Patent ID: 12190394

DETAILED DESCRIPTION

Embodiments of systems and methods for aiding tax compliance are described herein. While aspects of the described tax compliance aiding systems and methods can be implemented in any number of different configurations, the embodiments are described in the context of the following exemplary configurations. The descriptions and details of well-known components and structures are omitted for simplicity of the description, but would be readily familiar to those having ordinary skill in the art.

The description and figures merely illustrate exemplary embodiments of the inventive tax compliance aiding systems and methods. It will thus be appreciated that those skilled in the art will be able to devise various arrangements that, although not explicitly described or shown herein, embody the principles of the present subject matter. Furthermore, all examples recited herein are intended to be for illustrative purposes only to aid the reader in understanding the principles of the present subject matter and the concepts contributed by the inventors to furthering the art, and are to be construed as being without limitation to such specifically recited examples and conditions. Moreover, all statements herein reciting principles, aspects, and embodiments of the present subject matter, as well as specific examples thereof, are intended to encompass all equivalents thereof.

For example, the description provided herein generally describes the inventions with respect to a consumption-based value added tax, but one skilled in the art will appreciate that the inventions may be applied to other types of tax regimes as well including, for example, sales tax, goods and services tax, payroll tax, property tax, etc. As another example, the present description focuses its discussion on an application to transactions involving cryptocurrency, however one skilled in the art will appreciate that the inventions are applicable to other types of transactions as well.

In general, the systems and methods described herein may relate to improvements to aspects of manipulating information using a computer. These improvements not only improve the functioning of how such a computer (or any number of computers employed in the search) is able to operate to serve the user's goals, but also improves the accuracy and efficiency of the user's interactions and submissions with taxing authorities.

In one embodiment, the inventive system may be configured to ensure consumption tax compliance using distributed ledger technology. In one example, the inventive system considers the sovereign identity of individuals and businesses in order to calculate and remit consumption tax, which can largely eliminate today's compliance and audit processes. With the systems and methods described herein, businesses no longer need to calculate and collect tax, nor fear audits. The innovations described herein improve data privacy, expand tax bases, streamline and lower costs associated with tax compliance, bolster global trade, and reduce government bureaucracy.

In one embodiment, a vendor may create a tax tool that eCommerce, Point-of-Sale, etc. systems can utilize. The tool may be certified by a governmental tax authority, its designee or an accounting firm or other specialized type of firm prior to use so that it can be relied upon by businesses and government alike to provide a guaranteed calculation, collection and remittance of the correct consumption tax amount.

In one aspect, the establishment of verified identity wallets by governmental bodies enables the inventive system a way to efficiently obtain verified information with minimal privacy concerns. In order to determine the attribution for tax payments and individual tax statuses it is important to have a verified source of identity information for business and individuals participating in the transaction.

An identity wallet may also be established by a governmental body or other trusted agency and provided to consumers and sellers in a market. Such an identity wallet may utilize distributed ledger technology. Such an identity wallet is a verified repository for information about the consumer relevant for tax purposes, but protected in a way that complies with applicable personal information privacy laws. Because the information contained in an identity wallet will have been verified by the government or its trusted agent, the information contained therein may be assumed to be accurate for tax compliance purposes. The information contained in the identity wallet includes, for example, the consumer's residence location information, any applicable tax exemption or reduction status, etc. In another example, a consumer's identity wallet may be configured to retain information regarding their personal preferences, for example their past shopping history, consumption address, and other data that may be used to finalize a sale. In a similar fashion, each seller also has an identity wallet to hold the relevant information of the seller. If a person or entity makes both purchases and sales, one identity wallet may be used for both purposes.

The viability of a blockchain based identity system that is verified by government authorities has been tested in Zug, Switzerland. The city of Zug issued a Zug ID that acts as a certificate of digital citizenship. In another example, a service known as UPort enables individuals and businesses to obtain a sovereign digital identity that can be verified by governments.

In one example, shown generally inFIG.5, a seller may establish an eCommerce website listing one or more products or services for sale. Of course, one skilled in the art will appreciate that the innovations described herein are equally applicable to a brick-and mortar store or another type of seller-purchaser transaction other than retail. As shown inFIG.6, an eCommerce website may ask each consumer, upon entry to the site, for access to their identity wallet. In response, purchasers may be given the option of providing access to their identity wallet to the seller at that point or to wait until a transaction is imminent, i.e. at checkout. If the purchaser decides to provide access to their identity wallet, which may be accomplished by the user providing a unique ID or other identifying information (as shown inFIG.7), the website may be configured to inform the potential purchaser about which information contained in the identity wallet the seller is requesting to access. The purchaser may then select which of the requested information in its identity wallet it wishes to share. If the seller is satisfied with the information permitted to be shared, the user is permitted to continue their use of the seller's website, as shown inFIG.8. However, if the purchaser (through an automated or manual review, for example) is not satisfied with the amount or type of information that the purchaser is willing to share with the seller, the seller may elect to decline the purchaser further use of the website. For example, a seller may determine that being allowed to know a purchaser's residency information is a prerequisite for use of the website, but may determine that access to a purchaser's personal purchasing history is an optional piece of information to be shared.

A consumer peruses the eCommerce site and places goods or services in a virtual shopping cart, as shown inFIG.9. When the consumer is ready, they elect to begin a checkout process, shown generally inFIG.2. As shown inFIG.10, the consumer may be asked to verify the delivery address and, as shown inFIG.11, the delivery method. Based on the information entered so far, the system may request an estimated tax amount from a tax determination service and, as shown inFIG.12, a final order placement screen may be presented with all transaction information. After a consumer proceeds with the order, if they haven't provided it already, the consumer will be prompted to provide their identity wallet information to continue the transaction, as shown inFIG.13. The consumer may be prompted to provide their specific identity information via an application installed on a mobile device, as shown inFIG.14. At this stage, the seller may choose to only request access to the minimum information needed for tax purposes, for example the consumer's residency location and tax exemption or reduction status. If the consumer fails to provide access to a sufficient amount of information from their identity wallet, the seller may have the option of declining the sale or continuing using a default set of information. For example, a brick and mortar store may use as default information for tax purposes (e.g., in an “uncertified sale”) its own physical location.

Next, the transaction information is sent to the verified tax determination engine for final computation of the appropriate tax. Then, just prior to payment, the consumer is prompted for final authorization to pay the appropriate amounts to the seller for the good or service that is the subject of the transaction and the appropriate amount of tax, calculated by the inventive system, to the appropriate governmental body, as shown inFIG.15. The calculation of the appropriate amount of tax is accomplished using as inputs the identity wallet information of the seller and purchaser as well as an information about the good or service that is the subject of the transaction. Following final authorization from the consumer, the appropriate transactions are carried out on the distributed ledger(s) to effectuate the payment to the seller and to the governmental body.

In one example, the payment of tax to the governmental body is accomplished via a smart contract that acts as a tax reserve account. Such account is owned by the governmental body, but the governmental body may elect to outsource control of the account to a third party. The tax reserve account collects tax and is configured with a predetermined reserve amount to cover the refund of taxes in connection with consumers returning goods. In the case of a return transaction, for example, an identification of the original transaction and which item on that transaction may be passed to a smart contract with a record of the transaction for verification and recordation prior to refund of the purchase price for the returned item. Any amount of tax contributed to the reserve account in excess of the predetermined reserve amount may be transferred to a different account of the governmental body.

In one aspect, the use of blockchain technology, the technology behind cryptocurrencies such as Bitcoin and Ethereum, may play a central role in the administration of the inventive system. At the core of blockchains are collections of data called blocks. Each block is the result of multiple mathematical computations on some transactions. For example, a transaction might be sending Bitcoin to a Bitcoin address in the case of the Bitcoin network or executing a function in a smart contract in the case of Ethereum. Once the block is computed, it is sent to other nodes (miners) in the network for confirmation and, once a majority of nodes have verified the block, it is made the most recent block. The next block must use a seed based on the hash of the current block, chaining block together and repeating the cycle.

The users who do the required computation on the network for the next block receive a digital asset, such as Bitcoin, for their efforts. This process is called mining and is the process which generates new coins on the network. In the Ethereum network, mining is done by processing transactions which can either be calls to programs stored on the Ethereum blockchain or transfers of Ether between users.

In another aspect, smart contracts may be utilized to record elements of a transaction. For example, different smart contracts may be established and maintained using distributed ledger technology to record different elements of a transaction and to aggregate data from multiple transactions.

For example, a “pass through” smart contract may be configured to manage the sending of funds to both the merchant and the tax reserve contracts. The system submits a transaction which lists which merchants to pay, how much to pay the merchants, which tax authorities to pay, and how much to pay the tax authorities. The pass through contract then splits the total payment according to the ether to the corresponding party.

As another example, a “detailed tax escrow” smart contract may be configured to hold taxes sent to it by a user or company as well as additional related information. Such a smart contract may be configured to store all the information relating to a tax payment in the smart contract itself. This may include, for example, the address of the user, the block number, whether or not it was refunded, a transaction ID, and the amount paid.

In another example, a “basic tax escrow” smart contract may be configured to hold tax amounts sent to it by a user or company and to process refunds, but does not store other, more detailed information. In other words, such a “basic tax escrow” smart contract may be used as a simple currency repository.

In yet another example, a “factory” smart contract may be configured to deploy and track all tax escrow contracts. Such a smart contract allows for the deployment of new contracts from trusted sources and can also be configured to permit upgrading and removing other smart contracts as necessary.

FIG.3. is a block diagram depicting an illustrative embodiment of a system according to the present disclosure. As shown inFIG.3, at the point of sale, which may be, for example, an online eCommerce website with a shopping cart, a transaction is initiated by sending30to a tax determination engine information from a purchaser and a seller sufficient to retrieve information from those entities' respective identity wallets as well as information about the transaction. The tax determination engine, using the identity information from the point of sale system, queries31a verified identity wallet system for verified identity information relevant to the transaction, which is returned32to the tax determination engine. Using the verified identity wallet information and the initially received transaction information, the appropriate amount of tax is determined and communicated33to the point of sale. This tax information may also include an identification or the appropriate taxing authority of governmental body to which the tax is owed. The tax information, as well as the transaction information, may be presented to the purchaser for their final approval.

Upon receipt of purchaser approval, the point of sale system may communicate34to a payment processing system the transaction and tax information as well as payment information submitted by the purchaser. The payment processing system may communicate35the transaction information back to the tax determination information for verification of the actual tax owed. The tax determination engine may be configured to once again provide verified tax information, but this time communicated36to the payment processing system. The payment processing system may then record two transactions—first to the merchant37for the transaction amount and second38to a tax escrow of the taxing authority. The tax escrow may be configured to redirect39any tax remittances once the tax escrow is or would be above a predetermined reserve amount.

FIG.4depicts another exemplary embodiment in which the current (previous) process is augmented by the buyer authentication aspects, tax payment and processor aspects, and tax determination system of the present disclosure. Dual blockchain transactions are submitted to the vendor and tax authority by the tax and payment processor.

In these examples, because the tax determination engine, identity wallet, and the payment processing system can be verified by governmental bodies, many previously required steps in a transaction and tax reporting thereof may be eliminated. For example, previously, the following 24 steps might have been necessary to implement, collect and report a consumption tax:1. Tax Authority creates and publishes tax registration regulations2. Tax Authority creates and publishes tax determination regulations3. Tax Authority creates and publishes tax compliance/reporting regulations4. Tax Authority creates and publishes tax transaction (eInvoice, SAF-T) regulations5. Tax Authority implements registration solutions6. Tax Authority implements compliance/reporting solutions7. Tax Authority implements Invoice/SAF-T logging solutions8. Vendors implement tax determination solutions9. Vendors' solution certified10. Vendors implement tax compliance/reporting solutions11. Vendors implement Invoice/SAF-T logging solutions12. Business(es) register for VAT13. Business(es) setup tax determination solution (only eCommerce and POS solutions setup to use the T &PS)14. Business(es) setup tax compliance/reporting solution15. Business(es) setup invoice/SAF-T logging or real-time invoice requests16. Business(es) execute tax determination on every transaction17. Business(es) frequently (e.g., daily) log Invoices/SAF-T to Tax Authority—OR—request and process real-time valid invoice numbers.18. Business(es) periodically (e.g., quarterly) gather all of their detailed transactions for the period and create a tax return/report. File the return and remit their tax due.19. Tax Authority receives tax return and processes (e.g., analyze data compliance/fraud).20. Tax Authority receives tax remittance.21. Tax Authority receives Invoice/SAF-T logs and processes (e.g., analyze data for compliance/fraud).22. Tax Authority selects business for audit.23. Tax Authority and Business work together to gather/exchange data and perform audit.24. Tax Authority and Business work together to close Audit and finalize Settlement.

However, under the system proposed herein, the most expensive steps of the previous process are eliminated, and the steps that remain become necessary for only a few vendors rather than every business. In the proposed system, the steps are:1. Tax Authority creates and publishes tax registration regulations2. Tax Authority creates and publishes tax determination regulations3. Tax Authority implements registration solution4. Vendors implement Real-Time: Tax & Payment Solution (“T&PS”)5. Vendors' solution certified6. eCommerce and POS systems setup Determination and T&PS. Each business doesn't need to separately setup.7. eCommerce and POS systems execute Determination and T&PS. Each business doesn't need to separately execute.8. Tax Authority receives tax remittance.

Governments of the world bear the lion's share of the burden of ensuring tax compliance. Using the present system, tax authorities will dramatically cut down on oversight costs. The need to determine the appropriate amount to tax due will be automated thus cutting down on a considerable amount of expense. Only transactions that are irregular will trigger a need for further audit.

The average business spends between $3,000-$500,000 per year on compliance with $15,000 being the average. Much of this expense can be attributed to the way tax is determined. The present solution removes the duplication of efforts by ensuring all payment made through the system will automatically have tax determination, remittance and attribution. Tax authorities will have a clear audit trail if irregularities are noted. This automated process removes overhead for business and significantly reduces risk of audit.

Calculating taxes owed across multiple jurisdictions can be a laborious process. These processes can be automated by a system that takes into account the jurisdiction along with the identity of sellers and goods. Tax that needs to be reclaimed or claimed would be done so instantaneously.

In a future in which IOT devices produce a great deal financial microtransactions in the form of machine-to-machine connections, transactions must be underpinned by a tax infrastructure, such as the one proposed herein, that can support a high throughput infrastructure.

Users of the present system will be in complete control of their personal data through the identity verification systems proposed herein. Identity and access control may be managed through the individual's mobile device. Only parties that have asked for permission will be able to access data. This permission can be revoked at any time. Identity ownership is determined by possession of a digital private key that controls a public key associated with the identity. If a private key is lost or stolen, user identities can be recovered by having trusted friends or institutions attest to the change. This decentralized model places the power of control in the hands of the user ensuring that private data cannot be exposed.

Although the above description focuses on an example in which a seller's point of sale system interfaces with and includes aspects of the described system, another possible implementation is that of an online marketplace administered by a single entity in which many different sellers participate. eBay and Amazon, for example, are marketplaces in which many sellers participate and offer their products and services for purchase. A system according to the present invention may be deployed by such a marketplace for many or all of the sellers in its platform to use.

FIGS.1through16are conceptual illustrations allowing for an explanation of the present disclosure. It should be understood that various aspects of the embodiments of the present disclosure could be implemented in hardware, firmware, software, or combinations thereof. In such embodiments, the various components and/or steps would be implemented in hardware, firmware, and/or software to perform the functions of the present disclosure. That is, the same piece of hardware, firmware, or module of software could perform one or more of the illustrated blocks (e.g., components or steps).

In software implementations, computer software (e.g., programs or other instructions) and/or data is stored on a machine readable medium as part of a computer program product, and is loaded into a computer system or other device or machine via a removable storage drive, hard drive, or communications interface. Computer programs (also called computer control logic or computer readable program code) are stored in a main and/or secondary memory, and executed by one or more processors (controllers, or the like) to cause the one or more processors to perform the functions of the disclosure as described herein. In this document, the terms “machine readable medium,” “computer program medium” and “computer usable medium” are used to generally refer to media such as a random access memory (RAM); a read only memory (ROM); a removable storage unit (e.g., a magnetic or optical disc, flash memory device, or the like); a hard disk; or the like.

Notably, the figures and examples above are not meant to limit the scope of the present disclosure to a single embodiment, as other embodiments are possible by way of interchange of some or all of the described or illustrated elements. Moreover, where certain elements of the present disclosure can be partially or fully implemented using known components, only those portions of such known components that are necessary for an understanding of the present disclosure are described, and detailed descriptions of other portions of such known components are omitted so as not to obscure the disclosure. In the present specification, an embodiment showing a singular component should not necessarily be limited to other embodiments including a plurality of the same component, and vice-versa, unless explicitly stated otherwise herein. Moreover, the applicants do not intend for any term in the specification or claims to be ascribed an uncommon or special meaning unless explicitly set forth as such. Further, the present disclosure encompasses present and future known equivalents to the known components referred to herein by way of illustration.

The foregoing description of the specific embodiments so fully reveals the general nature of the disclosure that others can, by applying knowledge within the skill of the relevant art(s), readily modify and/or adapt for various applications such specific embodiments, without undue experimentation, without departing from the general concept of the present disclosure. Such adaptations and modifications are therefore intended to be within the meaning and range of equivalents of the disclosed embodiments, based on the teaching and guidance presented herein. It is to be understood that the phraseology or terminology herein is for the purpose of description and not of limitation, such that the terminology or phraseology of the present specification is to be interpreted by the skilled artisan in light of the teachings and guidance presented herein, in combination with the knowledge of one skilled in the relevant art(s).

In order to address various issues and advance the art, the entirety of this application for SYSTEMS AND METHODS FOR AIDING TAX COMPLIANCE (including the Cover Page, Title, Headings, Cross-Reference to Related Application, Background, Brief Summary, Brief Description of the Drawings, Detailed Description, Claims, Figures, and otherwise) shows, by way of illustration, various embodiments in which the claimed innovations may be practiced. The advantages and features of the application are of a representative sample of embodiments only, and are not exhaustive and/or exclusive. They are presented only to assist in understanding and teach the claimed principles. It should be understood that they are not representative of all claimed innovations. As such, certain aspects of the disclosure have not been discussed herein. That alternate embodiments may not have been presented for a specific portion of the innovations or that further undescribed alternate embodiments may be available for a portion is not to be considered a disclaimer of those alternate embodiments. It will be appreciated that many of those undescribed embodiments incorporate the same principles of the innovations and others are equivalent. Thus, it is to be understood that other embodiments may be utilized and functional, logical, operational, organizational, structural and/or topological modifications may be made without departing from the scope and/or spirit of the disclosure. As such, all examples and/or embodiments are deemed to be non-limiting throughout this disclosure. Also, no inference should be drawn regarding those embodiments discussed herein relative to those not discussed herein other than it is as such for purposes of reducing space and repetition. For instance, it is to be understood that the logical and/or topological structure of any combination of any program components (a component collection), other components and/or any present feature sets as described in the figures and/or throughout are not limited to a fixed operating order and/or arrangement, but rather, any disclosed order is exemplary and all equivalents, regardless of order, are contemplated by the disclosure. Furthermore, it is to be understood that such features are not limited to serial execution, but rather, any number of threads, processes, services, servers, and/or the like that may execute asynchronously, concurrently, in parallel, simultaneously, synchronously, and/or the like are contemplated by the disclosure. As such, some of these features may be mutually contradictory, in that they cannot be simultaneously present in a single embodiment. Similarly, some features are applicable to one aspect of the innovations, and inapplicable to others. In addition, the disclosure includes other innovations not presently claimed. Applicant reserves all rights in those presently unclaimed innovations including the right to claim such innovations, file additional applications, continuations, continuations in part, divisions, and/or the like thereof. As such, it should be understood that advantages, embodiments, examples, functional, features, logical, operational, organizational, structural, topological, and/or other aspects of the disclosure are not to be considered limitations on the disclosure as defined by the claims or limitations on equivalents to the claims. It is to be understood that, depending on the particular needs and/or characteristics of an individual and/or enterprise user, database configuration and/or relational model, data type, data transmission and/or network framework, syntax structure, and/or the like, various embodiments may be implemented that enable a great deal of flexibility and customization. While various embodiments and discussions have included reference to applications in the retail and blockchain contexts, it is to be understood that the embodiments described herein may be readily configured and/or customized for a wide variety of other applications and/or implementations.