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Sales Tax Automation: There’s No “Plug and Play” – Without People.

author photo of Patricia L. Pelino

My name is Patricia Pelino and I worked for a leading sales tax software solution provider for over 20 years - as a tax research analyst, business analyst and finally a tax consultant.

My goal is to open a dialogue regarding automation-related issues, concepts and trends which will benefit the small-medium business audience as a whole. (That said - if you need specific assistance – feel free to contact me directly through my bio page, using the link above.) And finally – just to make things clear from the start - it's not my plan to endorse or recommend any products (regardless of vendor) in this venue. What I can and will do however is try to be an information conduit and a gate keeper – so that lively dialogue ensues about sales tax automation.

So - sales tax automation. Why in the world would you want to do something like that? Save time? Sure. Utilize the tax team for more strategic and revenue focused assignments? Absolutely! Save money? Eventually. No question - sales tax automation can deliver many advantages. However, the reality is that implementing an automated tax calculation system can be expensive, time consuming and stressful – and that’s when things go according to plan – which they usually don’t for various reasons- sort of like Murphy’s Law.

There are some excellent sales tax solutions available. However, in spite of what you may read in some of those Marketplace/Main Street articles about the ready availability and ease of sales tax solutions – most sales tax automation projects are not “plug-and-play” scenarios. While there are some select situations where that may work (although obviously requirements will vary by company - and certainly by size of company) it generally takes a team of diverse individuals with a deep understanding of various aspects of a company’s technical and tax operations to bring an implementation project to a successful “go live” date.

So what do I consider the right internal implementation team? Generally - an internal implementation team can be defined as a cross-functional group of subject matter experts (SMEs) from Finance, Tax, IT and Software Development. (Tax may well be a part of finance, but their processing needs and timelines for monthly rate and rules updates can be different than the finance group’s needs.) Other departments may also be included based on the industry and need for SME input. (For example, a retailer may want to include the folks who work with coding the merchandise before it is entered into inventory.) This core team is charged with reviewing the various automated software solutions available – and after careful review and requirements analysis – recommending the software solution that would be the best fit for the organization overall.

The purpose in having the cross-functional team is to have as complete a picture as possible of the processing needs of the various groups impacted by the installation of an automated software solution. That said, during my years as a tax consultant, I observed that most implementation projects were frequently driven by departments other than tax (often IT) , so it was their budgets and their timelines which were used to define the project.

While IT understands a project’s technical requirements, it’s important that Tax provide the guidelines for what information has to be passed from the ERP to the tax software in order for the tax to be calculated correctly and develop appropriate test scenarios. (While these are all important things to a tax department – they may not be on the radar of the other groups involved.) Tax can also then ensure that the go live date doesn’t interfere with a sales tax returns reporting period. :)

Projects which considered tax needs from the beginning usually fared better when it was time to request specific features, functionality and development resources. So if you are a tax person - this is something you may want to consider when you hear that an automated tax solution is being considered. Where does your department fit into the picture as far as requirements, deliverables, budget, and timelines? It’s up to you to ensure that the lines of communication are open and that your voice is heard. And that needs to happen before the software review begins – and before the budget is set and approved.

So tell me – what did your internal implementation team look like? How much was the tax department involved? What role did they play in the evaluation of the automation solutions that were reviewed? And how much did their input count when the decision to buy was made? If your answer is “not much” how would their involvement, recommendations, and comments have made a difference in the whole process – from what to buy, to implementation, to testing, to go live?

And if you are still in the “what to buy” stage and haven’t included your tax folks – what are you waiting for? Here’s your chance to build a great relationship with a great bunch of people who like you, want to do their job.

I look forward to learing about your implementation experiences!

Other recent “Sales Tax Automation & Software” posts by Patricia L. Pelino:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.


4 Responses to Sales Tax Automation: There’s No “Plug and Play” – Without People.

  • Posted by Anne on May 19, 2014 1:40am:

    Kieth that is an excellent point- uniform classification of products (or worse yet- services) is a HUGE obstacle for anyone selling a variety of products/services online. SSUTA's broad classifications, or even the thousands of specific classifications under the United Nations Standard Products and Services Code® (UNSPSC) is of no help and certainly not applied uniformly as each individual state uses their own terms and definitions. It is a nightmare to determine the correct classification for every sale in every possible jurisdiction an online customer may be in. One state may classify a certain service sold online as Data Processing, another Information Services, another Software as a Service and still another one (AZ) as tangible personal property, regardless of the fact it was digitally downloaded.
    And that is just one step- classification of all of the products. Now try to determine the correct jurisdiction for a service or digital product sold over the internet- there is no "ship-to" location and who knows where the customer is actually located much less where the "benefit is received" ? He could be in an airport on his laptop purchasing an online subscription to something he will download and use in his office at a location different from his home or credit card billing address- if he even uses a credit card- he could pay with EFT.
    Since the customers physical use address information was irrelevant in the past sellers do not have this information - or even the ability to obtain it for new customers without rewriting all the system interfaces for each website to include detailed customer address information and address validation.
    This is an impossible compliance requirement for online sellers- and a windfall for state auditors. The old laws and rules were not written for today's e-commerce and digital world.

  • Posted by Keith on June 10, 2013 4:02pm:

    I'm just a one horse show selling online, but do sell multi-channel. It's bad enough that I have to collect Sales Tax for in-state sales with over 150 tax districts (none defined by zip code), hundreds of tax rules, and all my State has to offer is PDF files and excel spreadsheets, and zero support for an email (or snail mail) system to notify businesses of Sales Tax updates.
    Mr Campbell's Tax Cloud solution might work for my website, but what about eBay and Amazon? Neither of those companies will file tax for me, so rather than have automated filing for over 600 'States', I would need to do this manually.
    Next is the need to classify inventory to it's tax standard. Again that is not a 'plug n play' system. i.e. General clothing, protective clothing (safety), Wool coats and Fur Coats are all treated differently State by State as to taxability.
    SSUTA has a list of the categories, but I have been unable to find the code numbers. TaxCloud has a TIC code system, but is that the same system used by Avalara or Vertex?
    Who knows how eBay or Amazon will handle this, but current eBay category numbers, Amazon's ASIN numbers, and certainly product UPC codes will not be acceptable for product coding. Worse is that miscoding would be a user error, not a software error, an audit liability States would not forgive.
    What if I change tax service providers? Will recoding be required? What of in-house State software packages? Will they play 'nice' with other in-house State software packages? There are over 150 shopping cart systems out there, and even TaxCloud is only compatible with the top 30.

  • Posted by David on April 14, 2013 2:33pm:

    Wow. This entire post is based upon fear, uncertainty, and doubt. The truth is, MOST online retailers dont have the massive labyrinth of departments expected by the author. The VAST MAJORITY of online retailers are NOT big enough to endure or staff the cross-disciplinary approach suggested. I do agree that MOST businesses cannot afford to use a solution that the author's company provides... but EVERYONE can afford a free solution.
    Seriously, this post is WAY too self serving for the authors employer, and deserves an honest response or a "salestaxsupport" sanctioned rebuttal. As a news source, SalesTaxSupport has been good, until now, about neutrality. Sadly, this post crosses all of those lines, and has even infected a co-contributor (Sylvia Dion) to adopt this position as a factual basis for a subsequent post
    I dont think there is an editorial response posible that would justify this incident - i hope I will be proven wrong.

    • Posted by Author photo of Susan JaegerSusan Jaeger on April 15, 2013 1:57pm:

      David – Thank you for your message. We greatly appreciate your positive comments about the news/information available on
      We would like to clarify that while Patricia Pelino was with a leading sales tax software solution provider for over 20 years, she is now an independent consultant. Also, while her perspective may be influenced by her past experience, we are equally receptive to working with contributors who may have experience with other automation solutions. Our key stipulations are that content be educational (versus promotional) and that it be geared to the small-medium business (SMB) audience. (Per earlier conversations, we would welcome the opportunity to discuss such participation on with you and your associates.)
      Regarding Patricia’s post - David, we do agree with your statement that many (in particular small) on-line retailers do not have a “massive labyrinth of departments”. But please remember that we cater to the SMB audience. While definitions (and metrics) vary greatly – employee size for SMB’s can range from a single employee – to well over a thousand. Obviously, with such a broad range, there will be an equally diverse range in organizational structures, as well as automation requirements.
      That said, we believe that Patricia’s core message is applicable regardless of company size. Any sales tax automation project should meet the varying needs (i.e. technical and tax) of that particular organization. In order to make that determination, some companies might involve a team of individuals from multiple departments. However, in smaller (on-line) organizations, that team may include a single business owner who seeks input from a web-designer and accountant (ideally versed in sales tax issues) in order to ensure that all technical and tax requirements are met.
      Patricia does acknowledge that there are excellent sales tax solutions available and that in some situations the “plug and play” concept can work. Unfortunately, given the current complexity of our tax system and the many changing rules and requirements (re nexus, taxability, etc), even the smallest on-line retailer should take care to confirm that the solution under consideration will meet their particular (and current) requirements.
      David, we all hope that some sort of agreement will be reached in the not-too-distant future which will deliver the simplification to the sales tax process which will allow ALL companies to consider a cost-effective, plug-and-play solution. Until then, we greatly appreciate your insights regarding this challenging topic.
      Susan Jaeger


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