Global directory Product logins Support & training Contact us Thomson Reuters CORPORATE TAX DEPARTMENTS As use of indirect taxes grows, edge computing enters the fray to help sellers calculate and cope Gregg Wirth Content Manager / Thomson Reuters Institute / Thomson Reuters 30 Nov 2021 Share As state and federal governments increasingly turn to indirect taxes (IDT) to make up a larger portion of their overall corporate tax scheme, the tax teams at many US companies may find it more difficult to stay ahead of the growing workflow brought on by IDT “It’s becoming a much larger source of revenue for governments,” says Ray Grove, Vice President of Product Management for Indirect Tax at Thomson Reuters. “It’s a way of extracting value where there is value.” Indeed, the portion of corporate taxes represented by taxes on production and imports (indirect tax) — rather than taxes on corporate profits (income tax) — represented almost 90% of the total tax bill, according to tax figures from the US Bureau of Economic Analysis. Indirect taxes can be seen everywhere — retail sales tax, value-added taxes, and negative-incentive taxes on products such as sugary foods, cigarettes, alcohol, or gasoline. “In a way, IDT can control socio-economic behaviors and help shape economies as negative behaviors are penalized with taxation,” Grove says. Not surprisingly, the growth of IDT was accelerated by the COVID-19 pandemic, as e-commerce activity around the globe skyrocketed, with online spending representing 21% of total retail sales last year, compared with 15% in 2019, according to a Digital Commerce 360 analysis. Online sales volume is a big component of IDT, a fact that was underscored by the U.S. Supreme Court’s 2018 Wayfair decision that allows states to require that companies collect sales and use taxes even when the company making the sale does not have a physical presence in that state. As the use of IDT increases, however, the burden on the corporate tax teams behind those retailers and manufacturers — those tax pros that have to calculate the level of IDT, depending on product classification, location, and a host of other factors — has grown, especially as sellers need to instantaneously make these tax calculations to ensure smooth transactions with consumers buying their products. The just-released report, Indirect Tax: More than just a process, published by Thomson Reuters, shows just how dire the situation presented by increased IDT use can be to businesses. “Indirect taxes pose an increasing risk to companies,” the report noted, “but with the right investment in talent and technology, indirect tax teams can move beyond compliance to add value by improving customer relationships, cashflow, and risk mitigation.” Moving to the edge The growing pressure of this untenable situation has ramped up the need for solutions to address sellers’ concerns. And that’s where edge computing enters the picture. Edge computing allows retailers and manufacturers to bring their transactional tools much closer to the source of the transaction, while staying connected to the larger network. For example, Amazon’s Alexa or the Apple watch are examples of edge computing products that move their companies — Amazon or Apple — much closer to the transaction and the consumer. “The tech industry has been saying for some time that there is value in moving closer to the transaction,” Grove explains, noting that allowing sellers’ use of edge computing products to capture data and information, maximize the control and speed of transactions, all while staying connected to the cloud, has demonstrable benefits for sellers’ tax teams that can help make the business case for increased tech investment. In terms of IDT, these edge computing tools can allow retailers, manufacturers, and wholesalers to calculate the correct level of tax right there as the consumer is making the transaction, while still staying connected to the company’s larger tax engine in the cloud. Currently, most of these businesses have their tax engines on-premises, which grants them a certain amount of control over the process; however, it does force businesses to absorb the cost of outdated technologies, such as when they have to take their tax systems off-line so they can do updates. “What you’re seeing with edge computing is really not so much a step between on-premise tax engines and in-the-cloud tax engines, but rather a step beyond both to offer proximity to the transaction while remaining linked to the cloud,” Grove notes. “It’s really the future of the tax engine model.” In the IDT report, survey respondents who said they wanted to move their tax function to a more value-adding role said they saw technology as fundamental to improving their work. However, they also noted that making the business case to company management for investment in IDT tech solutions was daunting and usually had to be triggered by a cataclysmic event, such as a negative audit, evidence of tax overpayments, or other errors. Conversely, another trigger was simply the pressure caused by the company’s business growth outstripping the capacity of the IDT team to manage workflow using the existing systems. “Too often, people fall short of appreciating the technology they have and what it costs,” Grove says, noting that as edge computing transactions tools re-configure how companies address their IDT issues, making the business case for their adoption should become easier. You can learn more about how edge computing can impact your company’s IDT process here. Facebook Twitter Linkedin Email ACCOUNTING FIRM BUSINESSCORPORATE TAX DEPARTMENTSCORPORATESEDGE COMPUTINGINDIRECT TAXESTECH & INNOVATIONVAT TAX Solutions ONESOURCE Determination Anywhere Harnessing edge-computing technology, ONESOURCE Determination Anywhere brings tax calculation closer to where you do business, ensuring maximized performance, control, and reliability. Featured event DEC 02, 2021 “Those Darkest Hours”: The Future of American Security 2021 marks the twentieth anniversary of the September 11, 2001 terrorist attacks. In the two decades since then-President George W. … Event details Related posts How to attract and retain indirect tax talent through upskilling and career development 19 Nov 2021 · 5 minute read Share Indirect Tax Report: Will the growing wave of taxation swamp corporate tax teams? 15 Nov 2021 · 5 minute read Share Search ABOUT THOMSON REUTERS About us Annual report Careers Digital accessibility Investor relations Press releases Site map Social impact PRODUCTS & SERVICES All products Core publishing solutions Corporations Government Legal News & media Professional services firms Tax & accounting LEARN MORE API integration Artificial intelligence Innovation @ Thomson Reuters Partnerships Supplier portal The Trust Principles Thomson Reuters Institute CONTACTS Contact us Global sites directory Investors Media relations Office locations Sales & account inquiries CONNECT WITH US Facebook Instagram LinkedIn Twitter YouTube Thomson Reuters Cookie policy Cookies Settings Terms of use Privacy statement Copyright Supply chain transparency For CA: Do not sell my personal information Our Privacy Statement and Cookie Policy All Thomson Reuters websites use cookies to improve your online experience. 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