Convenience Stores and Sales Tax: How to Ease the Burden
- Sales and Use Tax
- Jun 29, 2016 | Aberdeen Group
Convenience store (c-store) finance operations can get bogged down in a sea of tax-based filings. For example, c-stores sell a wide range of taxable products whose tax codes can vary by product and transaction type, all while the applicable tax code goes through frequent updates. This places a huge strain on tax management.
To look at one particular product, fuel, we find that the strain exists on two sides, since here the c-store operates as both buyer and supplier; meaning exposure is two-fold. For owners of c-stores dealing in fuel,it is crucial that tax filings be accurate. Comprehensive solutions that feature automation can significantly reduce the time and resources needed to stay updated on changes in the tax code, while also reducing risks related to errant filings (and the associated audits, fines, or penalties).
C-stores are using the automation capabilities of comprehensive solutions to improve their tax processing. Figure 2 highlights the specific tax-related processes respondents in Aberdeen Group's Convenience Store Excise Tax Compliance Survey (Mar 2016) are automating in this way.
Figure 2: Participants' Tax Pressures Alleviated with Automation
Taking The 'Man' Out of Tax Management
Survey data showed that industry Leaders were more prone to leverage automated capabilities in order to reduce pressures around sales and excise tax management (see Leaders/Followers KPIs graph below). Leaders' reliance on automation helps them stay updated on changes in the tax code and to ensure accuracy in pre-filing preparation or, in adjusted filings, ex post facto.
Comprehensive tax solutions have many capabilities that improve enterprise-wide financial management. However, when these capabilities also feature automation, this can substantially reduce the time and resources devoted to tax management and ensures ongoing compliance with the most current regulations. Figure 2 highlights the automation features used most frequently to help improve c-store tax management.
Figure 2: Leaders Maximize Automation When Managing Taxes
Automated updates to tax codes, as well as alerts notifying stakeholders of such changes or notifying them of discrepancies in anticipated tax calculations, all serve to minimize errors and reduce risk. In this regard, it's worth noting that Leaders were found to be 21% more likely to have the ability to automatically calculate excise tax at point of sale. Such a capability is critical because it not only decreases the chance of human error (mathematical or coding) in calculating taxes, but also because it ensures that the most current and applicable tax code (via product and jurisdiction) information is used to calculate these taxes in the first place.
When considering solutions to help manage sales (and excise) tax, be sure to take a close look at solutions that automate rules and rates. The solution you choose should also handle transactions based on products and regional jurisdiction. Lastly, the solution should be comprehensive and fully capable of integration with your ERP or back office accounting system.
If you keep these points in mind, finding the ideal tax management solution should be a piece of cake.
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