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to self-audit seamlessly and reduce leveraging the sampling methodology
Many countries reserves while improving cash flow discussed above.
should help in seeking leadership
Second, out-of-date government
already are using support for the audit-ready file IT processes eventually will catch up to
e-invoicing, which effort. advancements already in place with global
eliminates the ‘paper’ ■ The power of artificial intelligence taxation. Many countries already are using
(AI) has started to unfold, especially
e-invoicing, which eliminates the “paper”
exchange of invoices. as marketplace facilitator taxation exchange of invoices. Some U.S.-based
has evolved. Consider leveraging the organizations are ahead of their competi-
power of AI to predict differences tors and began to implement e-invoicing
■ Whether sales and use tax returns are in tax engine calculations and/or capabilities years ago. These programs
prepared in-house or outsourced to supplement the calculation of use tax likely herald a continuing evolution of
a compliance provider, the primary in place of a tax engine — feeding sales and use tax technology, and, in time,
objective is to make the data you data back into the audit-ready file the current sales and use taxation system
will eventually provide an auditor tie process to proactively true-up differ- may be replaced with blockchain technol-
to the data used for the company’s ences prior to audit problems. ogy, allowing taxpayers to move toward
returns (which, in turn, tie to your Cadence of review is trumped by real-time compliance. This would change
trial balance or general ledger totals). process when it comes to getting ahead the entire aspect of U.S. taxation, with a
Creating a database through cloud of auditor data and documentation re- heavy impact on sales and use tax engines,
technology or old-school SQL serv- quests. Still, it is important to commit data requirements, and audit capabilities.
ers can allow “stacking” the data used to a regular cadence of reconciliation, Third, until then, state revenue
for compliance month over month, test sampling, and tracking audit his- departments may face limited resources
automating reconciliation against tory. Consider engaging the organiza- and massive backlogs of audits. There
the file amounts reported on returns. tion’s internal audit team to collaborate has been a recent uptick in the number
Watch for your IT organization to in undertaking a regular cadence of of auditors accepting or even suggest-
use terms such as “global platform,” sampled self-audit reviews. ing the roll-forward of error rates from
“data mart,” “data warehouse,” or a prior audit. Be sure to include the
“data lake” as a cue to ensure sales Forward looking estimated cost of documentation, data
and use tax is in those solutions. Looking forward, there are three key preparation, and auditor negotiation in
Your team and/or your compliance takeaways from this column: your planning of how to move forward
provider can support taking the First, government technology and with the audit, prepare audit-ready files,
initiative to also incorporate credit systems likely will continue to be years and create lasting processes that should
tracking and rebate capabilities into a behind the evolution of data handling. reduce audit anxiety. ■
one-stop shop of data. Numerous state and local jurisdictions
■ The traditional approach of linking still require paper filings each month, Contributors
supporting documentation can save in contrast to the holistic, end-to-end
time in material review. Incorporat- automation trends in industry sales and Lindsay Galvin, J.D., is principal;
ing hyperlinked invoices into the use tax processes. Some jurisdictions Elizabeth Schraeder, CPA, CMI, is
database through invoice extraction have technology for sampling but still director; and Daniel Gwin, CPA, is senior
automation, combined with analytics cannot leverage appropriate file transfer manager, all of Indirect Tax at Price-
to highlight troublesome trends in mechanisms and require the taxpayer to waterhouseCoopers LLP, with Galvin
vendor purchases and customer sales, break up files. Even the use of citizen and Gwin in Pittsburgh and Schraeder
can allow a streamlined review to automation is relatively unfamiliar to in Dallas. Moshe Bell-Jacobs, J.D., is
occur without significant manual many, which equates to confusion when senior manager of State and Local Tax,
effort. a taxpayer considers using AI for use tax Washington National Tax, at RSM US
■ The process of self-audit can be accruals or cloud-based global tax marts. LLP in the Washington, D.C., area and
time-consuming and frustrating So, how can you as the taxpayer take chair of the AICPA State and Local Tax
to gather documentation for. If advantage? Set the tone with a managed Technical Resource Panel. For more
an organization is struggling to audit–style response to audit notices. information about this column, contact
articulate a return on investment on Provide audit data reconciled with hy- thetaxadviser@aicpa.org.
creating audit-ready files, the ability perlinked supporting documentation,

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