Case Study: Medical Devices Manufacturing
BACKGROUND
ABC Company is a medical device company specializing in women's health. They produce and distribute medical equipment to hospitals across the United States. Recently, they discovered that medical devices can be taxable in various states and that the taxability exemptions for these devices may vary depending on whether the hospital is for-profit, nonprofit, or governmental.
CHALLENGE
ABC Company lacked the resources to conduct a comprehensive analysis of the taxability of their medical devices in all 46 state jurisdictions. Furthermore, they did not have exemption certificates from most of their hospital customers, which made it difficult to determine whether they qualified for any tax exemptions. Additionally, their invoicing system was incapable of calculating sales tax on invoices.
SOLUTION
To address these challenges, ABC Company engaged the services of Mo to conduct sales tax research and develop a matrix to determine the taxability of their medical devices in all 46 state jurisdictions. Mo also conducted an overall sales tax exposure analysis to identify areas of concern. He analyzed ABC Company's list of 1,000 hospital customers and used various databases to determine the structure of each hospital, whether they qualified for any exemptions, and whether they had an exemption certificate on file.
Once the tax matrix and tax exposure analysis were complete, Mo set up an ""external manual system"" to calculate the appropriate sales tax for specific hospitals and override ABC Company's current invoicing system to include the tax. This interim solution was necessary while they were transitioning to a new invoicing system.
RESULTS
Mo successfully completed the sales tax matrix and tax exposure study, identifying areas of concern and prompting ABC Company to contact certain hospitals to request exemption certificates. He also set up a system to calculate sales tax in real-time using an Excel database that pulled in the correct tax rate based on current sales to a particular customer. This system seamlessly communicated with the invoicing system, ensuring the correct tax was applied to invoices. Overall, Mo's efforts helped ABC Company ensure compliance with state tax regulations and saved them from potential penalties and fines.
CONCLUSION
In summary, ABC Company faced significant challenges with regards to the taxability of their medical devices and the limitations of their invoicing system. However, by engaging Mo to conduct sales tax research and develop a tax matrix, ABC Company was able to gain a comprehensive understanding of the taxability of their medical devices in all 46 state jurisdictions. Mo's tax exposure analysis also helped to identify areas of concern and prompted ABC Company to contact certain hospitals to request exemption certificates. Additionally, Mo's interim solution of setting up an external manual system to calculate sales tax in real-time and overriding the invoicing system was instrumental in ensuring that ABC Company remained compliant with state tax regulations. Overall, Mo's efforts helped ABC Company to streamline their tax processes, minimize their tax exposure, and avoid potential penalties and fines.
AT A GLANCE
CHALLENGES
Lack of knowledge about the taxability of medical devices in different states
Inability to determine whether hospitals qualified for tax exemptions
Invoicing system not capable of calculating sales tax
BENEFITS
Comprehensive sales tax matrix and exposure analysis
Real-time sales tax calculation system
Identification of problem areas and exemption opportunities
TIME AND RESOURCE SAVINGS
Avoided the need for ABC Company to conduct time-consuming research
Streamlined invoicing and tax calculation processes
Reduced time spent on resolving tax-related issues
FINANCIAL SAVINGS
Avoided potential penalties and fines for noncompliance
Took advantage of tax exemptions where available
Optimized invoicing and tax processes to reduce overall costs
EXPERTISE
In-depth knowledge of sales tax regulations and requirements
Ability to analyze complex tax issues and recommend effective solutions
Familiarity with various tax databases and resourcess
ADDITIONAL BENEFITS
Improved compliance with sales tax regulations
Enhanced ability to manage tax-related issues
Increased efficiency and accuracy of invoicing and tax processes
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.
