Dealing With Tax Exemption Certificate Issues.

This is the eighth installment of our Tax Technology Corner. As a corporate tax professional, you know how important technology is and how it's evolving at warp speed. With new regulatory and compliance initiatives in the federal, state, and international areas, landmark tax reform legislation, and globalization of tax monitoring and enforcement, keeping up with tax technology is not a luxury--it's a necessity. Each installment of this column will pair a taxpayer with a service provider. Together, in Q&A format, they'll tell a story about how they have worked together to solve a specific tax problem, implement a better solution, cut costs, or improve productivity. In this installment, Lauren Marks, administrative manager at Graybar, a leading distributor of electrical communication and data networking products, and Mike Lott, senior product manager at Vertex, Inc., a leading tax and services provider that empowers global commerce, discuss how they worked together to tackle important tax certificate exemption issues. Michael Levin-Epstein, senior editor of Tax Executive, moderated the discussion.

Michael Levin-Epstein: I'd like to begin by asking Lauren to describe the tax issue that led you to Vertex.

Lauren Marks: Graybar is a wholesale electrical distributor, so approximately sixty percent of our sales are exempt from sales tax. We have thirteen district offices across the country, and at the time, each one handled the loading of certificates and processing of our tax corrections separately. We realized that we needed to come up with a way to make this process more efficient, so it was a great opportunity for Graybar to partner with Vertex, as well as [with] Conexiom. We could validate our customers' tax certificates online and load them through a web service call into Vertex. Graybar also worked with LCR-Dixon to issue tax-only credit and invoicing to our customers. These tools cut the number of open tax deductions in half. This initiative completely transformed Graybar's indirect tax function. In the first six months of this implementation, we reduced tax-related working hours by 54,000 and achieved a cost savings of nearly $6 million.

Levin-Epstein: Mike, from your point of view, what made you guys confident that you could solve Lauren's problem?

Mike Lott: For context, it's important to point out that incorrect or missing exemption certificates is the second leading cause of audit noncompliance. If an auditor finds transactions that...

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