SAP Tax System vs. Bolt On

[vijayendra_rao]

I would like to understand, besides cost, which tax system would be an ideal choice for a small sized company based in United States. The things that come to my mind are:

1) Resources - bolt on - less, built in - more

2) Data maintenance - bolt on - less, built in - more

3) Accuracy - bolt on - less, built in - more

4) Updates - apply a patch vs. research & configure manually

5) Reports - does bolt on provide more tax reports than standard SAP reports?

5) Ease of implementation - which tax system would have the edge? Call this a flush?

6) Cost - bolt on more, built in - less

7) Time savings / efficiency - bolt on more (due to the fact that tax is calculate accurately and hence tax filing would take less time)

Am I missing anything else?!

What are the typical cost estimates (implementation + annual recurring costs) for a bolt on tax system. I know I can contact the reps, but I really don't want to have a long requirements analysis stage at this moment. Just need a quick number to work with.

I appreciate if anyone can share their experience on this issue.

Cheers.

[Former Member · Accepted solution]

In general, here are some of the answers to your questions...

1) Resources - bolt on (very little required after implementation) - less, built in - more (more IT on-going)

2) Data maintenance - bolt on - less (performed by Tax Dept, not IT), built in - more (both IT & Tax)

3) Accuracy - bolt on - much higher, built in - cannot handle all tax algorithms (ie. max-tax, tiered tax, also unique nexus rules in various states) and have to have IT maintain on-going

4) Updates - apply a patch (SAP interface hasn't changed for years and typically a patch or version upgrade doesn't require a lot of work) vs. research & configure manually (tax laws can impact the code you have to write to override standard tax logic in SAP)

5) Reports - does bolt on provide more tax reports than standard SAP reports?  Yes with many easy options for Tax department with no impact on IT

5) Ease of implementation - which tax system would have the edge? Call this a flush?  This depends on your company tax complexity, number of company entities, number of states you collect in.

6) Cost - bolt on more, built in - less - Total Cost of Ownership depends on your tax complexity and exposure to audits to do being less accurate and potentially out of compliance; Other potential issues - customer satisfaction issues with incorrectly taxing customers

7) Time savings / efficiency - bolt on more (due to the fact that tax is calculate accurately and hence tax filing would take less time); Tax bolt on would provide much better accuracy, efficiency and reduce reliance on IT and Tax Dept to research laws, rate & rule changes every month.

What else?

😎 Managing Exemption Certificates? Bolt on can greatly simplify and improve compliance with keeping current and valid certificates on file for your exempt customers.  State tax authorities can assess fines for not having current and valid certificates.

9) Compliance Risk - Much lower for bolt on, higher for built in

I can help you here, but need to ask a few questions to ensure I give you the proper answers to your questions...

1. How many states is your company registered to collect sales tax in?

2. How does your tax department keep up with tax rate changes today?

3. Are the vast majority of your sales to end customers or to resellers?

4. Do you have a lot of exempt customers?

5. Do you have any customer satisfaction issues today related to incorrect sales tax charges?

Cost estimates depend on the size of your company, the complexity of your tax compliance and the amount of customizations you have made to SAP SD, FI and MM for your Order to Cash and Procure to Pay processes.

[vijayendra_rao · Accepted solution]

Todd,

Thanks for your valued inputs.

My company's tax and IT management team will reach out to Vertex for SAP integration when we get closer to having concrete implementation plan.

I am supporting from Japan and was not aware that we already had Vertex on our legacy system!

Thank you again.