United States

Using automation to reduce sales tax assessments and refunds

National clinical laboratory

CASE STUDY

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Background
Over a three-year period, a national clinical laboratory grew rapidly due to a series of acquisitions, expanding its physical footprint and creating sales tax nexus in many new states. Ineffective and mismanaged sales tax processes among the acquired companies meant that sales tax audit assessments and refunds were increasing rapidly. For the company, that meant:

  • Penalties and interest due to compliance failures
  • The risk of undiscovered compliance issues that could result in future expenses
  • Routine overpayment of sales taxes
  • Accounting staff tied up addressing a constant stream of sales tax audit responses and refund claims in numerous jurisdictions 

Goals
The company sought to centralize and better manage its sales and use tax efforts across all entities and jurisdictions, which would reduce overpayments, minimize compliance issues and reduce demands on its accounting staff.

Our role
The company turned to RSM for advice on how best to achieve its sales and use tax goals. RSM's state and local tax team worked with the company's tax director and chief financial officer to understand the company's challenges and goals and, subsequently, recommended an automated sales and use tax approach. This helped the company:

  • Stop the pattern of overpaying and continually having to file for refunds
  • Address compliance issues that were driving assessments
  • Reduce sales and use tax burdens on accounting staff, freeing them up for other needs

RSM helped the company sort through a number of available automated sales tax compliance software products to find a scalable solution that would meet their current and future needs. RSM then helped the company evaluate the strengths and weaknesses of each product, identify a short list of appropriate vendors and run a competitive selection process that resulted in securing the right solution at a fair price.

Finding the right tool was only part of the challenge. The company was in the midst of implementing PeopleSoft as its new ERP system, which meant the sales tax automation tool had to be effectively integrated with the new ERP system during the complex implementation. As part of the system set-up, RSM's sales tax automation professionals helped the company determine where and when sales tax was due to ensure the system would make the correct sales and use tax decisions for the company's unique circumstances.  Additionally, RSM's sales tax team worked alongside the company and the PeopleSoft implementation team to help assure the sales tax system was appropriately installed and integrated with the ERP system.

The results
After the successful implementation of the sales tax automation tool, compliance accuracy improved immediately, and sales tax audit assessments and refunds decreased dramatically. Prior to the implementation, assessments and refunds averaged $1 million to $2 million per audit/refund cycle. Today, they average less than $100,000. Not only is the company seeing vast improvement in its sales and use tax compliance performance, it is able to perform at a high level with significantly fewer staff and has thus been able to allocate accounting personnel to more strategically significant tasks.

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