• Multiple nexuses,
• Multiples situses,
• Multiple locations inputting data and calculating sales and use tax,
• A filing history that has created a pre-defined pattern,
• A minimal or unavailable IT resources,
• A nexus in Georgia, California, New Mexico, Alabama, Louisiana, Florida, Colorado or Texas,
• A history of one or more past audits.
The functionality checklist at the bottom of page 70 can be used to determine if a business’ needs will be best met by a forms library or a compliance engine.
Compliance software has another stress-reducing benefit. A forms engine calculates and reports a business’ taxes due at pre-set intervals appropriate for the taxes it should pay. It will calculate taxes due for the month or quarter, but does not keep a running tab. A compliance engine, however, often shows the tax liability in real time, where the business doesn’t have to wait for a monthly or quarterly report to know where it stands on taxes owed.
Compliance is often less expensive and less stressful than an audit. And it can be easier too.
The following example is a life lesson on picking software carefully and making sure the results can be easily checked. An officer of a New York company that retails sales of shirts, suits and accessories was a person responsible for the collection and payment of New York sales and use taxes on behalf of the company. Even though he did not have direct responsibility for keeping the books and filing tax returns, he was directly responsible for the operation and oversight of the department that performed these functions. For the same reasons, the taxpayer’s argument that the tax software system, which he investigated and approved for purchase, was responsible for the failure to collect the proper tax on retail sales was rejected. Responsibility for compliance with the sales tax law was ultimately his, and delegation of the duty to monitor collection could not be shifted to a software program.
A quality compliance engine will build and maintain the audit trail, providing the business with peace of mind by reducing human error. Calculations will likely be footed and cross-footed with every transaction for every form. That intensive, real-time auditability of the numbers, along with the adaptive cross-checks that ensure form-filing accuracy, gives a level of compliance that will make it less likely that a business will be audited. If the business ever is audited, however, information should be readily available. A compliance engine is effectively in a constant state of readiness to respond to internal or external audit requests.