This blog was last updated on February 23, 2024
As the digitization of sales tax continues to raise compliance stakes worldwide, businesses require a complete solution for real-time tax calculation. User-centric solutions that operate on the most up-to-date regulatory requirements can help organizations avoid backtracking and making adjustments for evolving regulations after the fact. This is where a cloud-based sales tax solution comes into play.
There are numerous potential challenges with running a sales tax engine on-premise, which is why organizations of all sizes have moved to the cloud. Businesses that are considering migrating to SAP S/4HANA will especially benefit from making the switch.
ASUG, the world’s largest SAP user group, conducted research in collaboration with Sovos to better understand the sales tax solution experiences and change management processes of customers that use SAP enterprise resource planning (ERP) systems. The research also explored why organizations opt for on-premise or cloud-based solutions.
Cost reductions (hardware/software costs and/or support staff costs) and strategic initiatives or digital transformations were the top reasons companies host sales tax solutions in the cloud. Additionally, the number one reason respondents that currently host their sales tax solution(s) on-premises are planning to move their solution(s) to the cloud is to stay current with ERP evolutions and avoid aging out of support.
Approximately two-thirds of respondents (60%) said they are planning to move or are considering moving to the cloud. However, organizations are not strangers to cloud-based sales tax solutions. One-third (34%) said they are hosting their sales tax solution(s) on-premises, though a combined 66% use a cloud solution of some kind.
When cloud solutions are used, the most popular environments are a hybrid cloud (some on-premises private cloud, some public or hosted cloud) followed by a software-as-a-service (SaaS), cloud-based solution.
Nearly half of respondents (47%) said the top benefit in hosting sales tax solutions in the cloud is reduced manual work for IT staff, with 35% citing better integration with other systems and 33% saying faster updates are delivered to the business.
A solution to keep you moving forward
Switching to the cloud from an on-premise solution can make a huge impact on an organization.
For example, an existing Sovos client had outgrown the ability of an on-premise based solution to keep pace with a rapidly evolving tax landscape. The company had become too dependent on IT to manage its tax engine and a reliance on manual and paper-based solutions was impacting the organization’s ability to scale. Being forced to run continuous manual updates also created an undue burden on a small team.
Moving from an on-premise tax engine to one in the cloud helped to better manage all sales tax obligations. The company gained better oversight and management of exemption certificates and evolving tax forms and had a completely automated process for tracking and updating regulatory changes. There was also less reliance from tax on the internal IT team and a significant reduction in dedicated IT for tax related issues.
Ready to see if a cloud-based sales tax solution could be the key to your business’ success? Reach out to our team of experts to see how Sovos can help.
Take Action
Ready to learn more about how moving to a cloud-based sales tax system is beneficial? Check out our on-demand webinar with ASUG where we dug into the survey results.
