Sales Tax Exemption Certificates

Oxley and SSAE 16 Type II Compliant
Electronic Certificate (ECM) solutions that
give you control over your document
management governance and processes
cost-effectively.
1
Sales Tax Exemption Certificates
Larry Powers
ISSI/TEAMS
ISSI provides industry-leading, Sarbanes
Confidential and Proprietary - ISSI

2
Agenda for Presentation
 The Regulatory Challenge for Governance
 What is Exemption Certificate Governance
Policy?
 Assembling the best ”Governance Team”
 ECM Governance Metrics
 Setting the Mission and Strategy
 Best Practice Data Policies
 What are my Integration Points?
 Technology Enablement Success
 Conclusions and Q/A

3
ISSI/TEAMS
Founded in 1994, ISSI conceived and developed
imaging software specifically to help
corporations get control of the sales tax
exemption certificates and tax planning/audit
strategy that goes with this process. The
decision to use technology to streamline
certificate management was made, and TEAMS
was developed as an on-premise solution with
complementary tools and utilities, then moved to
SaaS environment for a more fluid delivery
model and to meet industry demand for a hosted
model.

4
The Governance Challenge
 Increasing Regulatory Scrutiny.
 Transaction Taxability Encompasses:
 Today: Sales and Use
 Tomorrow: VAT
 National and International
 Expand Compliance Efforts.
 Reduce compliance cost and effort.

5
Exemption Certificate Governance
Policy
 Cost Reduction
 Risk Reduction
 Effort Reduction
 Compliance Improvement
 Short Term Impact
 Long Term Results

6
Inhibitors - Certificate Governance
 Diffused compliance responsibility
 No central authority
 Many departments play a part
 The framework is crucial to success
 Lack of visibility
 Limited understanding of true risk

7
ECM Governance Metrics
 Reduction in
 Assessments, interest and penalties.
 Accruals.
 Resources spent
 Preparing for and defending audits.
 Acquiring and reviewing certificates.
 Researching and correcting errors.

8
Percentage of Revenue
 A Measure of Relative Impact.
 A Means for Audit Assessment.
 Statistical Sampling that can hurt
or help.
 Used as a means to proportionally
determine compliance.

exemption certificates as a percentage
of the total number of exempt customers
and as a percentage of revenue.
9
More ECM Governance Metrics
 Number of valid exemption certificates
as a percentage of the total number of
exempt customers and as a percentage
of revenue.
 Number missing, incomplete or invalid

Even More ECM Metrics
 Response time on certificate acquisition
10
campaigns.
 Response levels on certificate
acquisition campaigns.
 Tax accrual accuracy.
 Time spent preparing Tax accrual
calculations.

11
Data Policies
 Standardization
 Quality Control
 Compliance Rules
 Data Ownership
 Flow of Data
 Synchronization Rules

12
Data Policy Impact
Data Sources: Data Uses:
 Master Customer File
 Master Vendor File
 Order Entry
 General Ledger
 Exemption Certificates
 Exempt Status
Determination
 Sales Tax Calculation
 Tax Accruals
 Contingent Reserves
Calculation
 Reverse Audits
 Audit Defense

13
Document Indexing
 Customer Name
 FEIN
 Customer Bill To Address
 Customer Ship To Address(es)
 Customer E-mail
 Customer Phone
 Customer Fax
 Unique Customer ID
 Effective Date
 Expiration Date
 State Registration Number
 Signature
 Current Certificate Status
Certificate Type:
 MTC Multi-State Resale
 SSTI Multi-State
 State Issued
 Blanket Exemption
 Single Purchase Exemption
 Direct Pay Permits
 Exempt Use
 Non-Expiring
 Limited Life
 Description of Purchase

 What happens when customer or vendor
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Data Synchronization
 Which system’s data takes priority?
 How, when and at what interval data is
exchanged?
 How are data conflicts resolved?
 Where and when is new customer or
vendor data entered?
records are deleted?

15
The Sales Tax Process
 Determine tax-exempt status of the
customer placing an order.
 Calculate sales tax owed.
 Collect exemption certificate.
 Review certificate for sufficiency.
 Reverse audit to determine overall level
of compliance and determine specific
gaps and audit exposure.
 Respond to state audit documentation
requests and defend the audit.

 Respond to state audit documentation requests
16
The Use Tax Process
 Request determination that a purchase is use
tax exempt.
 Determine the taxability of said transaction.
 Prepare and deliver an exemption certificate to
the specific vendor.
 Document use tax-exempt transaction for
future reference.
 Perform periodic Use Tax accrual calculations.
 Reverse audit to determine overall level of
compliance and determine specific gaps and
audit exposure.
and defend the audit.

17
“Gotchas” for Additional Complexity
 Drop Shipments
 Streamlined Sales Tax Project
 Direct Pay Agreements
 What is and is not taxable?

18
Sufficiency Review
A minimum set of sufficiency rules
would include checking:
 That the proper form was used.
 That it was signed and dated.
And may also include:
 A specific seller’s name
 A description of purchase
 A valid certificate registration number (form
and format).
 Expiration Dates.

19
Forms and Statutory Compliance
 Each State has their own
 May be transaction specific
 SSTP
 May expire
 Change frequently

20
Certificate Workflow
 Transaction inception
 Sales taxability
 Sufficiency Reviewed
 Documented, Stored, Indexed
 Searchable
 Retrievable
 Audit Defense

21
Document Capture
 Paper Delivery
 Pot luck
 Needs scanning
 Easy for customers to fax or mail
 Electronic Delivery
 Improved document capture
 Better indexing
 Correct Forms first time
 Fewer errors

22
Technology Enablement
 Platform
 SaaS
 Traditional Self-hosted Delivery
 Hybrid Models
 Reliability
 Transparency
 Who has the staff?
 Who has the expertise?
 When do we need help?

23
Security
 At a minimum, SAS 70 Level II Certified
 Multi-tenant versus Single-tenant
 Commingling Data:
 Instances
 Customer Files
 Certificates
 Single Sign-on
 Offshore versus Onshore
 Hosting
 Services

24
Benefits of ECM Governance
 Reduce the cost to acquire and handle
exemption certificates.
 Eliminate errors and confusion.
 Increase ECM compliance.
 Minimize audit risk and exposure.
 Satisfy Customers and Staff.

25
Thank you for your time!
Larry Powers
Chief Strategy Officer, ISSI/TEAMS
http://www.teamscert.com
lpowers@issimage.com
650.383.8527

Sales Tax Exemption Certificates

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