With CRUSH 2016, Avalara’s national tax compliance conference coming up May 9-11 in New Orleans, we sat down with one of the conference speakers, Mark Houtzager, principal of U.S. VAT, Inc., to learn more about his sessions, business outlook on value added tax (VAT) and what he is most looking forward to at the conference.
Avalara: You are speaking on two topics, both related to VAT. What do you hope attendees take away from your sessions?
Mark Houtzager: First, I want them to understand the differences between VAT and sales tax. We know in the United States that VAT is somewhat similar to sales tax, but not really; they are more like cousins far removed! VAT must be considered on purchases and sales – and both sales of goods and sales of services are liable to VAT. As I always say, VAT is potentially due on everything that you collect some sort of payment for.
Second, I would like to see attendees take away a better understanding of how indirect taxes work outside the U.S. – and hopefully, get them more comfortable with VAT or GST. By the way, if anyone wants to read up on VAT, have a look at www.TheVATblog.com. My blog has more than 500 posts on VAT!
Avalara: Why do you feel businesses overlook, misunderstand or disregard VAT, and what potential ramifications do they face?
MH: VAT really tests the relationship between the tax/finance department and the rest of a company’s organization. For example, once someone on the sales and business development team starts thinking of doing business outside of the United Stats, VAT is going to be a major consideration. Particularly in Europe, where VAT is at an average rate of more than 20%, you must “think” VAT before you start doing business. I am only half-joking if I say that the tax/finance teams of multinationals, or aspiring multinationals, must be good at making friends in parts of the company they normally never deal with.
Because VAT must be actively managed on all purchases, sales, imports, exports and inter-company transactions, we see a VAT cash flow through a multinational’s general ledger between 25% and 45% of gross sales. You can imagine that such percentages open the eyes of a company’s CFO and risk management professionals. I have a bunch of examples I’m going to share at CRUSH 2016 that show what happens if things go haywire – ask me about the U.S. fashion company that was trying to set up a warehouse in Italy!
Avalara: VAT can be a very complex-yet-important topic for U.S. companies doing businesses overseas. What advice can you give these businesses?
MH: This may sound odd, but as I said, making friends throughout the organization is a prime directive for efficiently managing your international tax footprint. Next, I would say to map your knowledge of the supply chain, using the six questions that every VAT person will recite when you wake him or her up at night: Who sells What to Whom, Where, When and for how Much?
Once you have that overview, you want to pinpoint VAT liabilities, potential issues and invoicing requirements, and you will have connected with your vendors and customers to see if they are on board with VAT. This is followed by the implementation in the ERP. And, I should say, that at some point early on, you will have reached out to me or another VAT expert to hold your hand and give you advice.
Avalara: What are you looking forward to most at CRUSH 2016?
MH: My main focus is connecting with the audience, with old friends and new ones. I love hearing about their VAT challenges, as well as Avalara implementations and how we can fit the whole of tax automation, ERP, automated reporting, and matters such as e-settlement and e-invoicing, into one mold. And, of course, VAT for online businesses is a topic that I love to share. Whether it is during one of my sessions, in the conference corridors or over lunch and dinner, feel free to come over and say hello!
Join Mark Houtzager for his two sessions, “How VAT Affects Your Clients’ Overseas Businesses” and “Selling Globally and VAT Compliance,” on May 10. For more information on CRUSH 2016, visit our website that includes all conference sessions, keynote and session presenter bios, plus conference hotel and travel info.