Making the Case: Seven Benefits of Automating Your Tax Exemption Certificate Management Process

Charles Maniace
May 22, 2020

Tax exemption certificate management might not be the topic at the forefront of every executives mind, but if your organization is serious about reducing the risk of adverse audit assessments (including penalties and interest), it’s a process you absolutely have to get right.

Manual processes have proven time and time again that they are no longer capable of keeping pace with today’s challenging and ever-changing regulatory environments. Ultimately, they suck valuable resources away from the organization while failing to deliver the level of control needed to ensure compliance.

If you are trying to make the case to your organization on why this process needs to be automated without delay, start with these seven talking points.

Automating the exemption certificate management process will:

  1. Reduce manual work and paper documentation – By importing and centralizing exemption certificates and customer data into the cloud your team will have instant access and full visibility into which customers have missing, incomplete, invalid or expired certificates in a matter of minutes.
  2. Minimize transaction errors and incomplete records – A certificate management solution will alert you when there are certificates that need action. You can then proactively request new or updated certificates. This will reduce the amount of time your team spends collecting and validating certificates and ensure you are only exempting customers who have provided valid documents.
  3. Reduce IT costs – The value of outsourcing this business functions to a tax technology expert greatly reduces the costs of building and maintaining an in-house solution. Cloud-based or SaaS (software-as-a-service) models are the ideal as they represent low up-front cost, centralized processes and require minimal IT support.
  4. Simplify the customer onboarding process – Streamline the customer onboarding process by providing a simple method of uploading exemption certificates directly into the solution. This will improve your customer experience while ensuring you always have visibility into who has submitted certificates. 
  5. Improve customer relationshipsEnsuring accurate tax treatment on invoices and timely order fulfillment can make a huge difference in customer satisfaction. Holding up orders, reissuing invoices, and mis-applying tax can strain a relationship. A proactive exemption certificate management process in place will help to eliminate these issues.
  6. Significantly reduce audit frequency and time needed to prepare – Eliminate time spent gathering data if audited. Confidently defend audit inquiries knowing you have the required certificate documentation easily accessible. As everyone knows, when a state audits a taxpayer and finds a buttoned down and complete compliance process, the less likely they are to return any time soon.
  7. Maintain exemption certificate compliance as your business grows – As your customer base grows and your nexus footprint expands, collecting certificates will only become more challenging and time consuming. Having a management system in place that scales along with you ensures compliance no matter how big and diverse your customer base becomes.

Getting the exemption certificate management process right is an important step in ensuring that your organization remains compliant. Given the growing complexity of today’s regulatory environment, this is no longer a nice to have tool, but rather an essential solution in protecting your business from financial risk.

If you aren’t sure how to get started in automating your processes, talk to Sovos, we can help.

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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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