Manufacturing Case Study

Oxbo International reaps the benefits of sales tax automation

Oxbo International

Most of the foodstuffs we eat are harvested by sophisticated machinery. Oxbo International is the world-wide leader in manufacturing, selling, and supporting such specialized machinery, many of which are used by large-scale farmers of fruits, coffee, vegetables, seed corn, grapes, berries, and olives. Such crops are very perishable and high value, and most have a very complex value chain connecting production of the crops to the consumers. Headquartered in Byron, NY, Oxbo has domestic operations in seven states, as well as international activities in Brazil and Europe. In recent decades the company has grown significantly through mergers and acquisitions and expects that growth trend to continue based on the strength of its capabilities, people, and product innovations.


Tax challenges

  • Manage exemptions in a complex sales-tax environment
  • Add new nexus as company grows rapidly through M&A
  • Integrate disparate,disconnected systems
  • Decrease employee turnover resulting from highly exposed,tedious tax responsibilities

Business systems

  • QAD ERP system
  • Proprietary ecommerce system

Avalara systems


Results

  • Reduced exemption certificates and processing time by 40%
  • Eliminated 150 hours of sales tax work every quarter
  • Improved team morale as focus shifts to more meaningful work

Managing the Exceptions to the Exceptions

In most industries, sales-tax exemptions are, by definition, the exceptions. Not so in agriculture. The majority of tax jurisdictions in the U.S. are very favorable to agriculture, making most of Oxbo’s sales exempt from tax. But, a few jurisdictions create huge complications — some don’t exempt agricultural machinery from sales tax, while others do; but only partially. In the state of Washington, for example, the initial sale of agricultural machinery is fully taxed, but the sale of replacement parts is not.

Managing this complexity was, quite literally, a full-time job at Oxbo — and one with high turnover. “We had to have someone dedicated almost full-time to watching the rules in each county, municipality, and state where we sell,” says Barb Mika, who supervises sales accounting for the company. “The error rate was very sizable… we had been audited quite a few times.”

Without an automated system in place to manage exemption certificates, audits were especially challenging. “Some of the certificates were very old, some got lost… we didn’t have a process in place to ask clients for updated forms,” says Barb. As the company’s customer base grew rapidly, the problem was exacerbated.

To make the matter even more challenging, Oxbo was managing sales tax throughits ERP system, which was tedious and time-consuming, especially in a rapid-growth environment where new nexus was being added quickly. “We had to do all of the research into each state’s tax laws that apply to agriculture,” says Barb. “Then add each jurisdiction individually into our disparate systems and link them together… the setup was quite horrific for each state. Our systems really confined us.”

Implementing the Avalara Solution

Oxbo went on a very deliberate hunt for an automated solution, getting recommendations from some of their larger customers who were also resellers. Avalara soon emerged as a front runner, and then the hard work really began as Oxbo put the solution through its paces.

“The team at Avalara showed a remarkable willingness to dig in and figure out how to handle our specific set of needs,” Barb recalls. “We built a sandbox environment focused on California and Washington, the two states who give us the most grief. After eight or nine months of testing, we were surprised at the results.”

Avalara AvaTax dynamically evaluates invoices, makes tax decisions, and applies them across more than 16,000 jurisdictions at the point of transaction, within any ERP or billing system. Avalara CertCapture automates the entire process of managing exemption certificates, digitally capturing and storing them in a central repository where tax managers can easily pull reports, monitor expirations, and manage certificates to reduce audit risks and proactively maintain compliance.Oxbo implemented both solutions, integrated with their ERP system, QAD.

Reaping the Benefits

“We have everything in one place now,” says Barb. “When you have companies coming together through mergers and acquisitions, it’s nice to know we have one spot where we keep everything. And that’s within Avalara.” Accuracy has improved as the need for duplication of data entry into disparate, disconnecte systems has disappeared.

“We can allow state departments of revenue access to some of the reporting features within Avalara, so they can get their questions answered without our staff being directly involved, making it convenient as well,” says Barb.Barb reports morale on her team has improved immeasurably, since the tedious and time-consuming burden of managing sales tax and exemptions has been lifted.

“We’ve been able to put people on more meaningful work, like asset management and upgrading other systems,” Barb says proudly. “We didn’t want to have staff dedicated to managing sales tax. We want to focus on what we do best, and that’s selling agricultural machinery.” Looking forward, Oxbo aims to integrate Avalara with its proprietary ecommerce software to calculate sales tax on shopping carts, and with its CRM system to apply sales tax to quotes.According to Barb, “we see good things coming down the road from Avalara as we move in that direction.”

 


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Avalara Sales Tax Suite

Avalara supports quick deployment by providing over 600 pre-built integrations to business applications.

Avalara AvaTax

Delivers sales tax calculations to your shopping cart or invoicing system, and aggregates your transaction data so you can calculate what you owe in Returns.

Avalara Returns

A filing service so seamless you’ll barely lift a finger -- Returns pulls your data from AvaTax to prepare and file your returns. If you choose, we can even remit payments for you.

Avalara CertCapture

A seriously upgraded way to manage tax documents in the cloud for tidy, audit-ready records. Syncs with AvaTax to automatically apply exemptions at checkout.

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