7 Signs that Your Exemption Certificate Management Process is Putting You at Risk

Charles Maniace
May 21, 2020

Maintaining valid tax exemption certificates is one of the more difficult and labor intensive, yet critical, compliance requirements. Doing it correctly and completely is essential to protecting your business from audit exposure.

As the tax landscape continues to evolve and grow more complex, managing this process is becoming increasingly difficult and time consuming. Many companies are continuing to try to evolve and expand existing manual solutions to meet their new requirements but have found themselves falling further and further behind. The result is often a repository prone to missing or expired certificates that put your business in the cross hairs of auditors.

Knowing when you need help in managing the exemption certificate process is an important step in mitigating your audit risk. To assist you in assessing your own capabilities we’ve put together a list of key identifiers assembled from years of experience and conversations with hundreds of customers.

If any of these statements apply to your business and exemption certificate management process, it’s time to talk to the tax technology experts before the auditors ask to talk with you.

Seven signs you may need help:

  1. Our team is small, and we struggle to always request and track the receipt of exemption certificates from new customers.
  2. We don’t have the proper controls in place to track when certificates may be expiring so that we can request and receive new ones.
  3. Our customers find our certificate submission process to be cumbersome.
  4. Requesting exemption certificates from our customers is extremely time consuming and full of redundant tasks.
  5. We can’t easily track, or in some cases track at all exempt drop shipments We have yet to evaluate our need to collect and maintain certificates in the states where we are now collecting tax due to economic nexus.
  6. The number of exempt transactions booked in error is on the rise.
  7. Our existing process of managing exemption certificates is not scaling to meet or business expansion and growing compliance needs.

The best protection against a risk is often the simplest. In the case of exemption certificates, ensuring that you have the proper ones on file and current sounds easy. Yet the process of getting there can be anything but.

Automating your exemption certificate management process will ensure that you are protected against missing and expired certificates. It will also eliminate the hours upon hours your staff spends completing redundant tasks, freeing them up to focus on higher priority initiatives.

This process is complex and getting more complicated by the day. It’s OK to ask for help. If your organization identifies with any of these scenarios, talk to Sovos. We can support you seamlessly and ensure that the stress of exemption certificates becomes a thing of the past.

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Author

Charles Maniace

Charles Maniace is Vice President – Regulatory Analysis & Design at Sovos. An attorney by trade, Chuck leads a team of attorneys responsible for all the tax and regulatory content that keeps Sovos clients continually compliant. Over his 14 year career in tax and regulatory automation, he has given talks and presentations on a variety of topics including The Taxation of High Tech Transactions, The Taxation of Remote Commerce, The Regulatory Implications of Brexit, The Rise of E-Audits, Form 1042-S Best Practices and Penalty Abatement Practices for Information Returns. Chuck is a member of the Massachusetts Bar and holds a B.S. in Business Economics from Bentley College, a J.D. from Boston University School of Law, and an LL.M in Taxation from Boston University School of Law.
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