off the table.
00:24:01.759 --> 00:24:01.920
Yeah.
00:24:02.160 --> 00:24:03.920
So things can be costly.
00:24:04.160 --> 00:24:08.000
So, but that's why you look at different systems.
00:24:08.160 --> 00:24:19.759
Um, you look not only at what the cost of buying that platform, so like Avalera and Rock might charge you a price to um buy the software, just a subscription to it.
00:24:19.920 --> 00:24:23.279
But what are the professional fees for either internally?
00:24:23.359 --> 00:24:28.720
How long is Sardin gonna spend doing a return manually versus us doing it with with your firm?
00:24:28.960 --> 00:24:36.319
So professional fees, but I always say, and here's the thing, there's always a risk tolerance or a materiality.
00:24:36.559 --> 00:24:40.880
So some companies that I work with, they might say, okay, we're gonna go after all the big boys first.
00:24:41.039 --> 00:24:46.400
And they might set a threshold internally to say anything above this amount, we're attacking.
00:24:46.720 --> 00:24:50.160
We're gonna attack all of this because the goal is to always be compliant.
00:24:50.319 --> 00:24:50.480
Right.
00:24:50.640 --> 00:24:53.759
But it might not be that first, those are the first.
00:24:53.839 --> 00:24:54.079
Yes.
00:24:54.640 --> 00:24:59.680
And so, but I do feel like, but once the state comes after you, now you got to do some negotiating.
00:24:59.920 --> 00:25:03.920
Now you gotta have you have late penalties, failure to file, you have interest all building up.
00:25:04.000 --> 00:25:13.039
But if you would have had a salt process in place to periodically monitor your nexus, your taxability are automation.
00:25:13.519 --> 00:25:21.119
Um, and a lot of people, again, are relying on AI now, and they might say, AI told me it's not taxable, AI told me I don't need automation.
00:25:21.200 --> 00:25:27.440
So But it's only reliant on the data that you give it, and your data might not always be accurate.
00:25:27.759 --> 00:25:28.240
Exactly.
00:25:28.480 --> 00:25:38.400
And AI, as as good as it's getting, it's like you said, it's pulling from multiple sources and it's making it up as it goes.
00:25:38.640 --> 00:25:43.200
And that's why you'll continue to hear me say, people and platform together.
00:25:43.599 --> 00:25:47.759
One you can't have one without the other, the way that the world is moving with technology.
00:25:48.079 --> 00:25:53.839
But I most times handling it up front is gonna save you way more money.
00:25:54.160 --> 00:26:00.319
Um like I said, it takes tools off the table if you wait for the state to recognize you and come a call and give.
00:26:01.359 --> 00:26:01.680
Okay.
00:26:02.160 --> 00:26:08.160
So so looking ahead, the sales tax rules continue to evolve as businesses grow across more jurisdictions.
00:26:08.559 --> 00:26:14.799
What trends are you currently seeing and what should businesses be doing today to stay ahead of tomorrow's compliance challenges?
00:26:15.200 --> 00:26:15.440
Yes.
00:26:15.519 --> 00:26:20.559
So again, using the California and Colorado things of old are not the same.
00:26:21.440 --> 00:26:23.359
States are looking for more revenue.
00:26:23.759 --> 00:26:24.720
So what does that mean?
00:26:24.880 --> 00:26:26.160
They'll tax more things.
00:26:26.480 --> 00:26:29.839
So you have to stay abreast of the laws and the law changes.
00:26:30.160 --> 00:26:32.319
Um might even give you a break.
00:26:32.480 --> 00:26:34.160
Not all
states are coming after you.
00:26:34.319 --> 00:26:39.119
Um so you have to, that's one for looking who's monitoring the law changes, right?
00:26:39.359 --> 00:26:41.279
Somebody internally, somebody externally.
00:26:41.440 --> 00:26:43.200
How often are we looking at that?
00:26:43.440 --> 00:26:46.000
Um you get what you pay for, right?
00:26:46.079 --> 00:26:52.880
So if you're like, we're gonna do this on this point, then you might miss a whole six months of alert changes.
00:26:53.119 --> 00:27:03.519
Um monitoring, frequent monitoring, like I said, making sure that you're reviewing this and making sure you're letting the subject matter experts handle that business.
00:27:03.680 --> 00:27:13.680
Like um, especially like I said, with AI, somebody might be like, oh, I know enough to be dangerous about so I don't need to go to D because she's gonna cause me this, but it shouldn't be thought.
00:27:13.839 --> 00:27:17.359
You should be thinking about from an MA perspective.
00:27:17.519 --> 00:27:24.640
Even if you don't plan to sell your business in the near future or anytime, you should always have that lens though.
00:27:24.720 --> 00:27:26.880
What if I ever decide to sell my business?
00:27:27.039 --> 00:27:29.200
Yeah, I want it as clean as possible.
00:27:29.359 --> 00:27:29.440
Right.
00:27:29.680 --> 00:27:35.359
That way when we go through due diligence, they don't see anything on sales tax, income tax, salt related.
00:27:35.599 --> 00:27:39.839
I kept my business in a state that was had a clean bill of help.
00:27:40.160 --> 00:27:42.160
Like I said, every now and then some things are gonna slide in.
00:27:42.240 --> 00:27:48.319
So I think you should have an MA lens, whether you're gonna sell or not, to say, yeah, I don't even you go to sell.
00:27:48.559 --> 00:27:52.880
Hey, I don't even have to worry about that, guys, because I regularly did my Nexus checks.
00:27:53.039 --> 00:27:54.720
Absolutely I have an automated solution.
00:27:54.799 --> 00:28:03.039
So even if you do go due diligence, you can say, Oh, we can go to Avalair or ANROC and we could pull those records, and I have returns for the last six years.
00:28:03.279 --> 00:28:05.200
That's a good thing about automated solutions.
00:28:05.359 --> 00:28:06.799
They are repositories.
00:28:06.960 --> 00:28:09.920
No longer are you looking through the cabinet, like, man, didn't file that return.
00:28:10.240 --> 00:28:11.839
I think I saved it in my my website.
00:28:12.000 --> 00:28:12.960
I mean, here, here.
00:28:13.519 --> 00:28:18.400
So automated solutions, configurations, having regularly checkups.
00:28:18.480 --> 00:28:22.720
Think of everything like I said about your like you like you do your body or your car.
00:28:22.880 --> 00:28:23.920
Is my check light on?
00:28:24.000 --> 00:28:24.160
Yeah.
00:28:24.319 --> 00:28:26.000
Do I need to go get my physical?
00:28:26.319 --> 00:28:28.319
Um, all of these things are interchangeable.
00:28:28.480 --> 00:28:43.279
So MA lens, frequent monitoring, getting a subject matter expert to say, even if it's we're not gonna go with you to do this work, but at least you get them to consult to say, here, I'm giving you the lay of the land.
00:28:43.359 --> 00:28:48.640
This is where you have Nexus, this is where you have a taxable product, this is how much you owe.
00:28:48.799 --> 00:28:50.960
This is how much this is what we think you should do.
00:28:51.119 --> 00:28:51.279
Yeah.
00:28:51.440 --> 00:28:52.799
Now, how do we do those things?
00:28:52.960 --> 00:28:54.720
We get an automated solution.
00:28:54.880 --> 00:28:57.839
Now, once we have this solution, who's gonna drive this thing?
00:28:57.920 --> 00:28:58.079
Right.
00:28:58.240 --> 00:29:02.559
The process and the procedures, what things do we need to do and who was gonna do them?
00:29:02.720 --> 00:29:05.519
So that's a forward thinking company.
00:29:05.680 --> 00:29:08.000
Yeah, especially if you're over your skis.
00:29:08.319 --> 00:29:10.480
Um, and I look, I get it.
00:29:10.640 --> 00:29:14.240
People want to save money as best as they can, but consider their cost.
00:29:14.559 --> 00:29:18.960
What is saving money now gonna cost them for you in the future?
00:29:19.759 --> 00:29:21.200
Yes in place ahead.
00:29:21.599 --> 00:29:22.079
Yes.
00:29:22.319 --> 00:29:26.240
Okay, well, thank you, Dee, for the amazing conversation and insights.
00:29:26.400 --> 00:29:32.640
Hopefully, our audience, I'm sure, are gonna take a lot um into consideration and hopefully they put some plans in place.
00:29:32.799 --> 00:29:34.559
So I hope to see you again soon.
00:29:34.799 --> 00:29:35.359
I do too.
00:29:35.440 --> 00:29:37.119
And remember, guys, to stay salty.
00:29:37.200 --> 00:29:40.319
The salt, salt is always the condiment should be on the table.
00:29:40.480 --> 00:29:43.039
So we're always here to help you talk about again.
00:29:43.279 --> 00:29:45.519
Sardet used the word outsource.
00:29:45.680 --> 00:29:56.880
We want to be the outsource people that you come to, that you have confidence in, is looking at all the things we talked about, the notices, managing your software compliance for you, but really being your partner as well.
00:29:57.039 --> 00:29:57.440
Absolutely.
00:29:57.599 --> 00:30:00.240
We don't want to drive it without riding along with you.
00:30:00.319 --> 00:30:03.200
Uh, you know, so there's a driver and a guide.
00:30:03.359 --> 00:30:07.680
So we want to make sure that we're working together with you to have a clean bill of help.
00:30:08.400 --> 00:30:09.200
Thank you, Dave.
00:30:11.920 --> 00:30:15.519
Today's conversation highlights an important reality for businesses.
00:30:15.680 --> 00:30:21.920
Sales tech software is a powerful tool, but it's only one piece of a successful compliance strategy.
00:30:22.160 --> 00:30:32.480
The right processes, oversights, and ongoing monitoring can make the difference between staying ahead of issues and discovering them after they become costly problems.
00:30:33.119 --> 00:30:35.279
Thanks for tuning in to Beyond the Ledger.
00:30:35.440 --> 00:30:41.200
For more insights and expert perspectives, visit BTCPA.net and explore our latest resources.
00:30:41.359 --> 00:30:44.720
And don't forget to like, follow, share, and subscribe.
00:30:44.960 --> 00:30:49.119
Until next time, I'm Sharday Layfield, and we'll see you for the next conversation.