A guide to omnichannel commerce in the digital age

The retail landscape has undergone a radical transformation in recent years. Customers now expect a seamless and frictionless shopping experience in stores and online.

For retailers, an omnichannel approach is essential to staying competitive, but it creates significant challenges for tax departments. To ensure accurate tax determinations, retailers must navigate a complex maze of tax calculations across a wide range of products and jurisdictions, all while trying to keep up with constantly changing regulations and high volumes of transactions. Our guide to digital omnichannel selling discusses the pitfalls, new strategies, automation and benefits of centralized tax management systems.

Pitfalls of incorrect taxes in A digital omnichannel world

Mistakes in this tax maze can have serious consequences. Inaccurate product tax classifications, tax rates or tax rules are costly and can cause problems during customer checkout and refunds. If buyers become frustrated, they may take their business elsewhere, damaging the brand’s reputation and causing lost sales.

Underfunded tax departments struggling with outdated technology and burdened with manual processes and spreadsheets are even more susceptible to these pitfalls. Temporary IT fixes, patchwork solutions, and/or manual workarounds make it difficult to keep up with transaction volume and subsequent reporting and compliance impacts in an omnichannel sales environment, and do not facilitate the communication needed to share data across channels.

Temporary IT fixes, patchwork solutions, and/or manual workarounds make it difficult to keep up with transaction volume, and the further impact on reporting and compliance in an omnichannel sales environment does not facilitate the communication needed to share data across channels.

A new approach to brand channels and systems

Older approaches are a relic of the pre-omnichannel era, when brick-and-mortar stores and mail-order catalogs were the primary places of sale. Continuing to rely on these outdated systems and processes increases the risk of calculation errors, missed tax updates and potential compliance issues. As a result, retailers must rethink how their branded channels interact with each other and rethink their business systems to operate more effectively and efficiently in the marketplace. digital the omnichannel retail environment of the future.

Taxes are a key part of this conversation. After all, if companies promise customers that they can buy and return goods anywhere, through any channel they want, the company’s tax systems must be up to the task. But supporting this kind of agility in an omnichannel retail ecosystem is no easy feat – it requires more efficient systems with a broader range of capabilities and leaders who understand why these systems are necessary.

The power of tax automation

Some effective digital, multi-channel tax management system requires a few components, but it all starts with automation. Tax automation improves compliance and ensures accurate tax determination at the point of sale, resulting in a more efficient checkout process for customers, regardless of the channel they use or location. Well supported centralized tax engine it should also be possible to scale up during peak seasons, ensuring seamless check-out even during periods of high demand.

Another reason tax automation is so effective in an omnichannel sales environment is that it uses comprehensive tax rates and rules to navigate the complexities

product classification and coding, as well as the various unique tax scenarios that retailers face. Sales taxes alone are complicated enough, but retailers also have to contend with everything from tax holidays and interactions with social programs (like SNAP benefits) to delivery fees, product-specific taxes and environmental fees.

Automation also enables you to keep up with the speed and volume of transaction volume across multiple channels during checkout and compliance activities, where millions of transactions per month – or even hundreds of transactions for a second– are not uncommon.

Centralized tax management systems: the key to success

The more demands placed on a company’s tax system, the more sophisticated the system’s underlying architecture must be to meet those demands. That’s why many large retailers are moving to centralized, cloud-based (or hybrid “edge”) tax management systems.

A centralized, cloud-based tax management system creates a single platform, common hub for managing and maintaining tax policy, and retains digital sales data across multiple channels, supporting reporting, compliance and audit needs while eliminating the technical and geographic constraints that plague outdated solutions systems. Centralized systems are also extremely flexible, and when they include automated content handling and advanced API architecture, they can instantly adapt to new regulations and adapt to future retail innovations. Scalability is an equally important feature of a centralized tax platform, as any modern tax system must grow with the business.

Benefits that go well beyond taxes

The benefits of a centralized tax management system go far beyond accurate tax calculations. High-quality tax data enables tax departments to move beyond compliance and take on a more strategic role within the organization. With the right analysis, tax data can even improve supply chain monitoring, support strategic planning and ultimately lead to better decision-making.

Incorporating new tax technologies into a company’s software ecosystem is also a smart strategic decision. Centralized cloud-based tax technologies help lay the foundation for resilience for companies that must adapt to the demands of digital e-invoicing, real-time reporting and other upcoming technology innovations. Indeed, investing in tax infrastructure is not just about meeting current needs, but also about future-proofing your business and ensuring that your business is prepared to navigate every turn in the long tax maze that lies ahead.

To learn more, Thomson Reuters has produced a three-part whitepaper series on how automated tax management solutions can help large companies meet the challenges of omnichannel retailing:

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Part 1 focuses on the role of automation in retail taxation.

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Part 2 discusses the technical challenges of omnichannel selling.

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Part 3 covers managing regulatory change and risk in an omnichannel ecosystem

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Download all three whitepapers today.