STORES Magazine -August 2017 - 55

and local, that not only
create tax rules but
amend them. According
to an independent 2016
study conducted by
tax content analysts at
cloud-based automated
tax management system
provider Avalara, in
2015 there were more
than 428,000 changes
to tax rules nationwide.
Adherence to the rules
is ascertained by audit,
and any taxing entity
- particularly a state
- in which a retailer
has established a
physical presence such
as its headquarters,
an office, store or
warehouse, can audit
that retailer's tax-exempt sales
records and impose fines and penalties
for noncompliance.
DOCUMENTATION REQUIRED
"When it comes to selling exempt,"
Mike Maselli says, "if you don't have
the right documentation in place to
show why you didn't charge tax, you,
the seller, are liable for the tax plus
penalties plus any other fines involved."
Maselli is senior director of product
management at Avalara; its client
companies include Adidas, Birkenstock
and Northern Tool + Equipment.
Retailer audits are extremely
common, and the consequences of being
found liable for noncompliance are not
trivial. "There's a third-party study that
shows the average audit assessment is
$144,000," Maselli says, "and we have
some companies that in the past have
been fined 10 times that much."
At Northern Tool, the paperwork load
for exempt transactions is considerable.
"We have over 300,000 exempt
customers," says Jason Davenport,
Northern Tool's sales tax manager, "and
last year, just in retail, we did about
160,000 tax-exempt transactions."
To successfully pass an audit,
a retailer such as Northern Tool
must be able to produce a properly
STORES.ORG

filled-out and registered current tax
exemption certificate for any or all
customers involved in any or all of these
transactions.
Until five years ago, Northern Tool
was managing the paperwork mandated
by this requirement by hand. "It was
all manual," Davenport says. "We had
file cabinet after file cabinet filled with
thousands - tens of thousands - of
pieces of paper."
This is still an all-too-common
approach, Maselli says. "Some companies
don't provide any online capability for
someone to digitally create an exemption
certificate," he says. "They leave the onus
100 percent on the buyer to mail them
an exemption certificate or to bring it
into the store. If that happens, you have
to hope that that the right document was
accurately and fully completed.
"You also have to hope that when
they gave it to a part-time worker in
your store, it actually got saved and
faxed or mailed back to headquarters -
to the people who will have to produce
it three or four years later when they
get audited."
A BETTER WAY
Anyone who has ever been through
even a personal income tax audit - or
for that matter, had a look at the back

office of a busy store
- can appreciate the
weaknesses inherent
in such a system.
"Overall compliance
continues to grow,"
Davenport says,
"especially as the
states get more and
more stringent about
their nexus. So I think
it makes sense to use
a third-party provider
to help support you in
that initiative. It allows
your team members to
focus on value-added
work versus pen-andpaper activity."
Northern Tool
converted to an
Avalara system for
certification capture in 2012. "Now
we collect everything electronically,"
Davenport says. "We have a process in
the back end that validates electronic
exemption certificates. It's a huge win
for the company. We used to incur
significant audit assessments, but now
we rarely find any. In terms of money,
the difference it makes is several hundred
thousand dollars a year."
The digital capability also provides a
much better customer experience. "In
the past, a customer would bring in an
exempt certificate to make a purchase,
and the next time they came in they had to
remember to bring it," he says.
"Now, once they fill out the certificate
one time, or bring in their existing one, it's
in the system. If you need to get in touch
with a customer who's not actually in the
store, you can email them directly with a
link to the Avalara portal and they can file
the certificate from wherever they are."
Beyond the improved customer
experience, "At the end of the day,
there's a huge financial benefit,"
Davenport says. "And there's a
significant time savings benefit for
employees not having to dig through all
that paper during an audit."
Peter Johnston is a freelance writer and editor
based in the New York City area.
STORES August 2017 55


http://www.STORES.ORG

Table of Contents for the Digital Edition of STORES Magazine -August 2017

Editor’s Page
President’s Page
Retail Politics
NRF News
Trends
Retail People
Hot 100 Retailers
Forward Thinkers
Personalized Pricing
C2W
Q&A
Store Operations
Omnichannel
Marketing
Online
Finance
Business Operations
Startup Spotlight
Security
Fraud
STORES at 100
NRF Communities Update
End Cap
STORES Magazine -August 2017 - intro
STORES Magazine -August 2017 - cover1
STORES Magazine -August 2017 - cover2
STORES Magazine -August 2017 - 3
STORES Magazine -August 2017 - 4
STORES Magazine -August 2017 - 5
STORES Magazine -August 2017 - Editor’s Page
STORES Magazine -August 2017 - 7
STORES Magazine -August 2017 - President’s Page
STORES Magazine -August 2017 - 9
STORES Magazine -August 2017 - Retail Politics
STORES Magazine -August 2017 - NRF News
STORES Magazine -August 2017 - Trends
STORES Magazine -August 2017 - 13
STORES Magazine -August 2017 - 14
STORES Magazine -August 2017 - 15
STORES Magazine -August 2017 - Retail People
STORES Magazine -August 2017 - 17
STORES Magazine -August 2017 - 18
STORES Magazine -August 2017 - Hot 100 Retailers
STORES Magazine -August 2017 - 20
STORES Magazine -August 2017 - 21
STORES Magazine -August 2017 - 22
STORES Magazine -August 2017 - 23
STORES Magazine -August 2017 - 24
STORES Magazine -August 2017 - 25
STORES Magazine -August 2017 - 26
STORES Magazine -August 2017 - 27
STORES Magazine -August 2017 - 28
STORES Magazine -August 2017 - 29
STORES Magazine -August 2017 - 30
STORES Magazine -August 2017 - 31
STORES Magazine -August 2017 - 32
STORES Magazine -August 2017 - 33
STORES Magazine -August 2017 - 34
STORES Magazine -August 2017 - 35
STORES Magazine -August 2017 - Forward Thinkers
STORES Magazine -August 2017 - 37
STORES Magazine -August 2017 - 38
STORES Magazine -August 2017 - 39
STORES Magazine -August 2017 - Personalized Pricing
STORES Magazine -August 2017 - 41
STORES Magazine -August 2017 - 42
STORES Magazine -August 2017 - C2W
STORES Magazine -August 2017 - Q&A
STORES Magazine -August 2017 - 45
STORES Magazine -August 2017 - Store Operations
STORES Magazine -August 2017 - 47
STORES Magazine -August 2017 - Omnichannel
STORES Magazine -August 2017 - 49
STORES Magazine -August 2017 - Marketing
STORES Magazine -August 2017 - 51
STORES Magazine -August 2017 - Online
STORES Magazine -August 2017 - 53
STORES Magazine -August 2017 - Finance
STORES Magazine -August 2017 - 55
STORES Magazine -August 2017 - Business Operations
STORES Magazine -August 2017 - Startup Spotlight
STORES Magazine -August 2017 - 58
STORES Magazine -August 2017 - Security
STORES Magazine -August 2017 - 60
STORES Magazine -August 2017 - Fraud
STORES Magazine -August 2017 - 62
STORES Magazine -August 2017 - 63
STORES Magazine -August 2017 - STORES at 100
STORES Magazine -August 2017 - NRF Communities Update
STORES Magazine -August 2017 - End Cap
STORES Magazine -August 2017 - cover3
STORES Magazine -August 2017 - cover4
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