States Eliminate Sales Tax Holidays, Increase Corporate Sales and Use-Tax Audits

BOSTON, MA--(Marketwire - Aug 9, 2011) - Aberdeen Group, a Harte-Hanks Company (NYSE: HHS), has published a research report from its Financial Management and Governance, Risk & Compliance (GRC) research practice which discusses state and local government revenue shortfalls. This week the implications of revenue shortfalls were revealed as states eliminated their annual sales tax holidays. Despite the recent announcement enabling Massachusetts residents to enjoy a sale tax-free weekend in August, the government of Illinois announced that there would be no tax-free incentives for school supplies this year, as the state continues to battle its deficit.

The research study "Streamlining Sales and Use Tax: Best Practices in Minimizing Audit Exposure," written by William Jan, Senior Analyst, Financial Management & GRC, reveals that a growing number of states are experiencing revenue shortages. "Eliminating tax-free holidays for consumers is just the tip of the iceberg," says Jan. "The larger issue applies to corporations that are under tight scrutiny by state revenue departments for their tax practices. We are seeing acceleration in government audit activities in an effort to compensate for state revenue shortfalls."

Aberdeen's data reveals there is a sharp increase in government audit activity in the past 12 months. And as expected, the cost of negative audit results remains high, while companies continue to struggle with compliance with various jurisdictional requirements. Subsequently, companies leveraging real-time sales and use tax management processes and technologies are able to reduce their audit cost and penalties by nearly 33%.

Some additional feedback from Aberdeen's tax community reveals that sales and use tax compliance often receives less attention than other business taxes, such as corporate income tax, within their organizations. "What is troubling about this feedback, in light of the state revenue turmoil, is that governments obtain 30% or more of their revenue from sales and use tax. Thus, they are becoming more motivated to increase their audit activities around this tax segment, in hopes of obtaining more revenue.

"To reduce their risk," concludes Jan, "companies must proactively manage sales and use tax, seek expert advice regardless of whether or not they are being audited, and be prepared with an effective tax management and audit control solution and process in place to counter potentially high fines and penalties."

To obtain a complimentary copy of this report, made possible by ADP, Thomson Reuters, and Avalara, please visit: http://www.aberdeen.com/link/sponsor.asp?spid=30410182&cid=6595&camp=2.

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