The typical domestic business in the United States sees as much as 6% to 10% of revenues eaten up by sales and use taxes. For global firms that deal with the widely used value-added tax (VAT), that figure is closer to 12% to 15% of revenues, says Pam Kostka, senior vice president at Sabrix, a San Ramon,Calif.-based provider of tax management software products for corporations.
Kostka says Sabrix is now offering an online tool called Taxcast (also available as an on-premises software product), which can keep companies up-to-date on the latest versions of sales and use taxes in more than 13,000 U.S. tax jurisdictions and 170 foreign countries.
"The Sabrix software has performed even better than we expected," says Dennis Culin, director of finance transformation at Lenovo, the Chinese computer firm. "Shortly after we deployed the Sabrix solution in India, they instituted significant tax rate and policy changes. We were able to bill using the new rates two days after the changes were announced. In the past, this would have taken at least 10 days."
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Besides freeing up staff in billing and treasury offices, who no longer have to research such matters, Kostka says the tool also improves cash flow by reducing day sales outstanding–the time customers take to pay their bills, which can increase when there are disputes over the tax charged. "These delays can run from 30 to 90 days," says Kostka, "and with Taxcast, such errors are a rarity."
Kostka says one client, a firm with sales of $100 million, was able to free up staff who had been just working on researching and keeping the company compliant with tax payments. Another, a global company with 20 offshore units, each with its own tax operations, was able to consolidate its tax research into one centralized system at headquarters.
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