Technology and Automation: A Road Map for State and Local Tax Professionals; Challenges include spreadsheet-based calculations, manual tax software inputs and overrides, and cumbersome work papers.

• Author: Kammann, Mike

Tax functions today are under increased pressure to make processes more efficient and ensure proper compliance and reporting, while still taking time to analyze and synthesize growing volumes of raw data to provide more strategic insights. Predictably, the increased focus on analytics and strategic reporting drives the need for organizations to transform their tax functions, and state and local tax (SALT) functions have become a key focus.

Some of the greatest challenges the SALT functions of today face relate to inefficiencies in large spreadsheet-based calculations that are carried over from year to year, manual tax software inputs/overrides, and the use of large, cumbersome work papers. Just maintaining the status quo in the face of increased data management and reporting demands has driven up the staff hours needed to meet state and local statutory deadlines, leaving less time for the strategic planning initiatives companies now demand.

These process considerations and the nuances of state and local taxes, including the impacts of federal tax reform and the U.S. Supreme Court's historic ruling in South Dakota v. Wayfair et al., (1) present unique challenges to state and local tax professionals. However, these unique challenges present opportunities for SALT functions to leverage automated data workflow processing, data visualization, robotic automation, and other automation tools not only to react faster but also to deliver critical insights, reduce risk, and deliver other value-added benefits to their organizations. In fact, because the SALT function involves ingesting vast amounts of nonstandard data from disparate sources, it is well suited to benefit from these emerging technology and automation tools. In this article we discuss our own digital journey at PwC, provide an overview of several technology and automation tools used by SALT functions today, and, finally, delve into several companies' real-life SALT function digital journeys providing examples of where companies have realized the most benefits from technology and automation tools.

PwC's Digital Journey

PwC has embraced the opportunity to integrate new data ingestion, analysis, and visualization tools to transform the tax function. PwC leverages technology to help companies drive greater internal efficiency and realize improvements in day-to-day activities and is invested in preparing its workforce to think digitally, developing new skills to thrive in today's fast-paced and complex business environment. To do this, PwC is focusing on the digital experience, for both its people and clients, driven by a unified digital vision, our "Digital Fitness for All" mantra, and our willingness to self-disrupt to drive innovation. This digital journey started over five years ago. Significant milestones include:

* 2013: Committed to self-disruption by adopting collaboration tools and office technologies;

* 2014-2015: Developed a culture of real-time feedback with digital coaching and performance management tools that emphasize in-the-moment, effective, and ongoing improvement;

* 2017: Launched "Your Tomorrow," a firm-wide reimagining of what it means to work at PwC in the digital age. PwC also developed and launched a digital fitness assessment app to employees and the leadership team to support our digital upskilling journey; and

* 2018: Launched the Digital Accelerator initiative to develop a dedicated team of digital champions to drive innovation at the ground level. In addition to launching the Digital Accelerator initiative, PwC is working to digitally upskill its entire U.S. workforce by June 30, 2019, and acknowledges an individual's digital knowledge and skills with Digital Acumen knowledge badges, earned upon completion of four interactive, industry-based scenarios that focus on technologies that include artificial intelligence (AI), augmented/virtual reality, blockchain, robotics, 3-D printing, and drones.

By living through many of the same technology transformations and digital upskilling initiatives that companies are considering or starting now, PwC is positioned to leverage its experience to assist companies as they develop their vision of the tax function of the future and to support them along their own digital journeys.

Technology and Automation Tools Used by SALT Functions

Throughout PwC's digital journey, a number of different technologies and automation tools have emerged at the center of the transformation efforts. This section provides an overview of some of the more prevalent technology and automation tools used by organizations embarking on digital transformation initiatives. Each technology and automation tool can be deployed separately or in combination (which creates a technology multiplier effect) to fully automate large processes, such as state return apportionment, from beginning to end with the push of a button.

Automated Data Workflow Processing

Automated data workflow processing tools (automated data processing) can be categorized broadly as tools that "extract, transform, and load" (ETL). Most incorporate this functionality into a workflow format so that once configured, the workflow process can be repeated to produce consistent outputs. This workflow configuration allows for changes made to documents feeding the workflow to be processed through the workflow in seconds, potentially eliminating hours of effort needed for updates...