Comprehensive Solutions for Managing C-Store Fuel Excise Tax
- Sales and Use Tax
- June 27, 2016 | Aberdeen Group
Since 2001, Congress has enacted over 5,000 tax code changes — about 500 changes per year. This number does not include state and municipal tax code changes. While federal tax codes are centralized and easier to manage, state and local tax code requires monitoring multiple jurisdictions, each with their own processes and adjustments accordingly. Unsurprisingly, keeping up with local changes presents more challenges for convenience store (c-store) operations than federal ones. This and other pressures raises the question: "How can an organization efficiently keep abreast of all this change?" The answer is simple — with comprehensive tax solutions.
According to an excise and sales management survey conducted by Aberdeen Group (March 2016), premier comprehensive solutions improve tax processes while also supporting improved elements in financial management (i.e., more accurate real-time cash information, collaborative enterprise-wide data sharing, etc.) via integration with back-office systems and platforms. Automated updates and alerts are also benefits of these solutions.
Challenges Presented by Excise Tax Management
As mentioned, the frequent changes in tax codes are a major obstacle in excise tax management. This was the number one pressure identified by 44% of survey respondents, as shown below in Figure 1.
Figure 1: Processing Taxes Can Be Taxing
There's tremendous pressure in preparing and filing taxes, which is compounded by the stress from operational costs. To reduce this, organizations with comprehensive solutions are 2.6x as likely to have excise tax filing and preparation incorporated into their platform (see Figure 2). By having this capability as part of the broader comprehensive solution, rather than a standalone, updates to tax codes are automatically applied. With sales data recorded and accounted for in comprehensive solutions, the preparation is expedited, and filings are of superior accuracy.
Figure 2: Enjoy Comprehensive Solutions for All Excise Tax Management Functions
Respondents were also 52% more likely to have the ability to preemptively calculate anticipated excise tax based on fuel sales data. These calculations are then weighed against the actual filings and provide de facto checks and balances to official excise tax filings — thereby reducing risk.
The risk associated with motor fuel excise tax can be significantly higher than sales tax, due to the large allocation of costs tied up in fuel inventory, rapid inventory turnover (leading to lots of fuel transactions), and the high tax liability associated with each fuel transaction. This is not trivial. Inaccuracies in excise tax calculations, especially pertaining to fuel invoices, can create heightened risks for retailers, or worse still, potentially lead to the risk of audits if inaccurately filed. Comprehensive solutions use and analyze markedly greater data inputs than standalone software. This contributes to stronger risk mitigation.
In short, comprehensive solutions will pave the way to increased efficiency filing c-store excise taxes. Automated tax updates provide greater accuracy. File prep time is reduced and calculations mitigate risk. Death and taxes may await us all, but at least there's a better way to manage excise taxes as they arise.
About Aberdeen Group
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