When State Auditors Head out of State

Auditors are on the move. While most businesses expect (i.e., dread) to be audited by their home department of revenue, it often comes as a surprise to learn that state tax authorities routinely send auditors to, or hire auditors from, other states to capture unreported sales and use tax revenue. Some states go so far as to have remote offices.

For example, the Texas Comptroller has audit offices in Los Angeles, New York City, and Tulsa, Oklahoma. California has field audit offices in Chicago, New York, and Houston. There are Missouri Department of Revenue offices near Chicago, Dallas, and New York, while the Florida Department of Revenue has offices in Atlanta, Chicago, Dallas, Houston, Los Angeles, New York, and Pittsburg. The Utah State Tax Commission doesn’t specify where all it has sales and use tax auditors but notes that they “spend a majority of their time at taxpayers’ offices looking at detailed sales and purchase transactions” and “travel to locations all over the United States to perform their work.”

Field auditors employed by the Washington State Department of Revenue may audit businesses in multiple states. The Department divides the country into several sections: an Out-of-State North District (Eastern Iowa, Illinois, Indiana, Michigan, Minnesota, Ohio, Western Pennsylvania, and Wisconsin), an Out-of-State South District, and so on. Field audit offices develop and implement audit programs to optimize accurate tax reporting and payment by businesses located throughout the target area.

What do auditors in other states do?

Auditors frequently examine sales by companies that are headquartered in other states but have nexus (a connection strong enough to trigger a tax collection obligation) in the auditor’s home state. Yet a company doesn’t have to be registered with a state to be targeted by that state’s audit division. While many audits are selected by a random sampling of registered businesses, auditors knock on the doors of unregistered businesses whenever evidence suggests that they may owe the state tax revenue. This is true both in-state and out.

Many states have increased audits since the Great Recession, hiring new auditors as needed. New Mexico’s Audit and Compliance Division has added approximately 62 FTE employees since economy plummeted. And in 2015, the Wisconsin Department of Revenue announced that it needed 102 additional auditors and 11 additional agents to help uncover what was estimated to be approximately $80 million in unpaid tax revenue. Many of the new hires are focusing on businesses based in other states.

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States work together

In addition to sending auditors to other states, state tax administrators frequently work together. Regional information-sharing agreements between states, such as the following, can greatly help facilitate audits:

  • NESTOA, North Eastern States Tax Officials Association (Connecticut, Delaware, District of Columbia, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont)
  • SEATA, Southeastern Association of Tax Administrators (Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, and West Virginia)
  • MSATA, Midwestern States Association of Tax Administrators (Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, Oklahoma, South Dakota, Wisconsin)
  • WSATA, Western States Association of Tax Administrators (Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Texas, Utah, Washington, and Wyoming)

There are other sorts of information-sharing agreements as well. New Mexico shares information with — and receives information from — three tribal governments. And the Multistate Tax Commission Joint Audit Program for member states “provides obvious economies of scale to the states” and “relieves the taxpayer of the burden on multiple ongoing audits.”

Oklahoma to base auditors in other states

Oklahoma doesn’t currently base auditors in other states. Like Utah, it sends auditors to various out-of-state locations as needed, and between 2014 and 2017, it conducted more than 460 audits of remotely based businesses. But a recently enacted law will soon enable the Tax Commission to develop a stronger presence out of state.

HB 1427 authorizes the Oklahoma Tax Commission to create and maintain an Out-of-State Tax Collections Enforcement Division. It enables the Commission to “employ full-time, unclassified, out-of-state tax auditors or full-time-equivalent contracted auditors” to enhance the following:

  • “Sales and use tax collections related to sales or transactions involving residents of Oklahoma and out-of-state vendors with a nexus to the State of Oklahoma”
  • “Collections of any other unpaid taxes owed the State of Oklahoma by out-of-state individuals, firms, and corporations”

The Tax Commission may audit any individual or business it believes may owe tax revenue to Oklahoma. The law takes effect November 1, 2017.

How would your business fare during an audit?

Get your free copy of the Sales and Use Tax Audits Uncovered report to learn more about audit triggers, how to avoid them, and how to protect your business against unnecessary tax compliance risk.


Permission to reprint or repost given by Avalara. Content previously published at www.avalara.com/blog.

New Video Release: CRM (Dynamics 365 for Sales) Integration with Dynamics 365 for Financials (3 min)

One of the great things about Dynamics 365 is the native integration between different business functions. This short video is for current and prospective Microsoft Dynamics 365 for Financials customers looking for integration with a CRM application, in this case, Dynamics 365 for Sales.

In the past, financial applications that the accounting team used have been separate from the sales applications that the marketing and sales team used. This was important because these two divisions needed different information and needed easy access to only that information. However, maintaining, cross-referencing and updating two separate applications is incredibly difficult. What happens if a customer’s address changed? The accounting team may have taken note of the new address, but marketing and sales are using the old address. Someone forgot to update the address change in the sales application. Wouldn’t it be nice if you didn’t have to repeat the same task in two applications?

Microsoft Dynamics 365 for Financials is directly integrated with Dynamics 365 for Sales (CRM). This means that if a customer’s address changes, you only need to make the change in one application and it is automatically reflected in the other. What a time saver! Now, the whole company is on the same solution – giving everyone the most up-to-date information possible. There are many more features of Dynamics 365 for Financials integration with Dynamics 365 for Sales!

Watch as a Dynamics 365 expert demonstrates the capabilities of CRM (Dynamics 365 for Sales) integration with Dynamics 365 for Financials!


Watch what is possible on Dynamics 365 for Financials!

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Dynamics 365 Questions & Answers, Part II

In April, I published a post answering some of the more common Dynamics 365 questions asked by SBS Group customers and other partners.  I have received over 30 responses to that post in as many days so I think it is safe to assume that this is a worthwhile topic.

In this post, I will focus on questions related to Microsoft’s announcement that Dynamics 365 for Operations will be available as an on-premise solution in the second half of 2017, most likely June.  Although I believe that the advantages of a cloud-only ERP deployment almost always outweigh any disadvantages, I recognize that for some companies this just isn’t the right option.

In keeping with the question/answer format, I’ll expand on this below.

What does an On-Premise deployment of Dynamics 365 for Operations mean?

On-Premise is typically defined as software that is installed and runs on computers that are physically on the premises (in the building) of the person or organization using the software, rather than at a remote facility such as a server farm or cloud. Because the software runs on computers locally, the related data does as well. In the last 10 or so years, I have heard the on-premise term used for any deployment that is fully managed by the person or organization using the software. This means that “on-premise” deployments could also be referring to installations in a company owned or rented data center.

When Dynamics 365 for Operations was released, it was basically the next step for AX7 which was designed exclusively for a cloud-only deployment.  In November 2016 and again in February 2017, Microsoft indicated that they would be releasing on-premise options as well. In fact, they are expected to offer two more options for deploying Dynamics 365 for Operations as follows:

Cloud and Edge (Hybrid)

In this deployment scenario, the business process and transactions will be allowed to run “at the edges” with data being stored locally (on-premise).  The edges, referred to as “My Workplaces” will be managed by the customer while the cloud components will be managed by Microsoft.  This helps the customer to scale and take advantage of cloud-related services while keeping components like master data management private.  In some instances, this will help with integration to applications that can’t or shouldn’t be managed in the cloud.

The central cloud node can provide a singular view of operations across multiple “My Workplace” instances and still leverage the cloud for better business intelligence.  Cortana Intelligence will most likely not be accessible to full potential in this model if at all, but other BI tools can still be leveraged.

Local Business Data (LBD)

An LBD, local business data, deployment allows a customer to run all business processes on-premise, to support local transactions and store business data without replicating to the public cloud (Azure).

Replication of business data into the cloud no longer occurs so while data and processes are more private, the customer will lose access to many of the bells and whistles that come with Dynamics 365.  Cortana Intelligence, PowerBI and Azure Machine Learning services are all included in the list of items missing from the action in an LBD deployment.

Ultimately, customers will be able to leverage a federation of My Workplace instances under a single My Workplace to take provide better visibility and intelligence throughout the company.

Should I Implement Dynamics 365 for Operations in the Cloud or On-Premise?

The answer … at least if going live today … is quite simple.  In the cloud.  Microsoft has not released an on-premise version of Dynamics 365 for Operations yet.  They have indicated their intention to do so in the latter half of 2017, but have not provided an exact date to the public.

When they do release an on-premise version, it will be up to you and your partner to weigh the options around each and determine which is the best fit for your environment.  We can speculate on this today, but some of the details are still private and will continue to evolve right up to the public release expected in June/July of 2017.

Is there a clear comparison of these options?

It is almost impossible to compare them at this time as they have not been formally released and new information is coming available regularly.  Detail shared along the way through formal posts and reseller meetings provide enough information to facilitate good conversation, but I would caution anyone not to wrap up their due diligence until after general release.  The table below has some help information that I’ve seen shared by others from various partner conferences hosted by Microsoft:

Table-D365-OnPremise

Why would a Dynamics 365 Customer Choose to Implement On-Premise?

When looking from the outside, it isn’t obvious why any company would choose to take on the responsibility of directly managing the hardware, connectivity, security and administration of their own ERP data center.  Most companies are thrilled with the idea of avoiding upfront costs for infrastructure and related IT support services, not to mention traditional license software costs.  Most companies find the security, speed, and dependability of modern cloud providers is nearly impossible to duplicate in an in-house environment. But, many do … so why?

  • Existing Data Center Investments:  Quite often, companies have already sunk considerable investments into their hardware, physical location and IT support personnel.  Walking away from that investment can be difficult to do emotionally and financially.  Many companies compare the costs of maintaining existing data centers, or even riding it out for a few years, to the cost of moving to the cloud and find it more cost-effective to continue in-house.  This is a decision that each company needs to make based on their unique situation.
  • Not Cost-Effective Due to Other On-Premise Requirements: I’ve spoken with customers that would prefer to move their ERP to the cloud, but feel that the ROI expectations can’t be met unless they are able to move a more significant portion of their applications to the cloud.  Just moving ERP doesn’t allow them to significantly trim support staff or reduce costs associated with their physical data center.  When they are able to move the lion’s share to the cloud, they plan to switch (and many do).
  • Regulatory Requirements:  Some companies prefer to keep data and processing local to avoid the possibility of not being compliant with regulatory requirements related to their business.  Whether looking at a SaaS application (like ERP in the cloud) or data storage, your company must be confident that their customer and other information is protected.  Your cloud provider should be compliant with your industry’s privacy and security compliance needs, like HIPPA and PCI.  There are standards for companies with financial data and government, government contractors and a variety of industries where data integrity is considered hyper-critical.
  • We’ve always done it this way: If it isn’t broke, don’t fix it. Right?  One might argue that the very nature of technology is smart, measured change for cost and efficiency gains, but I often speak with clients that just can’t get comfortable with having applications and data move outside their walls.  Sometimes it isn’t as a result of due diligence, but more of a gut reaction.  Personally, I believe that the cloud offers far more value than on-premise deployments, but I would never pressure a company to operate in a way that they aren’t comfortable with.  Not everything is a math problem.
  • Heavy Customizations: Many SaaS ERP solutions do not provide an architecture that allows for heavy customizations.  In many cases, like with Microsoft Dynamics 365, a company can customize their solution and integrate other products with little issue.  However, if a customer has made substantial customizations over time, it may be that some of those customizations or integrations will not survive a move to the cloud.  We’ve become very adept at making this work for our customers, but in some cases, they opt to stick with their current solution until some of the more difficult customizations can be migrated to their satisfaction.

As more information comes to light regarding Dynamics 365 for Operations on-premise deployments, I’ll share it with you here.  We are excited to see Microsoft making this option available and helping our customers determine the best option for their business.

If you would like to discuss this in person, please feel free to reach out to me directly at rmorrison@sbsgroupusa.com.

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Best regards,

Robbie Morrison
Chief Solution Strategist, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions.  From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem and products helps SBS Group customers maximize ROI on technology investments.  Robbie

Today, Robbie serves SBS Group customers in his role as Chief Solution Strategist where he provides thought leadership and manages the development of B2B solutions.  Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

Growth Activities That Can Be Life (And Tax) Changing

Growth isn’t a one-size-fits-all approach. In fact, companies expend a great deal of energy and resources deciding which pursuits will move the needle the furthest toward achieving specific goals, and where to prioritize their time and investment.

Oftentimes sales and use tax gets left out of this equation, especially when it doesn’t appear to directly correlate to the task at hand. Certain growth activities, like adding new locations, products, or sales channels, instinctively signal a need to alter sales and use tax compliance practices. With others like financing rounds, acquisitions, or technology platform changes, tax implications aren’t as obvious and therefore are more likely to be overlooked. Yet these are often the situations where compliance strategies can have the greatest and most lasting impact.

growth tax

Below is a brief glimpse of how sales and use tax compliance can come into play for 3 business growth activities that can be life (and tax) changing: financing events, M&A, and technology platform integration projects.  Here’s what you should be aware of when going through these processes.

Financing events

For any financing event, public or private, investors look closely not only at how you plan to grow the business, but also how you are managing it now. Poor sales tax management practices or unfavorable audit outcomes can impact valuation, jeopardize funding, or even nullify deals. High visibility events like funding rounds and IPOs can also bring your business to the attention of state auditors looking to draw in more tax dollars.

Mergers and acquisitions

The meshing together of people, assets, systems, and processes is no simple feat. So, it’s not surprising that business integration issues following M&A transactions are one of the biggest things keeping company execs up at night.  Between due diligence, integration, accounting/financial reporting, and post-acquisition compliance, who has time for the minutia of sales tax? It can be easy to overlook tax obligations or liabilities, which can raise red flags with investors early in the process, or with auditors later.

Technology platform changes, consolidations or upgrades

During change events, it’s good practice to evaluate your financial systems and fill any gaps with new solutions or functionality that can advance your growth objectives. For example, tax automation software that unites critical transaction data from disparate systems and processes can alleviate compliance issues during post-merger integrations, reducing audit risk and avoiding delays in closing the books.

Download the complete whitepaper for further insights from leading industry leaders.


Permission to reprint or repost given by Avalara. Content previously published at www.avalara.com/blog.

Making the Business Case for PSA in a Project-Centric Company

I’m often asked about PSA (Professional Services Automation) solutions by potential buyers. Is it critical to success?  Is it more of a luxury solution to make things easier?  Will it pay for itself in the long-run? Short-run?  What they’re really asking, in most cases, is: “How do I sell it to our executive team?”

For the longest time, I was confused by this.  In my experience, it is often the executive team that drives the pursuit of a PSA solution.  Their need for more accurate reporting, project profitability and overall visibility of operational effectiveness in a professional services firm leads right to PSA.  So why the sell? I’ve come to the conclusion that overselling features of other solutions by those in the software market are often the problem.  Overzealous sales and marketing people pitch every ERP, CRM, Office productivity and project management solution as the end-all, be-all answer for professional services.

While each of these application families can deliver tremendous value to a services company, it is often an over-reach.  However, a PSA solution not integrated with core ERP or CRM systems is never as effective as those which are.  That’s why we love working with Microsoft Dynamics, and especially the Dynamics 365 suite.  But…my appreciation for Microsoft Dynamics is not the focus of today’s post.  Rather, how to help you share the potential value of an enterprise PSA solution with your executive team.  Let’s get started.

dynamics-psa-dashboard

Understanding PSA (Professional Services Automation)

PSA solutions are designed to assist project-centric companies with project management and resource management for client projects. This is accomplished by developing metrics to quantify and qualify basic business processes that can then be used to streamline and improve those processes.  Typical PSA functions include project management and documentation, time recording, billing, reporting and labor utilization. These features are often integrated with accounting, Customer Relationship Management (CRM) systems, and payroll systems in order to improve the efficiency of overall operations. In addition to better managing client projects, the right PSA can prevent lost revenue and lagging billing cycles thereby improving cash flow.

Ultimately PSA software suites allow users to integrate industry-appropriate metrics in order to better understand operations and, in turn, improve efficiency and profitability. As businesses grow, the size and complexity of their projects tend to increase and with it, their investment in PSA software.

microsoft-dynamics-365-psa

Making the Business Case

Generalizations about the value of leveraging software to improve project and services delivery are enough to get started, but here are some more specific points you can add to your pitch.

Improving Collaboration, Reporting, and Visibility into Project Profitability

While PSA is best known for improving resource and project management, the most significant impact is providing real-time visibility into all aspects of delivery. Delivery resources can simultaneously see the status of current and forecasted projects, historical or projected costs and revenue, the supply and demand for key resources, and issues that could impact a successful project outcome. With real-time visibility, executives can more efficiently and effectively run the business.  Organizations with high levels of real-time visibility grow more rapidly and face less employee attrition and fewer projects go south.

Clearing the Bench and Improving Human Capital Contribution

Every services organization struggles with the almighty utilization target.  Keep everyone working 100% of the time and you print cash.  Keep them sitting on the bench and the business fails.  Finding a balance of resources that works for your customers as well as your business is the key to success.  A well-implemented PSA solution helps you identify and work towards that optimal service model as the business fluctuates.  It can help you determine the best mix between full-time and contract employees, training requirements needed, etc.  Most importantly, your entire management team will have a better understanding of backlog and ability to meet demand at any given point during the year.

Improving Billing Accuracy and Shortening Billing Cycles

Without a PSA solution in place, time and expense data is usually captured through standard payroll or financial systems.  This data is ultimately sent to the project team, but not in real time.  Sometimes, there is a considerable gap of days or weeks.  The extra processing time and the potential for mistakes can be a negative impact on the customer relationship and internal project management.

PSA systems allow time card information to be entered through apps or even calendar plugins to improve efficiency and cut down on errors.  Allocations, project success, cash-flow, and billing frequency are all positively impacted.

Compliance with ASC 606 and IFRS 2015 Guidelines

Ensuring that project doers and project planners stay aligned is extremely important.  How you bill, when you bill and how you recognize revenue are often tied to performance milestones, as outlined in ASC 606 and IFRS 2015 guidelines.

Many companies, even those with enterprise ERP and high-end forecasting tools, will need to build a plan to implement process updates and retool the development of complex contracts.  Firms relying entirely on Excel or outdated planning and project management solutions may find the need to purchase and implement new software even before other processes can be adapted.  It will take a comprehensive, collaborative effort to realign business planning and budgeting as your back office team adapts to these new accounting standards.

solution integration

Dynamics 365 Integration with Microsoft Office 365

SBS Group has deployed PSA solutions for hundreds of companies over the last 30 years.  Today, we focus on Microsoft solutions, including Dynamics 365.  Within the Dynamics Suite, there are different options available for companies of varying sizes and needs, but all benefit from the sweeping integration across the Microsoft stack.

Dynamics 365 unifies the best of Microsoft’s customer relationship management (CRM) and enterprise resource planning (ERP) solutions into one fully integrated cloud service.  It offers deep integration with Office 365 and allows you to tailor your implementation with sophisticated productivity apps to support crucial business processes, including sales, customer service, finance, field service, operations, marketing and project service automation.  It utilizes one common set of data across CRM, ERP and Office 365, simplifying data management and allowing for seamless integration across apps and business processes.  Tools like PowerBI, Microsoft Flow, PowerApps and Cortana Business Intelligence work seamlessly with Dynamics 365 operations and PSA to create one of the most comprehensive solutions for professional services companies in the market today.

Sometimes Seeing is Believing

If they’re not connecting the value of the right PSA to business results, you may need to show them.  I know that most CFOs and CEOs either don’t have the time or interest in sitting through a software demonstration.  However, a focused discussion on business value can be much more impactful when the software solution is used as a backdrop to the conversation.  Discuss the benefits you’re expecting and follow with a 5-minute peek into how the system works.

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Also, remember that there is more than one way to deploy a PSA solution.  Obvious questions, like in the cloud or on-premises will always come up for discussion.  Be ready to discuss cost, risk and operational pros and cons of each.  Grounding your solution in the up-front bid process and WBS vs an ERP-based PSA solution to manage project accounting will factor heavily into product selection.  Many questions, but all should result in a solution that drives genuine bottom-line benefits to the company.

If you would like to explore this further, please feel free to reach out to me directly at rmorrison@sbsgroupusa.com.

Best regards,

Robbie Morrison
Chief Solution Strategist, SBS Group

About Robbie
Robbie Morrison has spent nearly 20 years helping customers build and deploy elegant technology and business solutions.  From start-ups to enterprise-class organizations worldwide, his knowledge of the Microsoft Dynamics ecosystem and products helps SBS Group customers maximize ROI on technology investments.  Robbie

Today, Robbie serves SBS Group customers in his role as Chief Solution Strategist where he provides thought leadership and manages the development of B2B solutions.  Robbie received his MBA from the University of Georgia, Terry College of Business.
https://www.linkedin.com/in/robbiemorrison

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