Case Study: Exemption Certificate Management (Banking and Commodities)
BACKGROUND
ABC is a company that sells commodities such as electricity, which happens to be taxable in most states. However, they were facing challenges in managing the collection of exemption certificates from their customers. They had recently experienced a high rate of employee turnover and were using a tax engine that none of their current employees knew how to use. Their sales tax exposure was increasing, and they were unable to determine their current exposure due to a large number of previous certificates that had not been reviewed or validated.
CHALLENGE
ABC faced several challenges, including a lack of understanding of their sales tax exposure, errors in sales detail, and a lack of information on where to get the right information to determine their exposure and progress on certificate collection. Furthermore, no one person in their department knew the status of the certificates, and a large number of certificates remained unreviewed and unvalidated.
SOLUTION
To address these challenges, ABC brought in Mo to review their old certificates and prior year sales data to determine their overall sales tax exposure, which turned out to be close to $700M. Mo worked with various members of their team to identify the right contacts to reach out to at customers' businesses and created a streamlined process to answer customer questions and address any pushback. They also set up a system to track and store incoming certificates, creating efficiencies and a database to track progress.
RESULTS
After several phases of email campaigns and follow-ups with customers, Mo was able to reduce ABC's sales tax exposure by 95%. The campaigns also created a responsive contact list for most of ABC's customers, allowing for a streamlined business-as-usual workflow and real-time tracking of sales tax exposure.
CONCLUSION
Managing sales tax obligations can be challenging, especially in the face of personnel turnover and technological challenges. However, having an experienced professional to collect and validate exemption certificates and establish proper tracking processes can save significant time and potential sales tax exposure. ABC's experience demonstrates the importance of having a solid process in place to manage sales tax compliance, especially for companies selling taxable commodities.
AT A GLANCE
CHALLENGES
Large number of unreviewed exemption certificates
Inaccurate sales data and errors
Lack of knowledge about sales tax exposure
BENEFITS
Extensive expertise in sales tax compliance and exemption certificate collection
Ability to identify and reach the right contacts at customers' businesses
Streamlined processes and workflows for managing sales tax compliance
TIME AND RESOURCE SAVINGS
Reduced time spent on manual processes and data management
Improved efficiency and productivity in the sales tax compliance process
Streamlined workflow and data tracking system
FINANCIAL SAVINGS
Reduced sales tax exposure by 95%
Saved $700M in potential sales tax liability
Improved accuracy in sales tax reporting and compliance
EXPERTISE
In-depth knowledge of sales tax compliance and regulations
Ability to navigate complex sales tax laws and requirements
Experience in managing exemption certificate collection and validation
ADDITIONAL BENEFITS
Creation of a responsive contact list for most of ABC's customers
Improved accuracy and transparency in the sales tax compliance process
Reduced risk of noncompliance and associated penalties and fees
OUR MISSION
What sets us apart from other sales tax consulting firms is our commitment to offering top-notch services without charging exorbitant fees typical of other firms.
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We believe that every business deserves quality sales tax consulting that is accessible and affordable, and we have built our practice around this core value.
