THE PROBLEM
As I say in the title, sales tax software is not the solution. What I mean is that software cannot be a 'load and leave it' solution. It cannot be used blindly without proper oversight and implementation.
Otherwise the old saying, "garbage in/garbage out" becomes all too true.
You can't assume that your point of sale system or your ERP systems are properly communicating with your tax decision software. If the systems don't understand each other, or the company is not getting proper advice from the tax decision software company or other outside consultants, errors can happen. Sales tax can be collected for states that the company isn't registered in. Sales tax can even be collected for states in which the company is registered in, but the tax doesn't get remitted because the other system doesn't report it or expect it (capture it).
If these errors go on for months or even years, the liability can be significant in several states creating a mess to clean-up. The clean-up can involve filing Voluntary Disclosure Agreements (VDAs), filing amended returns, and even going back to customers to issue refunds, and/or the paying of tax, interest and penalties out of your own pocket.
I see too many clients with sales tax problems caused by software issues, registration issues, account login issues, etc.
During due diligence, whether we are assisting the buyer or the seller, I see too many companies that have played the 'wait and see' game or were simply unaware of their sales tax obligations due to either the complexity of what they were selling and making bad assumptions, or getting bad advice, or bad software implementation.
Emerging companies and middle market companies generally don't have enough in-house staff to properly complete their sales tax compliance, let alone ensure their software systems are communicating properly. Even if they do, they may incur employee turnover that makes it difficult to keep a handle on what is going on. If the company is relying on the software company to provide that assurance, unfortunately, that trust is often misplaced as the software company is selling the software (a tool) and is not providing specific tax advice to help the company apply the tool to the company's unique facts.
IT'S JUST A TOOL
For the last several years, we have seen the creation of many new software tools for sales tax compliance and other areas of tax. Some of them are great, some not so great. However, we've also experienced that feeling of being overwhelmed by all of the software tools available that you get to the point of -
this is all well and good, but who really understands it?
who really implements it?
how do I know when I need it?
and the most important - if I need it, how do I implement it well?
All of this talk about how great AI (artificial intelligence) is and how great it can be, is ........(to be determined). However, regardless of the tool you use (and AI is a tool), you can never 'load it and leave it.'
If you expect a tool (software or AI) to be as simple as pushing a button and magic happens that you can rely on, then prepare for 'garbage' to eventually appear.
Over the past year, certain lawyers got in trouble for using AI in cases, relying on false legal support, which they call "hallucinations." That can happen in any industry or profession.
CAN'T DELEGATE DECISION MAKING
Regardless of the tool, we have to remember these are tools. We can't delegate our responsibility. We can't delegate oversight. We can't delegate decision making.
It's like doing tax research and relying on some database or chart to tell me the answer by just doing a simple search. That is not analysis. That is not looking at all of the facts, and other court cases, rulings, etc. It is looking at things in a 'vacuum.' A vacuum can only pick up what is in front of it, it doesn't see the entire room, you do (or at least you better). The vacuum has to be moved to find the other dirt in the room.
CONCLUSION
Software and AI are not the solution. You are.