The Changing Landscape of State Sales and Use Taxes

The stakes are higher than ever before — find out what the solutions are

by Scott Gruchot, Vice President, Advance Technology at CCH

The need to properly handle sales and use tax compliance is greater than it was before this recession. Thankfully, you and your business can manage sales and use tax mandates more accurately and more efficiently with a little help from CCH.

First, let’s look at how the sales and use tax environment has changed. The recession has had a devastating effect on state sales and use tax revenue. In response, states and localities are increasing tax rates at an alarming rate. Close to a dozen states and more than 1,000 localities raised their sales tax rates in 2009. Many are expanding their taxable base to cover more services and digital products bought online.

You can expect more aggressive nexus claims as well, because of these trends:

• E-commerce is a target. A recent University of Tennessee study predicts state and local governments will lose up to $12.65 billion of uncollected Internet sales tax revenues per year by 2012. States are taking steps to rein in this unrealized revenue.

• More states use sophisticated algorithms to rank companies based on the highest probability of audit success — from the state’s perspective. Zeroing in on companies with low tax compliance scores means that revenue per audit goes up dramatically.

In response, more companies are outsourcing some or all of their sales and use tax processing and compliance activities. This is the fastest-growing tax outsourcing service line because of the potential for cost savings, improved audit defense and the ability to shift a labor-intensive administrative function to specialized professionals, freeing up the in-house finance and accounting team to work on core tasks.

Through its CorpSystem® suite, CCH, a Wolters Kluwer business, offers end-to-end solutions to sales tax problems. The software uses comprehensive and accurate rates, sophisticated calculations and automated return processing.

In the first quarter of 2010, CCH expects to launch sales and use tax outsourcing services as well. Companies that choose a full-service approach will simply transmit an encrypted transaction file for processing. CCH will calculate the applicable sales and use tax liability, generate and file the appropriate state tax forms, and even make the necessary tax payments.

Sincerely,
Scott Gruchot, Vice President, CCH Advance Technology

AUTHOR

Wolters Kluwer Tax and Accounting

Wolters Kluwer Tax and Accounting is a leading provider of software solutions and local expertise that helps tax, accounting, and audit professionals research and navigate complex regulations, comply with legislation, manage their businesses and advise clients with speed, accuracy and efficiency. Wolters Kluwer Tax and Accounting is part of Wolters Kluwer N.V. (AEX: WKL), a global leader in information services and solutions for professionals in the health, tax and accounting, risk and compliance, finance and legal sectors. We help our customers make critical decisions every day by providing expert solutions that combine deep domain knowledge with specialized technology and services. Wolters Kluwer reported 2016 annual revenues of €4.3 billion. The company, headquartered in Alphen aan den Rijn, the Netherlands, serves customers in over 180 countries, maintains operations in over 40 countries and employs 19,000 people worldwide. Wolters Kluwer shares are listed on Euronext Amsterdam (WKL) and are included in the AEX and Euronext 100 indices. Wolters Kluwer has a sponsored Level 1 American Depositary Receipt program. The ADRs are traded on the over-the-counter market in the U.S. (WTKWY).

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