Biographical Information Scott Billadeau, President, DSTax, LLC - - PDF document

28th Annual

Tuesday & Wednesday, January 29‐30, 2019

Hya Regency Columbus, Columbus, Ohio

Workshop I

Staying Competitive in Today’s Technology-Driven, Globally-Connected World … Indirect Tax Solutions

Tuesday, January 29, 2019 1:45 p.m. to 2:45 p.m.

Biographical Information Scott Billadeau, President, DSTax, LLC 4320 Winfield Rd., Suite 200, Warrenville, IL 60555 630.862.9552 FAX: 630.839.0621 scott.billadeau@dstax.com Scott has extensive knowledge and experience in implementing indirect tax automation solutions such as Thomson Reuters ONESOURCE Indirect Tax Determination, Taxware and Vertex. He has implemented these solutions for multiple ERP and legacy accounts payable systems. Before joining DSTax, Scott gained valuable experience as a Senior Manager with a “Big Four” firm and as the Midwest Regional Sales & Use Tax Leader for a national accounting firm. His expertise for the past several years has been focused on project management of indirect tax solutions for large corporations with complex indirect tax requirements. Combined with Chris Pounds, Scott & Chris have almost 50 years of sales/use tax consulting experience. Chris Pounds, Principal, DSTax, LLC 4320 Winfield Rd., Suite 200, Warrenville, IL 60555 773-209-3086 FAX: 630.839.0621 chris.pounds@dstax.com Chris’ primary responsibilities consist of applying his sales and use tax expertise in the development of our clients’ functional design, system configuration and user acceptance testing. Before joining DSTax, Chris gained valuable experience at a “Big Four” firm in both their tax outsourcing practice and as a manager in their State & Local Tax practice.

Factors to Consider in Shopping for an Indirect Tax Solution

OBJECTIVE At the end of this session, attendees will understand the factors to consider during the indirect tax automation software evaluation process, as well as the lifecycle of the typical implementation.

AGENDA

• Introduction
• Benefits of Automating the Sales and Use Tax Function
• Factors to Consider: Project Cost Components
• Factors to Consider: Tax Scope
• Factors to Consider: Source Systems and Integrations
• Factors to Consider: Hosted vs. Premise
• Factors to Consider: Software Vendors
• Factors to Consider: Compliance and Other Ancillary Tools
• Typical Implementation Lifecycle
• Coordination with an ERP Implementation
• Implementation Partners
• Q&A

INTRODUCTION: PRESENTERS

Scott Billadeau, Principal

• Scott has extensive knowledge and experience in implementing indirect tax automation solutions

such as Thomson Reuters ONESOURCE Indirect Tax Determination, Taxware and Vertex. He has implemented these solutions for multiple ERP and legacy accounts payable systems.

• Before joining DSTax, Scott gained valuable experience as a Senior Manager with a “Big Four”

firm and as the Midwest Regional Sales & Use Tax Leader for a national accounting firm. His expertise for the past several years has been focused on project management of indirect tax solutions for large corporations with complex indirect tax requirements. Chris Pounds, Principal

• Chris’ primary responsibilities consist of applying his sales and use tax expertise in the

development of our clients’ functional design, system configuration and user acceptance testing.

• Before joining DSTax, Chris gained valuable experience at a “Big Four” firm in both their tax
• utsourcing practice and as a manager in their State & Local Tax practice.

BENEFITS OF AUTOMATION

• Companies with multi-state or international activities

have incredibly complex tax rules they are responsible for tracking and complying with.

• For companies with high volumes of transactions, it is

impossible to review each transaction individually.

• State authorities are becoming increasingly strict

regarding the allowance of exemption certificates. A properly automated solution improves this compliance.

• Tax automation software vendors maintain tax rates

and tax laws across all jurisdictions, relieving you of this burden.

BENEFITS OF AUTOMATION

• Software vendor supported rates and rules
• Specialized tax reporting allows for improved tax

analysis and easier routes to provide required information to auditors.

• A flexible solution allows you to correct for costly

audit findings on future transactions.

• Compliance tools allow for more efficient tax

preparation, freeing up valuable internal resources.

• The Wayfair ruling is dramatically increasing the nexus

risk and compliance burdens of many companies.

COSTS OF AUTOMATION

• Tax Engine Software fees:
• Software license
• SAAS
• Other
• Integrations
• Supported integrations
• Custom developed as a service
• Implementation costs
• Third-Party Certified Implementation Partner (DSTax)
• Internal resources, hardware, additional software, other

FACTORS TO CONSIDER: TAX SCOPE

Determining the tax scope of the project should be the first step in the evaluation phase.

• What countries are in-scope? U.S. only, EMEA, Global,

etc.

• What transactions are in-scope? A/R, A/P or both?
• Are there special excise, rental or other

industry/business specific requirements that should be considered? If your organization requires a solution covering A/R and A/P, across multiple countries, you may wish to consider a phased approach.

FACTORS TO CONSIDER: SOURCE SYSTEMS

There are also technical considerations to consider during

• scoping. Most companies have multiple order/and billing

systems.

• ERP’s (Oracle, SAP, MS Dynamics, NetSuite, etc.)
• Legacy systems (may require custom integrations)
• eCommerce platforms (Magento, Shopify, etc.)
• Quote systems

Which of these systems do you intend to integrate with your tax solution?

FACTORS TO CONSIDER: SOURCE SYSTEMS In addition to identifying the source systems to be included in the scope, a decision must be for each as to whether they should be live calls or batch feeds.

FACTORS TO CONSIDER: SOURCE SYSTEMS Live Integration

• A real-time “call” between your source

system and the tax engine.

• Benefits
• Results in immediate tax calculation and

automated accounting back to your source system

• Vendor Tax validation proactively

FACTORS TO CONSIDER: SOURCE SYSTEMS

Batch Integration

• A batch of transactions that are organized and

consolidated into a flat file and loaded periodically (frequently nightly) into your tax engine

• Viable solution in the absence of a standard
• integration. Each source system should be evaluated

independently for this decision.

• Most software vendors offer a standard batch

solution as part of their menu of products.

FACTORS TO CONSIDER: HOSTED vs. PREMISE

Hosted (Cloud) Solution

• The software vendor hosts the tax engine on

their services

• Also automatically updates the software,

rates and rules and stores all historical transactional information on their servers. Premise-based solution

• Installed on your servers
• All hardware and software maintained by

internal IT resources

FACTORS TO CONSIDER: HOSTED

When the software vendor is responsible for the hosting of the solution:

Pro's Con's ฀No additional IT infrastructure is required. ฀No installation effort, though implementation tasks still need to be completed. ฀Patches and updates are applied by the vendor. ฀Relies on the vendor’s infrastructure vs. your

• wn.

฀Some companies have policies against any customer data being stored outside of their internal firewall. ฀May be associated with higher licensing fees.

FACTORS TO CONSIDER: PREMISE

When your organization is responsible for the hosting of the solution:

Pro's Con's ฀Your organization maintains control of the application and it's infrastructure. ฀All data is behind your firewall. ฀May have lower licensing fees. ฀Your organization may require additional infrastructure. ฀Your organization will be responsible for the maintenance of the tax engine. ฀There is a nominal installation effort.

FACTORS TO CONSIDER: Software Vendors

There are various tax automation software vendors in the

• marketplace. While all vendors serve the same overall function,

each has their own advantages and disadvantages. Key market leaders for manufacturers include:

• ONESOURCE Indirect Tax Determination (“OSITD”)

(formerly known as Sabrix)

• Vertex O
• Sovos (formerly known as Taxware)

Note: There are other tax engine vendors, as well such as Avalara, TaxJar, and CCH. They may be better suited for simple sales side integrations vs. larger global ERP solutions for manufacturers.

FACTORS TO CONSIDER: Software Vendors

Tax Engine Hosted and Premise Options Standard US Content VAT Functionality Standard Connectors for Most Major ERP's If/Then Logic Reporting Thomson Reuters ONESOURCE Yes Yes Yes Yes Yes Yes Vertex O Yes Yes Yes Yes Yes Yes Vertex Q No Yes No Yes No Yes Vertex L No Tax Rates Only No Yes No Yes Sovos Determination Yes Yes Yes Yes Yes Yes

FACTORS TO CONSIDER: AVAILABLE CONNECTORS

Connectors

• The availability of standard connectors to your

company’s ERP/Source Systems are a potential differentiator between software vendors.

• Connectors are the technical integrations that

allows for communication between your source systems and the tax engine.

• Vendors and third parties have already developed

standard connectors for many source systems.

• Other “custom connectors” can be developed by

third party vendors, such as DSTax.

FACTORS TO CONSIDER: AVAILABLE CONNECTORS

During software selection, You should inquire as to the availability of standard connectors for all of your in-scope source systems. While custom connectors can be developed, standard connectors are generally preferable due to lower costs and the fact that development and testing have already been completed.

FACTORS TO CONSIDER: AVAILABLE CONNECTORS

During software selection, You should inquire as to the availability of standard connectors for all of your in-scope source systems. While custom connectors can be developed, standard connectors are generally preferable due to lower costs and the fact that development and testing have already been completed.

FACTORS TO CONSIDER: COMPLIANCE AND OTHER ANCILLARY TOOLS

While most organizations consider the tax engine the primary goal of an automation project, software vendors

• ffer several additional tools that may enhance your
• solution. Common examples include:
• Compliance (Returns) packages
• Exemption certificate management (“ECM”)
• Enhanced connectors
• Industry specific tools

FACTORS TO CONSIDER: COMPLIANCE

Compliance packages generate signature ready sales and use tax (and in some cases VAT) returns. By automating this process, organizations can reduce the amount of time spent in preparing these returns.

FACTORS TO CONSIDER: COMPLIANCE Key features generally include:

• Import capabilities to load reports generated from

your tax engine.

• Manual adjustments to the returns
• EDI
• Prepayments
• Additional reporting options

Note: Most compliance packages allow for custom import templates. This means that you can choose different vendors for your tax engine and compliance packages if you wish.

FACTORS TO CONSIDER: ECM

Properly implemented ECM’s allow for dramatically increased validity and completeness in your inventory of customer exemption certificates. As tax authorities become stricter, and less likely to provide taxpayers with the benefit of doubt, this improvement can result in significant audit reductions.

FACTORS TO CONSIDER: ECM Key features of ECM’s may include:

• Linkage to the tax engine, allowing for the proper

application of the exemption to your sales.

• Validation of tax ID formats
• Storage and presentment of certificate images
• Reporting features to identify missing certificates or

certificates that are expiring soon.

• Mailing campaign assistance
• Web portals where customers can upload their

certificates to your ECM.

FACTORS TO CONSIDER: ENHANCED CONNECTORS

Some software vendors have developed “enhanced connectors” that provide additional functionality and

• flexibility. Examples include Thomson Reuters’

GlobalNext and Vertex’s Accelerator for SAP. Benefits may include:

• Custom data mapping (no need for ABAP coding)
• RFC queue management
• Tax code logic
• Additional reporting and reconciliation options.

FACTORS TO CONSIDER: INDUSTRY SPECIFIC TOOLS Industries such as leasing or hospitality have unique tax rates, impositions and rules. While many tax engines can be configured to address these industries, certain vendors may have developed industry specific applications. These tools may include: Leasing

• Type of lease (operating vs. capital)
• Length of term
• Different tax basis (cost vs. stream)

Hospitality

• Length of stay
• Type of facility

FACTORS TO CONSIDER: Vendor Summary

Vendor Compliance ECM Enhanced Connectors Specialized Industry Content

OSITD Yes Yes Yes for SAP Yes Vertex Yes Yes Yes for SAP Yes Sovos Yes Yes No No

PROJECT LIFECYCLE: TYPICAL IMPLEMENTATION CYCLE

Tax engines are not “plug and play” software applications. Even simple business requirements will necessitate an implementation plan and third-party certified services (DSTax). Implementations are generally broken out into the following phases, each with their own project deliverables:

• 1. Requirements Gathering
• 2. Development/Configuration
• 3. Testing
• 4. Production Cutover
• 5. Post-Production Support

PROJECT LIFECYCLE: REQUIREMENTS GATHERING

It is imperative to identify as many of the business requirements as possible early in the project as these requirements will drive the design. While many requirements are common across all projects, every company will have their own unique business needs to be

• considered. Deliverables include:
• Functional Requirements and Design – A document

that lists all requirements and how the solution will address them.

• Technical Requirements and Design – A document

that lists any specific development or infrastructure requirements.

PROJECT LIFECYCLE: DEVELOPMENT/CONFIGURATION

Once the requirements are identified and approved, the solution needs to be developed and configured. Key activities include:

• 1. Source system configuration to enable the tax call
• 2. Installation of connector and tax engine (premise

based)

• 3. Product code taxability mapping
• 4. Tax engine configuration to apply the proper rules (if

then logic, lookup lists, special purchase exemptions by vendor, etc.)

• 5. Custom data mappings

PROJECT LIFECYCLE: TESTING Once the solution is built, it should be thoroughly tested prior to rolling it out to production. Key activities and deliverables include: 1. Cohesive test plan, scripting and identification of the roles of who is responsible for staging and running the test transactions 2. Integration testing to ensure that the source system and tax engine are communicating properly. 3. Unit testing to make sure the tax engine is configured as expected. 4. User acceptance and tax expected result testing to ensure that the proper tax treatment is being applied to all in-scope transactions.

PROJECT LIFECYCLE: PRODUCTION CUTOVER

Upon successful testing, the solution is ready to be rolled

• ut to production. Key activities include:
• 1. Migration of ERP configuration to PROD.
• 2. Installation of PROD connector and tax engine

(premise)

• 3. Migration of tax engine configuration
• 4. User training and documentation
• 5. Possible vendor, customer or internal user

communications (new steady state processes)

PROJECT LIFECYCLE: COORDINATION WITH AN ERP IMPLEMENTATION

Many times a tax automation project is initiated in conjunction with the implementation of a new ERP. When a company is implementing a tax engine and ERP simultaneously, they should consider the following factors:

• 1. Synchronized timing of both projects.
• 2. Clear delineation of responsibilities of ERP and tax

engine implementation teams.

• 3. Proper tax representation in the ERP implementation

so that key requirements are not missed.

• 4. Integration of both ERP and tax engine test plans.

PROJECT LIFECYCLE: COORDINATION WITH AN ERP IMPLEMENTATION

Key advantages and challenges of synchronized ERP/tax engine implementations include:

ADVANTAGES CHALLENGES ฀Ability to include tax requirements into the

• verall ERP design.

฀High project visibility generally allows for greater resources. ฀Business users will need to adapt to new processes for the new ERP, so new tax processes can be implemented as well. ฀ Provides a good time to review longstanding tax policies that may have created tax liabilities. ฀ Tax automation timeline may be driven by the

• verall ERP implementation timeline.

฀ Due to the differences in project size and complexity, tax requirements may be disregarded without a project champion. ฀ ERP implementation consultants may claim tax automation knowledge when none exists. Making the ERP and tax engine "talk" does not qualify as a successful implementation.

PROJECT LIFECYCLE: IMPLENTATION PARTNERS

As previously mentioned, tax engines are not “plug and play”. Very few organizations have internal resources with experience implementing tax engines. You may consider engaging third party consultants to assist with the project and implement a successful solution. You should consider:

• Expertise of the implementation team
• Evaluating hourly rates and scope so that you are

comparing apples to apples

• Determining the project scope so as to best balance

fees and freeing up valuable internal resources.

Q&A

Q&A

CONTACT US

4320 Winfield Road, Suite 200 Warrenville, IL 60555 info@dstax.com

• Scott Billadeau – scott.billadeau@dstax.com
• Chris Pounds – chris.pounds@dstax.com