Sales Tax Series Blog 5 – ERP Challenges
Posted on: December 30, 2019 | By: Andy Vitullo | QAD Financials, ERP Selection, QAD Distribution, Microsoft Dynamics Manufacturing
Ensuring a sound United States sales tax configuration in your ERP system can be a challenging endeavor. Your business needs to consider the following.
- How many U.S. states does the business have Nexus? (Nexus is the relationship between a business and a state that requires the seller to register, collect, and remit sales tax on sales made in the state).
- What is the jurisdiction level of detail required for tax filings? States, Counties, Cities and special jurisdictions (i.e. Stadium Sin Taxes) can all be combined to create a single rate on a transaction. Filing requirements with the relevant jurisdiction will drive this level of configuration required).
- What is the frequency of rate changes for those jurisdictions in which the business has Nexus?
- How will Certificates of Exemption for Customers be maintained. Certificates of Exemption storage and annual updates from customers are required by most jurisdictions.
- Who are the business human resources responsible for ensuring the sales tax configuration in ERP is continuously maintained?
Your ERP team will need to understand these considerations to properly configure the system. The ERP team should understand the trigger events that require updates to the configuration. The configuration should designed with simplicity, be well documented and be easy to maintain.
The configuration of the system can be categorized as static and dynamic data. Static data elements will include the definition of tax jurisdictions, types of taxes, and tax classes for customers, suppliers, products or services that may be taxed at a lower tax rate than typical transactions. Dynamic data will generally include tax rates for the defined jurisdictions.
If your business has a relatively small sales tax risk, then these configurations can be enabled within your ERP system. If your business has nexus in multiple states and your customer base requires management of their Certificates of Exemptions, then a bolt on sales and user tax package should be considered.