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TECHNOLOGY: TAX PROFESSIONAL’S NEW BEST FRIEND

Nausher Hoodbhoy Manager PwC Los Angeles, CA [email protected]

Suzy Soo Co-Founder LCR-Dixon Corporation San Francisco, CA [email protected]

IPT

ANN

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IPT 2014 ANNUAL CONFERENCE

PROLIFERATION OF DATA TECHNOLOGY CHANGES ARE RESULTING IN

UNPRECEDENTED REACH, POWER AND COMPLEXITY

Google’s Eric Schmidt claims that every two days now we

create as much information as we did from the dawn of

civilization up until 2003

In 2008, Google was processing 20,000 terabytes of data (20 petabytes) a day

Walmart collects more than 2.5 petabytes of data every hour from its customer transactions.

A petabyte is one quadrillion bytes, or the equivalent of about 20 million filing cabinets’

worth of text.

48 hours of video are uploaded to YouTube every minute, resulting in

nearly 8 years of content every day

A new blog is created every second; there are over

80,000 created daily

70% of data is created by individuals – but enterprises are responsible for

storing and managing 80% of it


PROLIFERATION OF DATA

AMOUNT OF DATA GENERATED IS GROWING 40% EACH YEAR

Source: The Backup Blob


Globalization of commerce and M&A activity Consolidation of ERP systems

Automation in Procure-to-Pay (P2P) and Order-to-Cash (O2C) Cloud computing enabling rapid deployment

Convergence of consumer and business technology (e.g. iPad)

Big Data and increasing analytics capabilities

TECHNOLOGY TRENDS AFFECTING TAX


Expanded options with enterprise, hosted and global tax calculation and returns systems Intense competition fostering better innovation Integrated exemption certificates tools that connect with

ERPs and Tax Calculation software Increasing use of embedded taxability content within tax

software – less manual research More “upstream” enhancements embedded in P2P and

O2C to support the sales/use tax function Development of better data extraction from ERP systems

EVOLVING TECHNOLOGY IN SALES/USE TAX


WHEN DOES AUTOMATION MAKE SENSE?

- In case of multiple scenarios, ability to “toggle” between different scenarios - Ability to expand automation to other similar tasks with relative ease

- The process can be repeated for upcoming periods with minimal effort

- Less human intervention = Less likelihood of errors

Repeatability / Speed

Optionality / Scalability

Cost Savings

Accuracy

- Current and future savings on the current task and frees up resource hours that can be redeployed to other tasks

When to Automate? - Difficult to perform in Excel - Takes multiple steps to complete - Difficult to QC and follow - Task will be performed repeatedly - Task has multiple scenarios Benefits of Automation


THE MECHANICS OF AUTOMATED TAX SYSTEMS

•Tax Codes •Tax Indicators

•Company Codes •Vendors •Customers •Materials/SKUs •Material Groups •GL accounts •Plants •Cost Objects

• Addresses • Assign Tax ID codes

•Sales Order •Billing •Purchase Order •AP Invoices •Inventory Use •Asset movements

•Assign Tax Codes •Trigger call to the Tax System •Pass data •Return tax to ERP

• Determine sourcing • Exemption Certs • Apply rules • Determine rate • Calculate Tax • Post to Reports • Export to Returns


GETTING IN LANE FOR STATE AUDITS

Data Collection Data Cleansing/ Profiling/Validation Data Reconciliation

Singular Database

Data Profiling/ Validation Analyses tax returns/

work papers

Reconcile data

Collect and consolidate data for all states

Prepare Data for Audit

Extract relevant reconciled data for each state and

invoice images

Other

Oracle

SAP

The approach outlined below provides a defensible approach to extracting relevant transactional data in support of state sales/use tax audits:

Flag sales/use tax transactions

Presenter

Presentation Notes

Good with this one


TRANSACTIONAL DATA ANALYSIS 1. You will likely need an ERP report with line item detail 2. Get the fields you would use in a reverse audit and more 3. Pivot and analyze the data 4. Review select invoices to validate assumptions

Expense Acct – not clearing accts LIV & FI Doc #s AP Processor ID

Vendor # & Name

Jurisdiction Codes Tax Codes

Plant Material Group

Doc Type & T-Code Co Code

Include both sales tax and use tax


DATA ANALYSIS – KEYWORD VALIDATION


VISUALIZING YOUR DATA

Are there goods bought from vendors in certain states that might be exempt from tax?

Data visualization helps people see and understand data.


A LOOK INTO THE FUTURE

ERP and other

systems

Embedded tax reports and tools

Tax ETL tools

Data Warehouse

& Document Management

Tax applications

(multiple)

Tax Portal (business intelligence, reporting & tracking, document access, news and collaboration, access to data collection tools and other modules)

Data analytic tools, reporting tools, rule engines E-filing tools, archiving tools, planning and forecasting


Q A

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