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Energy Tax Filers Survival Guide: The Benefits of Preparing Excise, Sales, and Use Tax Together

Midstream & downstream energy companies often need to collect sales and use tax in addition to motor fuel excise, environmental and alternative fuel taxes.


Energy Tax Filers Survival Guide: The Benefits of Preparing Excise, Sales, and Use Tax Together | HiTechNectar
Published By - hitechnectar

Midstream and downstream energy companies often need to collect sales and use tax in addition to motor fuel excise, environmental and alternative fuel taxes. And in many cases, there are different departments involved in managing these complicated taxes which have rates and rules that vary by jurisdiction. Many states require sales and use tax collection on bulk fuel sales, while others require that sales and use tax only be charged when there is an exemption from excise tax. Also, some fuel suppliers sell non-fuel products that are subject to sales and use tax. Due to the interrelationships between these taxes, many companies would find an integrated filing process beneficial to their business.

The Challenges of Independent Filing Processes

Managing independent filing processes for excise and sales taxes can be problematic to your business. If multiple people and departments are involved in filing these returns, they likely are not communicating effectively to ensure that they are filing consistently based on the same transaction data. And, if your company is using one system or platform for their excise taxes and another for their sales and use taxes, they may be accessing different data extracts or need to make adjustments independently, increasing the risk of manual errors.

In addition to an increased opportunity for errors, managing independent filing processes for excise tax and sales and use tax can result in process redundancies and duplication of effort. When multiple people are involved, it is more difficult to have centralized ownership of tax responsibility, and as your business grows, the process is less scalable. However, you may be able to improve productivity and reduce your risk of errors by enabling a single tax analyst to handle all returns easily, without the complexity or cost of spreadsheets or multiple tax solutions.

The Advantages of an Integrated Filing Process

While many companies use tax accruals to calculate taxes owed for a reporting period, both excise tax and sales tax should be determined independent of accruals based on the raw transaction data. This can provide a check against tax accrual errors and will improve tax accuracy. In an integrated filing platform, once transaction data is imported, built-in rules handle schedule determination and tax calculation. Tax managers can also configure sales tax nexus and provide custom mappings of product codes to tax codes. After taxes are calculated, all returns can be generated and can all be accessed within one platform.

Implement a single platform for filing both excise, sales and use tax to:

  • Improve tax filing productivity by automating excise and sales tax returns within an integrated filing process – one single analyst handles it all.
  • Detect invoicing or sales and use tax accrual errors.
  • Automate an integrated tax data management process and eliminate the use of spreadsheets.
  • Reduce IT costs by eliminating IT projects for tax reporting and by eliminating hardware and application management requirements through cloud-based deployment.

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