Simplify Exemption Certificate Management and Establish an Audit Defense

This blog was last updated on March 11, 2019

Sales and use tax exemption certificate management is critical to creating an effective tax compliance process for manufacturers and wholesalers. As states move forward with employing technology-driven compliance requirements and enforcement measures to maximize revenues, manufacturers and wholesalers can expect an impact to their bottom lines and profitability due to penalties, interest and fees if an outdated manual exemption certificate management process remains in place or even if the wrong solution is implemented. Automation and centralization are key to a simplified exemption certificate management program and establishing an audit defense plan.

Mismanaged tax exemption certificates – whether incomplete, missing, or invalid – are red flags for auditors. With a greater number of certificates to manage, growing companies further increase the risk for non-compliance – more money often breeds more problems.

Exemption Certificate Management Process Questions

For companies that have not automated and centralized compliance, the chance of becoming an audit target increases the longer a manual process is in place. Compound this challenge with the fact that there are many different exemptions and certificate types across the U.S., and it’s easy to see why exemption certificate management should be a priority for manufacturers and wholesalers.

But establishing an exemption certificate management process can be complicated because of the many variables that need to be considered, such as:

• Should we create a homegrown product or select a turn-key, automated solution?
• Is the solution scalable?
• How secure is the solution?
• Are the updates in real-time?
• Does the solution integrate seamlessly with other processes and technologies?
• What manual tasks will it alleviate?
• Will it improve customer experience by submitting exemption certificates and avoiding incorrect tax charges on future sales?

A cloud-based solution, unlike a manual or even homegrown solution, takes the burden of maintaining an effective, scalable exemption certificate management system off the company, and instead allows internal teams to focus on growth. SaaS-based tax compliance that is tailored for all transaction types and feeds into a single database:

• Helps the tax department to easily retain, recall and compile records.
• Integrates the processes of relevant departments, including tax, credit, IT, accounts receivable, finance, sales and customer service teams into a single portal.
• Creates a single resource for tax exemption certificate management by merging the information held in ERP, CRM and financial systems.