Accounting Best Practices, Fifth Edition

14–6. Use Forms/Rates Data Warehouse for Automated Tax Filings

Any organization that operates in a number of states will find that an inordinate number of sales and income tax returns must be filed, not to mention a plethora of lesser forms. The traditional way to meet these filing requirements is to either keep a staff of tax preparation personnel on hand or else outsource some or all of these chores to a supplier. Either approach represents a significant cost. An alternative worth exploring is to store tax rates and forms in a database that can be used to automatically prepare tax returns in conjunction with other accounting information that is stored in either a general ledger or a data warehouse.

To make this best practice operational, there must first be a common database containing all of the information that would normally be included on a tax return. This may call for some restructuring of the chart of accounts, as well as the centralization of companywide data into a data warehouse (see the preceding best practice). This is no small task, since the information needed by each state may vary slightly from the requirements of other states, calling for subtle changes in the storage of data throughout the organization that will yield the appropriate information for reporting purposes.

The next step is to obtain tax rate information and store it in a central database. This information can be manually located by accessing the tax agency Web sites of all 50 states, but is more ...