{"id":10703,"date":"2022-08-16T10:31:00","date_gmt":"2022-08-16T10:31:00","guid":{"rendered":"https:\/\/taxops.com\/?p=10703"},"modified":"2022-08-16T20:27:32","modified_gmt":"2022-08-16T20:27:32","slug":"sales-tax-calculation-software-do-you-really-need-it-2","status":"publish","type":"post","link":"https:\/\/taxops.com\/sales-tax-calculation-software-do-you-really-need-it-2\/","title":{"rendered":"Do you Really Need Sales Tax Automation?"},"content":{"rendered":"\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<figure class=\"wp-block-gallery has-nested-images columns-default is-cropped wp-block-gallery-1 is-layout-flex wp-block-gallery-is-layout-flex\">\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" width=\"1024\" height=\"536\" data-id=\"10709\" src=\"data:image\/gif;base64,R0lGODlhAQABAIAAAAAAAP\/\/\/yH5BAEAAAAALAAAAAABAAEAAAIBRAA7\" data-src=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Sales-Tax-Calculation-Software-1-1024x536.png\" alt=\"\" class=\"wp-image-10709 lazyload\" data-srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Sales-Tax-Calculation-Software-1-1024x536.png 1024w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Sales-Tax-Calculation-Software-1-980x513.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Sales-Tax-Calculation-Software-1-480x251.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1024px, 100vw\" \/><noscript><img decoding=\"async\" width=\"1024\" height=\"536\" data-id=\"10709\" src=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Sales-Tax-Calculation-Software-1-1024x536.png\" alt=\"\" class=\"wp-image-10709 lazyload\" srcset=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Sales-Tax-Calculation-Software-1-1024x536.png 1024w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Sales-Tax-Calculation-Software-1-980x513.png 980w, https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Sales-Tax-Calculation-Software-1-480x251.png 480w\" sizes=\"(min-width: 0px) and (max-width: 480px) 480px, (min-width: 481px) and (max-width: 980px) 980px, (min-width: 981px) 1024px, 100vw\" \/><\/noscript><\/figure>\n<\/figure>\n\n\n\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">By the <a href=\"https:\/\/www.saltovation.com\/\" target=\"_blank\" rel=\"noopener\">SALTovation Team at TaxOps<\/a><\/p>\n\n\n\n<div style=\"height:42px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\"><p><em><em>Use of sales tax automation is worthwhile and beneficial for many companies, but not necessarily all companies.<\/em><\/em><\/p><\/blockquote>\n\n\n\n<div style=\"height:42px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<p class=\"wp-block-paragraph\">There are a lot of sales tax automation companies out there delivering automation tools for sales and use tax (SUT) calculations. These tools automate the sales tax calculation process by integrating with invoicing or ERP systems, which pass data elements identifying the customer location, product, sales amount, and other invoice specifics to the automation system, which then calculates real time rates for various jurisdictions to accurately process and fulfill SUT documentation requirements.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Current tax rates and taxability rules are required to calculate applicable sales tax. Both rates and rules can be manually generated without sales tax automation tools. But as a business gets more sophisticated and the number of transactions across multiple jurisdictions grows, so too does the need for sales tax automation. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For a company selling taxable tangible personal property in select jurisdictions where the tax rates are easily accessible, then sales tax automation may be overkill. However, a company selling telecommunications services on a nationwide basis into various jurisdictions needs sales tax automation for accuracy.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>Complications in Colorado<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Colorado and several other states add a layer of taxation at the local level in what are known as home rule cities. Not all home rule cities participate in Colorado&#8217;s statewide Sales and Use Tax System (SUTS), meaning taxpayers have to do some extra work to capture home rule rates and rules. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Most of the software vendors \u2014 Avalara, OneSource, TaxJar, Quaderno, StripeTax, and Vertex \u2014 were not linked into SUTS at the time  of this writing. Avalara, TaxJar, StripeTax, and Vertex were not universally using SUTS to remit their customers\u2019 taxes. Furthermore, users of software systems such as TaxJar, StripeTax, and Quaderno could not collect the home rule taxes because none of these providers have the rates and\/or rules baked into their products, though these providers are aware of the issues and are working on them. <\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Thus, to collect several layers of tax on one invoice \u2013 city, state, county, special district \u2014 when volume is significant, automation is key. Automation allows the slicing and dicing of tax data across invoice, customer, product and jurisdiction. If done manually, it is difficult to remit the tax because reconciliation needs to be done to properly report the tax, even if collected at the right rate. This manual process has inhibited taxpayers from using the SUTS because they just automate the collection, and their choice of sales tax providers is limited.\u00a0If sales tax automation addresses home rule city compliance, the cost increases for that license exponentially as well as the cost for each additional return counted in the filings. This has meant that taxpayers have chosen to activate\u00a0fewer cities in their nexus profile within a software product and limit their licenses to cities where they have the largest volume of sales.\u00a0\u00a0\u00a0<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><strong>The bottom line<\/strong><\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Sales tax automation can be very beneficial when volume and accuracy across jurisdictions is paramount but can be overkill for companies selling into few jurisdictions with limited product. The time spent with a manual process must be evaluated against the cost of a sales tax automation for a final determination.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For more reading on this topic, see <a href=\"https:\/\/taxops.com\/sales-tax-automation-solutions-what-businesses-need-to-know\/\">Sales Tax Automation Solutions: What Businesses Need to Know<\/a><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">For more general guidance, reach out to the tax professionals at&nbsp;<a href=\"https:\/\/taxops.com\/\">taxops.com<\/a><\/p>\n\n\n\n<div style=\"height:50px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/taxops.com\/contact\/\" target=\"_blank\" rel=\"noreferrer noopener\">Let&#8217;s Talk Tax<\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<h3 class=\"wp-block-heading\">More Tax News<\/h3>\n\n\n<ul class=\"wp-block-latest-posts__list wp-block-latest-posts\"><li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/auditor-independence-in-the-age-of-private-equity\/\">Auditor Independence in the Age of Private Equity: What CFOs Need to Know<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/r-d-credits-for-software-companies\/\">R&amp;D Credits for Software Companies: Scrum Teams, Qualifiers, and Section 174 After OBBBA<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/section-174-decoupling-what-tax-pros-need-to-know-state-by-state\/\">Section 174 Decoupling: What Tax Pros Need To Know State By State<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/sean-espy-new-partner\/\">TaxOps Welcomes Sean Espy as Partner, Tax Minimization<\/a><\/li>\n<li><a class=\"wp-block-latest-posts__post-title\" href=\"https:\/\/taxops.com\/state-nexus-demystified-navigating-tax-compliance-after-wayfair-episode-1-2\/\">Your Tax Footprint Is Probably Bigger Than You Think: What Finance Leaders Need to Know About State Nexus<\/a><\/li>\n<\/ul>\n\n\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-fe48e5de wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/taxops.com\/contact\/#subscribe\" target=\"_blank\" rel=\"noreferrer noopener\">Subscribe to Tax News<\/a><\/div>\n<\/div>\n\n\n\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n","protected":false},"excerpt":{"rendered":"<p>By the SALTovation Team at TaxOps Use of sales tax automation is worthwhile and beneficial for many companies, but not necessarily all companies. There are a lot of sales tax automation companies out there delivering automation tools for sales and use tax (SUT) calculations. These tools automate the sales tax calculation process by integrating with [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":10709,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"off","_et_pb_old_content":"<!-- wp:spacer {\"height\":\"53px\"} -->\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:gallery {\"linkTo\":\"none\"} -->\n<figure class=\"wp-block-gallery has-nested-images columns-default is-cropped\"><!-- wp:image {\"id\":10182,\"sizeSlug\":\"large\",\"linkDestination\":\"none\"} -->\n<figure class=\"wp-block-image size-large\"><img src=\"https:\/\/taxops.com\/wp-content\/uploads\/2022\/04\/Texas-High-Court-Clarifies-Service-Receipt-Apportionment-1-1024x536.png\" alt=\"\" class=\"wp-image-10182\"\/><\/figure>\n<!-- \/wp:image --><\/figure>\n<!-- \/wp:gallery -->\n\n<!-- wp:spacer {\"height\":\"53px\"} -->\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p><em><em>The Texas Supreme Court has ruled in favor of apportioning service receipts to the location of personnel or equipment, a position providing clarity to taxpayers on whether to source receipts from services performed versus where customers are at.<\/em>&nbsp;<\/em><\/p><\/blockquote>\n<!-- \/wp:quote -->\n\n<!-- wp:quote -->\n<blockquote class=\"wp-block-quote\"><p><\/p><\/blockquote>\n<!-- \/wp:quote -->\n\n<!-- wp:paragraph -->\n<p>By <a href=\"https:\/\/taxops.com\/tram-le\/\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"Tram Le\">Tram Le<\/a> <\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>On March 25, 2022, the Texas Supreme Court held in favor of the taxpayer that services revenue is apportioned to the location where services are performed, consistent with Texas law.<sup>1<\/sup> The Court found that the performance of service is located where the taxpayer\u2019s personnel or equipment is physically doing useful work for the customer.&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The case involves Sirius XM (Sirius XM Radio, Inc. v. Hegar, Tx. Sup. Ct. No. 20-0462 (3\/25\/22)), whose headquarters, transmission equipment and production studios used in providing a subscription-based satellite radio service are largely located outside of Texas. In the 2010 and 2011 tax years, Sirius XM apportioned tax based on costs of activities in Texas and outside of Texas. Under Texas rules, service revenue is apportioned to Texas based on the \u201cfair value of the services\u201d rendered in Texas where services are performed in more than one state.<sup>2<\/sup>&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>For those tax years, the Texas Comptroller adjusted on audit to base the tax on the percentage of Sirius XM\u2019s Texas subscribers. The Comptroller argued that service revenue is sourced to Texas if the \u201creceipt-producing, end-product act\u201d takes place in Texas. In this case, such an act was considered the decryption of the satellite network and enabling of each subscriber\u2019s radio to receive Sirius XM\u2019s signal. However, Sirius XM argued that its services \u2013 the production and broadcasting of radio content \u2013 was mainly performed outside of Texas.&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The Texas Supreme Court ultimately agreed that Sirius XM was providing satellite radio content and those services are performed in Texas if the labor employed in that service is doing the work in Texas. This constitues a natural reading of the law, which requires taxes due \u201cwhere service [is] performed in this state.\u201d This rejects the Comptroller premise of service taking place at the customer location. The Court also rejected the use of the \u201creceipt-producing, end-product\u201d test to determine where a service is being performed.&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Although the Court ruled in favor of the taxpayer, the case was remanded to the Appellate court for further review of Sirius XM\u2019s cost of performing services and evidence to support its \u201cfair value of services\u201d performed in Texas.&nbsp;&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>The Texas Supreme Court opinion provides clarification in apportioning service revenue in Texas and determining whether services are performed in the state. Taxpayers doing business in Texas should carefully review business operations, nature of services, i.e., properly characterizing the services provided to customers and location of equipment, facilities, and personnel to properly apportion revenue.&nbsp;&nbsp;&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>In addition, if services are being performed in Texas and outside of Texas, taxpayers must properly evaluate methods of determining the fair value of services and maintain sufficient evidence to support what revenue is apportioned to Texas. Contact a TaxOps advisor is you need assistance assessing nexus and taxability in the state of Texas and everywhere you do business.&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:paragraph -->\n<p>Tram Le is a member of the SALTovation team at TaxOps and an adjunct professor at the University of Texas at Arlington. She writes about hot topics in state and local tax affecting business operations and growth strategies and the Spreading SALTovation column for Tax Notes.&nbsp;Reach out to Tram at <a href=\"mailto:tle@taxops.com\" target=\"_blank\" rel=\"noreferrer noopener\" title=\"Tram Le\">tle@taxops.com<\/a>.&nbsp;&nbsp;<\/p>\n<!-- \/wp:paragraph -->\n\n<!-- wp:spacer {\"height\":\"53px\"} -->\n<div style=\"height:53px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/taxops.com\/contact\/\" target=\"_blank\" rel=\"noreferrer noopener\">Let's Talk Tax<\/a><\/div>\n<!-- \/wp:button --><\/div>\n<!-- \/wp:buttons -->\n\n<!-- wp:spacer {\"height\":\"47px\"} -->\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:heading {\"level\":3} -->\n<h3>More Tax News<\/h3>\n<!-- \/wp:heading -->\n\n<!-- wp:latest-posts \/-->\n\n<!-- wp:spacer {\"height\":\"47px\"} -->\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->\n\n<!-- wp:buttons -->\n<div class=\"wp-block-buttons\"><!-- wp:button -->\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link\" href=\"https:\/\/taxops.com\/contact\/#subscribe\" target=\"_blank\" rel=\"noreferrer noopener\">Subscribe to Tax News<\/a><\/div>\n<!-- \/wp:button --><\/div>\n<!-- \/wp:buttons -->\n\n<!-- wp:spacer {\"height\":\"47px\"} -->\n<div style=\"height:47px\" aria-hidden=\"true\" class=\"wp-block-spacer\"><\/div>\n<!-- \/wp:spacer -->","_et_gb_content_width":"","spt_transcript":"","footnotes":""},"categories":[229,226],"tags":[252,31,284,126,265,913,19,101,268,80,964,1010],"class_list":["post-10703","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-state-and-local","category-tax-news","tag-accountant","tag-business","tag-cfo","tag-cpa","tag-finance-professional","tag-new-tax","tag-sales-tax","tag-state-tax","tag-tax-filing","tag-tax-provider","tag-tax-service","tag-tax-software"],"aioseo_notices":[],"jetpack_featured_media_url":"https:\/\/taxops.com\/wp-content\/uploads\/2022\/08\/Sales-Tax-Calculation-Software-1.png","_links":{"self":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/10703","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/comments?post=10703"}],"version-history":[{"count":7,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/10703\/revisions"}],"predecessor-version":[{"id":10740,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/posts\/10703\/revisions\/10740"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media\/10709"}],"wp:attachment":[{"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/media?parent=10703"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/categories?post=10703"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/taxops.com\/wp-json\/wp\/v2\/tags?post=10703"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}