How Oracle can be a cost-effective option for a US Sales Tax solution

Did you know there are more than 100,000 Sales Tax rates in place across the US?

Compare that to the UK, where most companies can reasonably expect to leverage between just three and ten rates to cover their full range of business activities (although we would advocate for far more to allow for better reconciliation), and you begin to understand the complexity of compliance standards in the US.

It’s therefore no surprise that so many businesses – especially the largest global brands and those with more complex business models – opt to utilise a third-party tax engine to manage US Sales Tax.

But that’s not to say third-party tax engines are the only solution or that every company should invest in such a comprehensive piece of technology without first evaluating various options.

For some enterprises utilising the native functionality of an existing Oracle ERPEnterprise resource planning (ERP) is a type of software that organisations use to manage main business processes. can be the most beneficial roadmap to follow.

Take, for example, a manufacturing company located in a few states with a stable customer base and economic nexus selling on a B2B basis with a known product list could be an ideal candidate to explore the functionality of the Oracle tax engine.

More on that later in the article.

In terms of the immediate challenge of managing Sales Tax, it’s clear the sheer volume of rates is not the only factor to contend with. As a tax professional, you must also consider that Sales Tax rates in the US are a moving target.

In 2023, there were 437 Sales Tax rate changes across all jurisdictions – including those made to state, county, city and district taxes – across the 50 states.

That figure is the highest for ten years and a 16% increase on the 2022 total; emphasising both the sheer volume and proliferation of newly-created rates across the States.

Whilst the US is arguably the most complex in terms of the volume of rate changes, the rest of the world puts up a fight for the complexity trophy with far more emphasis on the digitalising of tax. And eventually these two agenda will meet and cross-pollinate one another.

Not only are there many more Sales Tax rates in the US than there are for the comparable indirect tax in almost any other country in the world, you’ll also have to manage an average of nine new rates every week!

Incredibly, we frequently speak with US businesses that still attempt to determine Sales Tax rates manually, naively believing that ‘Google is my friend’ is sufficient.

Yes, you read that correctly. There are large organisations (many more than you probably think…) that rely on tax clerks to Google (other search engines are available) the relevant rates to apply to invoices and sales orders.

We can’t even begin to fathom the time, cost and risk of error that must entail.

So, halfway through this article, we have only mentioned Sales tax but of course, we have Use tax too! We will be publishing a separate article on Use tax in Oracle shortly so stay tuned.

Identifying the optimum way to manage US Sales Tax

For many businesses in the US – particularly firms with complex considerations – the solution to speedy, accurate and cost-effective Sales Tax determination is to implement a third-party tax engine.

The best tax engines on the market boast the features and functionality required to reliably determine the tax and tax rate that is applicable to each transaction. Even if your company processes millions of transactions per year, a great tax engine is up to the task of delivering 100% accuracy and therefore populating every invoice with the correct tax data based on the relevant rate.

For businesses of a certain scale and complexity and B2C sales, we’d always recommend an external tax engine implementation.

But for many organisations using Oracle ERP, there is another way that offers a range of competitive advantages.

What do you need for an automated Sales Tax solution in Oracle?

We freely admit that Oracle isn’t the right place for a US tax solution for every business, but if your company meets certain criteria we’d advise considering the merits of automating Sales Tax determination within your existing Oracle ERP, saving money and creating control.

For many Sales Tax solutions in Oracle ERP, you’ll need to consider the following:

• Geography structure
• Rates content
• Product/Purchasing categories
• Exemption certificates

Whilst the functionality exists in Oracle to manage Sales Tax calculations, the content does not come out of the box. For starters, Oracle does not have US rates in-built, so you’ll need to find a way of integrating thousands of rates from across the country into your solution.

Introducing our US Rates File for Oracle users

That’s why we’ve developed our unique US Rates File solution; specially designed to empower businesses to manage US Sales Tax in Oracle ERP.

It contains thousands of rates, providing extensive coverage for many organisations trading in the States. We can import all these rates into your Oracle ERP to enable seamless automation of appropriate transactions – all within the infrastructure you already own.

Plus, we update and publish our US Rates File on a monthly basis to ensure ongoing accuracy and compliance.

Our US Rates File is perfect for B2B transactions because the more complex district or special tax rates are usually in residential areas meaning the geography limitation with Oracle (state, county and city) does not typically impact the tax rate accuracy.

The geography limitation with using the native Oracle tax engine is that the tax rate is determined based on the state, county and city values entered against the customer/supplier. Oracle uses the full address each time to determine the tax rate.

Third-party tax engines work in most cases by pre-validating the address against their own database and then returning their jurisdiction ID for that address which in turn is used to know what tax rate to use, including any district or special tax rates.

So if your business is one of the relatively few that require a greater level of accuracy, the full-scale coverage of some of the third-party tax engine providers would be a better fit for you.

Just a few examples of the types of businesses that would benefit from our US Rates File over more complex and costly tax engine implementations include:

• Companies operating in the manufacturing industry that sell predominantly B2B. These businesses might have resale exemption certificates and often pass tax on to their customers.
• Professional services providers, which typically aren’t required to charge Sales Tax as many of these services are exempt.
• Any company that does not sell too many different product types where hundreds of exemption categories exist.
• Companies that already have a third-party tax engine for sales and now require US tax calculation in AP for both sales and use tax.

Depending on your circumstances and requirements, the US Rates File could be a cost-effective solution that automates tax determination for Sales Tax, relieving you and your team of laborious and error-prone manual processes. And for your peace of mind, our solution can handle:

• Origin vs destination taxes including California.
• Min-max rules.
• A zero-maintenance integration of third-party exemption certificate management systems into Oracle tax.
• Separate Use tax rates where different.
• Automation of Use tax for suppliers with no nexus.
• Exemptions linked to exemption certificates.
• Exemptions linked to items bought/sold or purchasing categories used.
• Intended use.

Get in touch with us today to enquire. We’ll be happy to provide you with an unbiased assessment of whether your business can benefit from our US Rates File or if you should look towards a tax engine implementation.