United States

New tax leadership prompts sales and use tax function reset

A financial institution company case study


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A newly appointed tax director at a national financial institution had questions about how a recent spate of acquisitions was affecting the company's sales and use tax function. The tax director discovered that most of the acquisitions had proceeded with little due diligence input from the tax department. As part of her new leadership responsibilities, the tax director wanted a full understanding of what she had inherited, including a detailed look at current internal and external processes. Further, a sales tax automation project was in its third year of implementation, with no end in sight. It was time for a fresh perspective.

The company needed answers to many sales and use tax questions. How were recent acquisitions affecting compliance? What types of tax liabilities did the company inherit? Were existing processes and resources matched to current needs? Why was this automation project taking so long? The company needed an impartial provider who would examine everything and provide a big picture solution to how all aspects of the sales and use tax compliance function fit together or, rather, how it should fit together.

Our role
The tax director asked RSM to complete a comprehensive sales and use tax process review and provide recommendations for improvement. This included:

  • Conducting on-site interviews at five locations nationwide
  • Reviewing ASC 450 (formerly FASB 5) public disclosures and documentation, including those related to the composition of a large, unknown reserve earmarked for sales and use tax
  • Evaluating multiple third-party providers across several stand-alone projects
  • Assessing the tax skills of the employees involved in the current sales and use tax process
  • Reviewing the sales tax categorization of multiple services offered by the company and the company's position(s) on software as a service

The results
Following a three-month, in-depth analysis of the company's entire sales and use tax function, including integration points with related departments, RSM delivered a detailed report outlining current process gaps, areas of audit or financial risk, and recommendations for improvement. Additionally, our sales and use tax team prepared a management summary report that allowed the tax director to easily demonstrate the financial impact of each process gap and the steps necessary to remediate the associated risk, allowing the company's leadership team to prioritize improvements. Over an 18-month period, the company implemented almost every suggested process improvement, including:

  • Completion of a stagnant automation implementation project
  • Participation in strategic state-level voluntary disclosure agreements (VDAs)
  • Repair of a previously mishandled Washington state VDA
  • Completion of a nexus study/evaluation along with the appropriate contractual registrations for previously and newly acquired companies
  • Realignment of the internal tax team to maximize individual strengths
  • Automation of sales tax calculations for nonautomated legacy billing systems (optimization of technology platform)

As an impartial party, RSM was able to assess what was working well and what was creating risk across the company's entire sales and use tax function. Today, the company has consistent processes in place for acquisitions, consistent tax decision-making and reporting processes to facilitate audit management and support audit claims, and detailed documentation of these processes throughout the sales and use tax function. The tax director is confident in her team and in the company's overall sales and use tax position.

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