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Thomson Reuters Tax & Accounting - Indirect Tax Seminars

Technology in Indirect Tax Automation

March 2013

Agenda

TAX & ACCOUNTING 2

INTRODUCTIONS AND SEMINAR OBJECTIVES

LUNCH

Q&A, WRAP-UP, CPE SURVEYS

IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION

INDIRECT TAX AUTOMATION –AN INTRODUCTION

Agenda

TAX & ACCOUNTING 3

INTRODUCTIONS AND SEMINAR OBJECTIVES

LUNCH

Q&A, WRAP-UP, CPE SURVEYS

IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION

INDIRECT TAX AUTOMATION – AN INTRODUCTION

Presenters

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Perry Falvo Regional Sales Manager

Thomson Reuters Indirect Tax

perry.falvo@thomsonreuters.com

(469) 361-6883

Tom Farmer Business Consultant

Thomson Reuters Indirect Tax

tom.farmer@thomsonreuters.com

(972) 390-7606

Loran Pellegrino Systems Engineer

Thomson Reuters Indirect Tax

loran.pellegrino@thomsonreuters.com

(770) 772-8157

Seminar Objectives

Indirect Tax Automation

Answer these questions:

What is indirect tax automation?

Why should I be concerned about automation?

What types of technology supports automated indirect tax

processing?

What types of automation technology can address my current

corporate challenges?

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Agenda

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INTRODUCTIONS AND SEMINAR OBJECTIVES

LUNCH

Q&A, WRAP-UP, CPE SURVEYS

IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION

INDIRECT TAX AUTOMATION – AN INTRODUCTION

Quantifying the Pain

The High Cost of Transaction Tax

In the Global 2000, for every $1 billion in transactions, approximately $6M is wasted in transaction tax costs annually.

Small-to-mid-sized businesses average more than

$327K in annual costs to manage sales and use

tax compliance.

Manual tax processes

Errors in sales & use tax

Errors in output/input VAT

Penalties and interest

Diverted capital

Heavy host system customizations

Source: Independent survey by Tallman Insights and fielded by Mindwave Research

7

Challenges of A Typical Month

SUT Professional

Meet with State

Auditor on Sampling

Method

Research Proposal Structure w Finance

Train New AP Hires with

Updated Matrix

Document Policy

Changes for IT To Implement

Prepare & Review

270 Returns

Prepare PLR Request

• Multiple Tasks to be Managed

• Completion of Returns Required

Each Month – Perpetually

• Reliance on AP, AR, & IT

Necessary to Complete Tasks

• Partial Data Residing within

Multiple Sources

• Manual Review Required For

complex transactions

• Lack of time & planning & analysis

tools to be proactive

8

Juggling Tasks – A Break Out of Effort Monthly

Compliance

59%

Planning, Training

& Management

6%

Audits &

Controversies

24%

Financial

Reporting & Forecasting

11%

11%

24%

59%

6%

Financial Reporting & Forecasting Audits & Controversies

Monthly Compliance Planning, Training & Management

9

Areas of Effort

Monthly

Compliance

Planning, Training

& Management

Audit &

Controversies

Financial Reporting

& Forecasting

1. M&A Planning

2. Training Non-

Tax Personnel

3. Transaction

Structure

Planning

4. Managing Tax

Personnel

5. Non SUT Work:

(Property Tax,

Business

License Tax &

Excise Tax)

1. Tax Reserves &

Provisions

2. Transaction

Analysis & Tax

Credit Studies

3. Sarbanes &

Financial Audit

Reviews

4. Reconciliation of

Tax Accounts

1. Audit & IDR

Management

2. Audit Data &

Document

Retrieval

3. Audit Research

& Negotiation

4. Refunds &

Credits

5. Audit Appeal &

Controversy

1. Data Collection

2. Consolidation &

Reconciliation

3. Exception

Review &

Manual

Adjustments

4. Preparing Tax

Returns

5. Preparing

Payments &

Accounting

Entries

10

Compliance - Opportunity Cost

Are Your Processes Costing You

More Than They Should?

IT Costs Manual Tax Processes

and Tax Errors

Penalties

and Interest Diverted

Capital

Transactions

•Business Region responsible for tax

solution

•Ongoing Custom API Development

•Custom VAT Solution

•Audit Expense

•Tax Research

•Tax Table Maintenance

•Exemption Management

•Tax Rate Lookup/ Errors

•Tax Training 11

Quick review

Transaction TAX Types

Sales Tax

Use Tax

Value Added Tax

VAT, GST, HST, PST

Excise Tax

Fuel Excise

Medical Device Excise Tax

Sin Taxes

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Business Processes

Order to Cash (O2C, Sales, AR)

Procure to Pay (P2P, Purchasing, AP)

Special Taxes and

Transaction Fees

Battery fee

PIF fee

Bag fee

Quick Quiz

What is your definition of Indirect Tax Automation?

Indirect Tax Compliance Reporting

Macros in spreadsheets to collect and analyze data?

Access database?

Logging on to state websites to submit returns?

Requiring the local locations to handle their own compliance so

you don’t have to worry about it?

Educated guesswork?

Pay someone else to do the work?

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Quick Quiz

What is your definition of Indirect Tax Automation?

Corporate Reporting and Audit Defense

Macros in spreadsheets to collect and analyze data?

Access database?

Calling IT on a regular basis to request reports from the ERP

system?

Hanging out in the tax conference room exploring boxes?

Educated guesswork?

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Quick Quiz

What is your definition of Indirect Tax Automation?

Front End Determination, Calculation, Recording

Pay what the vendor charges?

Review every invoice (or at least the big ones) for correctness?

Hire Tax Professionals to be part of the AP/AR department?

Provide “training manuals” to AP and AR so they can properly

pick tax codes and/or taxability?

Manually program the ERP with logic to handle the various tax

laws?

Maintain tables and taxability matrices?

Excel and Access?

Pay someone else to do the work?

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Common Approaches

Manual Processes

Subjective and

error prone

Time-consuming

and expensive

Little control over

the use of policies

Extremely difficult

to scale,

collectively

ERP Applications

Cost-intensive

customization

Difficult to keep

timely, up-to-date

Application- and

platform-

dependent

Poor separation of

IT/Tax duties

Semi Automatic

Processes

Still subjective

and error prone

Still time-

consuming

Hard to maintain

Consumes Tax

Department’s time

Typically the

responsibility of

the Tax

Department to

maintain

16

Evolution of Transaction Tax Automation

Manual Calculation

Tax Calculation Engines

Global Tax Solution

Automation With ERP Tax Tables and

Codes

Reduce the Cost of Compliance

Create Complete Audit Trails

Tax Professional Control and Visibility

Integrate Seamlessly into the Business

Respond and Manage Change

17

New Approach Using Automation

1. Centralized Management of Tax Policy

2. Centralized Management of Tax Processes and Data

3. Ability for Tax Professional to Set Tax Policy

4. Single Source Repository of Global Transaction Data

5. Consolidated Business Reporting Mechanism

6. Consolidated Audit Defense Support

7. Consolidated Compliance Reporting Mechanism

18

Key Requirements & Outcomes of True Automation

1. Consistent Accuracy

All tax policies, rates, rules & logic are enforced by a single tax application

2. Consistent Control

Tax professionals control all tax decisions

3. Consistent Efficiency

Single source of record for all transaction tax liabilities efficient monthly

filings, reporting, analysis and audit support.

4. IT Independence

Tax professionals configure, manage and test tax requirements in the tax

application vs. IT coding, programming and testing tax requirements.

5. Business Process, People and Systems Independence

Support automated transaction tax determination, calculation and recording

for all Sales, Purchase & Post-Purchase transactions, and all business

systems & applications.

6. Consolidation

Record historically rather than referentially all transaction and tax details in a

consolidated audit database. 19

Indirect Tax Automation - Process and Technology

TAX DETERMINATION TAX COMPLIANCE

Tax

Engine

Reporting

Solution

Returns

Solution

Filing

Solution

Exemption / Tax Certificate

Management Solution

20 TAX & ACCOUNTING

Sales, Billing, and

Purchasing Systems

Order To Cash Process

Procure to Pay Process

ERP Systems,

eCommerce Systems,

Point of Sale,

Legacy Systems

Content and Tax Research – Rates / Rules / Forms

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ONESOURCE Tax Content – Legal Citations

Invoice

processed in

ERP System

Vendor

tax

correct? No

Tax engine determines tax

Within tolerance?

Yes

Mark invoice as processed

Vendor charged no tax

Accrue correct tax, pay as-is

No

Vendor tax under-charged

Shortpay vendor tax and accrue correct tax

Accrue difference, pay as-is

Vendor tax over-charged

Pay as-is and track

Shortpay and accrue Mark invoice

as processed

Yes

Partial pay

Example of an automated business process

Vendor-billed Tax Verification

with Automatic Accruals

Agenda

TAX & ACCOUNTING 23

INTRODUCTIONS AND SEMINAR OBJECTIVES

LUNCH

Q&A, WRAP-UP, CPE SURVEYS

IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION

INDIRECT TAX AUTOMATION – AN INTRODUCTION

Agenda

TAX & ACCOUNTING 24

INTRODUCTIONS AND SEMINAR OBJECTIVES

LUNCH

Q&A, WRAP-UP, CPE SURVEYS

IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION

INDIRECT TAX AUTOMATION – AN INTRODUCTION

AUTOMATION - SUPPORTING THE END-TO-END PROCESS

Determination Global Reporting Returns Filing ERP (Oracle, SAP,

PeopleSoft, JDE),

Legacy, eCommerce,

Point of Sale, Home-

grown apps

Tax Request

Tax Result

Tax

Audit

Tax Certs

25

Types of Transactions

Transactions Determination Compliance Reporting

Procure to Pay Purchase Requisition Purchase Order Quote AP Invoicing

Goods/Inventory Movement

Order to Cash Inquiry Quote Order Return Order AR Invoicing

26

What does this mean to ERP functional users?

Transactions Determination Compliance Reporting

Purchasing AP Order Entry AR

27

Oracle PO/AP

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Example Purchasing (PO/AP) Process

using Oracle eBusiness Suite

Oracle PO/AP

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Oracle PO/AP

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Oracle PO/AP

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Oracle PO/AP

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Oracle PO/AP

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Oracle PO/AP

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Oracle PO/AP

TAX & ACCOUNTING 35

Oracle PO/AP

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No Tax Charged on Invoice -Accrue

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Correct Tax Charged on Invoice –Pay As Is

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No Tax Charged on Invoice -Accrue

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Correct Tax Charged on Invoice –Pay As Is

TAX & ACCOUNTING 40

Vendor Overcharge Tax –Pay As Is

TAX & ACCOUNTING 41

Vendor Undercharge Tax –Pay As Is & Accrue

TAX & ACCOUNTING 42

ONESOURCE ACCRUAL Report

TAX & ACCOUNTING 43

Oracle PO/AP

TAX & ACCOUNTING 44

Example AR (Sales) Process using SAP

SAP AR – Sales Order

TAX & ACCOUNTING 45

SAP AR – Sales Order

TAX & ACCOUNTING 46

SAP AR – Sales Order

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SAP AR – Sales Order

TAX & ACCOUNTING 48

SAP AR – Sales Order

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SAP AR – Sales Order

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SAP AR – Sales Order

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SAP AR – Sales Order

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SAP AR – Sales Order

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SAP AR – Sales Order

TAX & ACCOUNTING 54

SAP AR – Sales Order

TAX & ACCOUNTING 55

SAP AR – Sales Order

TAX & ACCOUNTING 56

SAP AR – Sales Order

TAX & ACCOUNTING 57

SAP AR – Sales Order

TAX & ACCOUNTING 58

SAP AR – Sales Order

TAX & ACCOUNTING 59

SAP AR – Sales Order

TAX & ACCOUNTING 60

SAP AR – Sales Order

TAX & ACCOUNTING 61

SAP AR – Sales Order

TAX & ACCOUNTING 62

SAP AR – Sales Order

TAX & ACCOUNTING 63

TRANSACTION LIFECYCLE

TAX DETERMINATION TAX COMPLIANCE

Tax

Engine

Billing and

Purchasing Systems

Reporting Returns Filing

Determine,

Calculate, Record

TAX & ACCOUNTING 65

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Automation of Tax Content Updates

Business

System

Audit

Database

“The Workbench allows us to simulate business

scenarios – as if we are connected with a live ERP

system”

1-Transaction

Data Elements

2-Tax

“Workbench”

DEMONSTRATING THE ENGINE / WORKBENCH

Tax Department

77

TRANSACTION LIFECYCLE

TAX DETERMINATION TAX COMPLIANCE

Tax

Engine

Billing and

Purchasing Systems

Reporting Returns Filing

Tax Certificate

Management

TAX CERTIFICATE LIFECYCLE

Certificate Received Certificate Reviewed Image Scanned Cert. Data Input

Tax Calc. w/Cert Data

Reports Run

Results Stored

Update Requests Made Status Reviewed

79

Tax Certificate Management - Search

Tax Certificate Management - Reports

Tax Certificate Management – Mail Notification

TRANSACTION LIFECYCLE

TAX DETERMINATION TAX COMPLIANCE

Tax

Engine

Billing and

Purchasing Systems

Reporting Returns Filing

Reconciliation

Reporting

Business

Analysis &

Audit

Reporting

Reporting

Transactions Determination Compliance Reporting

Localized Reports USA Canada VAT

Ad Hoc Reporting

Save Report Definitions

Daily, Monthly, Qrty Reports Audits ERP GL Reconciliation Reports No IT Involvement

Configuration Reports

84

Business Analysis Reporting

Audit Defense

ERP Reconciliation Reporting

ERP Reconciliation Reporting

TRANSACTION LIFECYCLE

TAX DETERMINATION TAX COMPLIANCE

Tax

Engine

Billing and

Purchasing Systems

Reporting Returns Filing

Compliance

Reporting

TAX & ACCOUNTING 90

ONESOURCE Indirect Tax Compliance

TAX & ACCOUNTING 91

ONESOURCE Indirect Tax Compliance

TAX & ACCOUNTING 92

ONESOURCE Indirect Tax Compliance

Compliance Workarea

TAX & ACCOUNTING 93

ONESOURCE Indirect Tax Compliance

Importing the Data

TAX & ACCOUNTING 94

ONESOURCE Indirect Tax Compliance Tax reports in the Workpapers section.

TAX & ACCOUNTING 95

ONESOURCE Indirect Tax Compliance Journal section for adjustments.

TAX & ACCOUNTING 96

ONESOURCE Indirect Tax Compliance Transfer section.

TAX & ACCOUNTING 97

ONESOURCE Indirect Tax Compliance Tax Returns section.

TAX & ACCOUNTING 98

ONESOURCE Indirect Tax Compliance The Tax Returns section. Looking at an Illinois ST-1 form.

TAX & ACCOUNTING 99

ONESOURCE Indirect Tax Compliance A PDF version of a completed Illinois ST-1 form.

TAX & ACCOUNTING 100

ONESOURCE Indirect Tax Compliance e-filing.

Integration – The Key To Automation

What does integration really mean?

102

Tax Solution

Types of System Integrations

ERP (i.e., SAP, Oracle, PeopleSoft)

XML

.Net

Java

Web Services

Flat File

???

Batch

Real-time

103

Real Example of Global Tax Automation

104

WEB SERVICES – The New Direct Integration

SOAP messaging framework

WSDL for web service consumption

Published and well defined XSDs

Example Tax Calculation Web Service

Call for tax determination, calculation, and

recording

Example Configuration Web Services

User Account Management Web Service

Company (Entity/Merchant) Web Service

Establishment Web Service (Nexus)

Product Mappings Web Service

Customer & Exemption Certificate Web

Service

105

Data File Integration - System Integration

106

• Calculate sales use and value-added taxes or validate

already-calculated taxes using a flat file report (also known as

a CSV, or comma-separated-value, file)

What is the Data File Integration for Indirect Tax?

Date Invoice # Item Customer Ship From Ship To Amount

107

• Calculate sales use and value-added taxes or validate

already-calculated taxes using a flat file report (also known as

a CSV, or comma-separated-value, file)

What is the Data File Integration for Indirect Tax?

Much More

108

Infrastructure?

Options

On Premise

Cloud

Hardware, Software, Network & Security

Minimizes IT Support & infrastructure costs

Upgrades & Updates Handled For You

Disaster Recovery

Minimal licensing costs

SLAs

Systems behind corporate firewall

Corporate data stored local

IT has direct / local control of system

Leverage existing hardware

Leverage existing software licenses

Up front investment recovered over time

110

Agenda

TAX & ACCOUNTING 111

INTRODUCTIONS AND SEMINAR OBJECTIVES

LUNCH

Q&A, WRAP-UP, CPE SURVEYS

IN-DEPTH DISCUSSION AND TECHNOLOGY DEMONSTRATION

INDIRECT TAX AUTOMATION – AN INTRODUCTION

Customer focus Global scale and presence Financial strength and stability

TAX & ACCOUNTING 112

THE THOMSON REUTERS ADVANTAGE

GLOBAL CAPABILITIES. LOCAL STRENGTH.

• 2012 Financial Results

• US $13 Billion in revenue

• Operating Profit $1.65 Billion

• $2 Billion in cash flow

• Global presence to better serve multi-

national corporations

• Over 60,000 employees in more

than 100 countries

• Thomson Reuter’s mission is to

provide intelligent information to the

world’s businesses and

professionals, giving our customers

competitive advantage.

• We do this by investing

in state of the art

technology,

• designing solutions

that integrate with

customer workflows,

• and investing in people

so that our solutions

are designed by

experts like you.

• 39th in Top 100 Global

Brands

•

• #2 globally for Financial

Data Services in

Fortune

Thomson Reuters Tax & Accounting - ONESOURCE - A Complete Global Tax Solution

TAX & ACCOUNTING 113

Global Tax Solutions

That Lead The Market

Reports

Compliance (Sales,Use)

Determination (Sabrix) i.e., Sales, Use, VAT, Excise, Special Fees

Tax Certificate Manager

Compliance VAT

Connections i.e., ERP, eComm, POS, Compliance, other

Indirect Tax Special Solutions i.e., Goods Movement

Compliance (GST.PST,HST)

INDIRECT TAX

INDIRECT

TAX

ONESOURCE Property Tax

Personal Property Returns

National Asset Classification

Tax Calculations

Up-to-Date Forms & Tables

Tax Bill Processing

Accounts Payable

Assessment Tracking

Valuation Analysis

Appeal Tracking

Automated Workflow

Budgets & Forecasting

Accruals

Deadline Information &

Reminders

Storage of Scanned Images

File Exports

E-mail Alerts

Comprehensive Reporting

SSAE Type II Certification

114

Questions?

Don’t forget to fill out those surveys

…and sign out (CPE Credit)

Thanks for joining us! (and drive safely back to the office)

TAX & ACCOUNTING 115