AI-driven sales tax verification strategy

Find out interesting insights with Dave Sackett, VP of finance at Persimmon Technologies

Moderated by Emily, Digital Transformation Consultant at Hyperbots

Don’t want to watch a video? Read the interview transcript below.

Emily: Hi, everyone. This is Emily, and I’m a digital transformation consultant with hyperbots. Really pleased to have Dave Sackett on the call with me. Who is the VP of finance at Persimmon Technologies. Thank you so much for joining us, Dave.

Dave Sackett: Yeah. Thanks, Emily.

Emily: So, Dave, the topic that we’d be discussing today is AI-driven sales tax verification strategy. And I’d like to kick things off by asking, how exactly does hyperbots AI-driven sales tax verification strategy ensure compliance with varying tax laws?

Dave Sackett: Sure. Hyperbots’ AI strategy automatically verifies sales tax rates by extracting the relevant data from invoices, purchase orders, and such as origin and destination addresses. These details are cross-referenced against local, state, and federal dictionaries to make sure compliance is maintained. For example, if a company in New York buys goods from a vendor in California, the AI pulls California as the origin, New York as the destination, allowing it to accurately assess sales tax based on these locations.

Emily: Understood. So can you also explain how hyperbots automatically categorize line items on invoices for accurate tax treatment?

Dave Sackett: It uses NLP and machine learning. Hyperbots categorizes each line item on an invoice into relevant tax categories. For example, an invoice with software licenses, computer hardware, and consulting services would be categorized as digital goods, physical goods, and services respectively. Each category may have a different tax requirement or exemption ensuring applied tax is accurate based on the item types.

Emily: Got it. And how does Hyperbots tracking of purchases by origin and destination exactly add value to sales tax verification?

Dave Sackett: Tracking purchases by origin and destination allows hyperbots to monitor total purchases over time for given locations, which is crucial for jurisdictions with specific thresholds. For example, if California requires tax to be collected only after total purchases exceed a certain threshold, hyperbots can identify when this threshold is met and apply the correct tax treatment automatically, preventing overpayment, noncompliance, and saving time.

Emily: Understood. Dave, can you also explain to the viewers how hyperbots reference sales tax dictionaries to verify the accuracy of applied taxes?

Dave Sackett: Yes, hyperbots leverage comprehensive sales tax dictionaries that can be accessed by AI, which include state, local, and product-specific sales tax rates. For example, if a vendor applies a 7.5% tax on a transaction where 8% is the correct rate, the system will flag this discrepancy by comparing it against the updated dictionary for that state. This ensures that the tax on the invoice is precisely aligned with local regulations and helps the accountant understand where that gap is in compliance and make the correct move.

Emily: Got it. Do you mind walking us through a specific example of how hyperbots would handle a tax exemption on a service item?

Dave Sackett: Sure. Let’s suppose an invoice includes software as a service or SaaS provided by a California vendor to a company in New York. Hyperbots identifies the SaaS as a category potentially exempt from New York sales tax by referencing New York’s tax guidelines. The system flags any incorrectly applied tax, recommending its removal to maintain compliance and avoid unnecessary costs, and again, to save time.

Emily: Got it. How are discrepancies in applied sales tax rates handled by hyperbots?

Dave Sackett: Hyperbots flags discrepancies automatically. If the AI detects that the rate applied by a vendor differs from what’s listed in the tax dictionary, it sets it aside and alerts the finance team, suggesting the correct rate. For example, if a vendor charges 9% tax when 8.875% is applicable, hyperbots notes that discrepancy, enabling quick correction before payment is made, which is far more difficult to reverse. This also ensures a clear audit trail, saving time.

Emily: Understood. Just a couple more questions, Dave. How does hyperbots ensure that its tax dictionary remains accurate and up to date?

Dave Sackett: Hyperbots regularly updates its tax dictionaries with the latest rates and regulations at all jurisdiction levels. This is especially important because tax laws are dynamic and change all the time. By integrating periodic updates, hyperbots guarantee that they apply the most accurate tax information, whether it’s for a physical good, a digital good, or a service.

Emily: Got it. And how exactly does Hyperbot’s AI-powered system operate autonomously to identify and correct tax application errors?

Dave Sackett: Hyperbots runs systems without manual intervention. It’s automatic, analyzing and validating tax applications as invoices and POs are processed. For example, if an invoice includes an incorrect tax on consulting services due to location-based exemptions, hyperbots automatically flag that mistake, providing recommendations. This ensures real-time accuracy without a heavy workload for the finance team.

Emily: All right. Do you mind giving an example of how hyperbots handle multi-state or multi-jurisdiction tax complexities?

Dave Sackett: Sure. Hyperbots handle multi-jurisdiction complexities by analyzing both the origin and destination information and referencing those state-specific tax laws. For example, if a company in New York purchases from a vendor in Texas, hyperbots considers both Texas and New York’s state laws. If New York mandates a different tax treatment than Texas, hyperbots applies the appropriate rate based on the destination-specific requirements, ensuring compliance.

Emily: Got it. And just one last question, Dave. What would you say are the primary benefits of using Hyperbot’s AI-driven approach to sales tax verification?

Dave Sackett: Hyperbots offer several benefits in this area. It enables compliance by applying accurate jurisdiction-specific sales tax rates, reduces manual intervention and potential for human errors, and saves time by automating these complex tasks. For example, the AI-driven approach identifies and corrects tax errors autonomously, freeing up resources in your finance department for more strategic activities. By tracking cumulative purchases, hyperbots can adjust tax treatment based on purchase thresholds, which is particularly beneficial for organizations with high transaction volumes across multiple locations.

Emily: Got it. Thank you so much, Dave, for talking to us about AI-driven sales tax verification strategy, especially in regards to hyperbots and how the various nuances are solved. It’s really insightful. Thank you so much.

Dave Sackett: Yeah. Thanks, Emily.