How Sovos Helps Future-Proof Sales Tax Compliance

Lizzy Connolly
May 20, 2021

Sales tax compliance is complicated, ever-evolving and often an increasing burden on IT teams. How can organizations manage the shifting rules and regulations, while also maintaining regular business operations? That was one of several questions posed to Sovos’ Terry Melnik, general manager, sales and use tax, on a recent CIO Talk Network Podcast episode.

A big event for sales and use tax was the 2018 Supreme Court case, South Dakota v. Wayfair, Inc., Melnik explained. That case changed everything and made things more complicated for manufacturers, retailers and others when it came to establishing economic nexus

“As jurisdictions try to balance budgets – especially in light of the pandemic – they’re looking for ways to make sure they’re getting an accurate amount of tax,” Melnik said. “They’ve turned to different programs to do that and are realizing it’s more complicated. They’re leaning on tax compliance companies to fill that void.”

Tax is part of a larger ecosystem, which is a key difficulty with managing tax from an IT perspective. The ecosystem consists of ERPs, ecommerce systems and point-of-sale (POS) systems. Organizations need to ensure that the entire shopping cart experience is followed through to completion. 

Tax is essential in all of those systems, and businesses need to ensure that the performance of their tax system is 100% reliable. It’s important to ensure that the tax rules and regulations are current – and those rules are constantly changing, are dynamic and need to be kept up-to-date. It’s absolutely a challenge for IT teams, Melnik said.

For example, consider sales tax compliance as the goalie of a business. A goalie sits in the background for the entire game, protecting the back of the net. The smallest miscalculation or misread of a play could lose you the game. Even if that goalie is perfect for 59 minutes, just one missed shot could lose the game and turns them into a pariah to the entire arena. 

The same is true with tax compliance. Just one error – even some detail you weren’t aware of – equates that goal against you in the form of a tax notice, leading to audits and penalties. Keeping up with these changes is a full time job and one that the IT team does not want to be responsible for. That’s the value of a tax compliance solution – keep up with the latest technology, tax rules and calculations to protect you from notices and audits.

Professional hockey teams want the best goalie to protect them from a loss. Smart organizations want the best sales tax strategy and a partner they can trust to protect them.  

Is Sovos a panacea?

Businesses need a partner that is committed to continually monitoring the tax landscape, Melnik stated. That partner should be looking at trends locally and around the world, seeing how other countries are looking at tax and what might be adopted – and be prepared for if and when those same approaches are adopted in the U.S.

“No one can stay ahead of the future because it hasn’t happened yet,” Melnik said. “But companies need a partner they can trust to take the entire tax burden off the table: one that can scale as the business grows.”

There is no panacea because the landscape is constantly morphing. But working with a partner like Sovos ensures that customers have an expert who can stay ahead of any change coming.

Every business is going through a transformation, whether it’s how customers buy, or how you grow by changing or adding entirely new categories of products and services. But businesses need to pick the right partners to unlock barriers to growth, ensuring that those partners are able to evolve with you and your strategy. A partner that works with you to manage change, who has the experience working with industry leaders to deploy major upgrades to key infrastructure components, is the partner who can best help you navigate the future of your tax journey.

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Lizzy Connolly

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