5 Factors When Moving Your Sales Tax Engine to the Cloud

This blog was last updated on March 25, 2024

Moving from an on-premise sales tax engine to one in the cloud can help businesses better manage their sales tax obligations. Whether organizations need improved oversight and management of exemption certificates, an automated process for tracking ever-evolving regulatory changes or more comprehensive compliance reporting, a cloud migration project may be needed. However, there are several key considerations to help ensure as smooth of a process as possible.

What are the goals?

Businesses should have clear goals in mind before migrating to the cloud, knowing what improvements will come from the upgrade and how that will impact the short and long term. For example, are you looking to streamline end-to-end sales tax compliance? Reduce your total cost of ownership (TCO)? Do you need real-time tax updates for improved accuracy? Putting together a budget, team resources and an overall project plan will also help outline a clearer path to accomplishing business goals.

This is also where organizations should consider the benefits of a multi-channel tax engine. If there are multiple transaction channels (e.g., accounting, billing, customer facing), they will all need to be able to talk to the same tax engine. Additionally, if there are plans to operate globally, a business needs to ensure its tax engine can handle that geographic expansion.

Planning out goals is also a good opportunity to engage with a cross functional team to make sure all points of view are considered. All teams (IT, order-to-tax, AP) are going to have different goals and it will be critical to try and accomplish all goals over time.

What is the timeframe?

Companies should determine ahead of time whether migrating their tax engine to the cloud is being done in conjunction with other projects, such as a cloud ERP upgrade or IT modernization. A lot of testing items will likely be the same and it’s important to know whether another project that touches tax engine is also being adjusted.

Businesses must also know whether this is a standalone project. After the goals have been decided, it will be easier to determine a potential time frame and how long certain departments may be impacted by the migration. Oftentimes, organizations tie a cloud migration project to an ERP migration or the launch of a new consumer-facing channel. This could impact the overall timeframe.

What is the project scope?

Considering the project scope is also essential. The scope should be a reflection of the goals that have been identified. For example, is it a technical upgrade? This would be when a business is not experiencing any limitations or having difficulties with calculating sales tax, but the company has decided to move to the cloud. Then there is a functional upgrade, which would mean that an organization was working to overcome some sort of limitation in its current sales tax system.

A technical upgrade would be a more basic transition. The business is not updating many features/functions and is likely working to achieve other efficiency goals. This can also be done as a first step toward more in-depth reconfiguration of a system farther down the line.

When a company is looking at a functional upgrade, it is essentially redesigning its entire tax strategy. Businesses must understand which scope it is looking at to ensure as smooth of a transition as possible.

Which resources are needed?

Internal resources also have to be considered. Companies may even want to create a roles and responsibilities matrix for the entire project. Laying out the project plan, which departments/individuals oversee each step and how those departments/individuals need to work together will help with the cloud migration.

Along with internal teams, there may need to be external consultants involved as well. Businesses should know ahead of time what sort of resources they may need from a third-party, such as the technology vendor.

Did you consider the details?

There will be numerous details that each business must review. For example, are there any touchpoints within an existing ERP system that must be considered? What about migrating data configurations, or jurisdiction code conversions? These details will likely vary from one business to the next, so ensure you are taking your daily operations into account.

The sales tax reporting process also must be considered. With cloud migration, there will be a change in process. Previously, there may have been processes to pull the data out. However, an automated sales tax system in the cloud can offer a more targeted and detailed report, without needing to query for a specific file. Instead of relying on the “old way” of sales tax reporting, businesses will need to account for new processes. Additionally, any type of add on solutions (e.g., exemption certificates) will also need to be accounted for as part of the migration.

Organizations also must have a plan for how they are going to access their archived data. For example, with sales and use tax audits, states can go back multiple years. Typically, completed transaction data is not migrated to the new solution – how is an organization going to make sure it still has access to the old data once it moves?

Migrating from an on-premise sales tax solution to a cloud-based engine may seem daunting. But accounting for key considerations and working with the right partner can keep the process seamless.