Global tobacco distributor automates excise tax compliance with IGEN
Human Error & Inaccuracies
IGEN’s client, a global tobacco distributor and US market leader, knew their manual excise tax process wouldn’t hold up to company structure changes or increased taxation complexities.
A new entity with plans to distribute across all fifty states along with the restructuring of their wholesale business, meant they needed to make a change.
Their North American finance team of 27 was using a completely manual excise tax process. That dependency on manual effort often leads to burnout on tax teams, an increased risk of human error, and more frequent inaccuracies.
“Accuracy and efficiency are essential,” said their Director of Finance, “We have to have it right, or we’ll be audited and hit with fines and penalties.”
- To ensure accuracy in each tax calculation, an analyst pulled every invoice, manually validated the tax on the invoice, then released the order. It was the cost of an FTE (full-time equivalent) to complete the daily validations.
- Monthly compliance depended on running reports out of Power BI to accumulate all the data for reporting. The process bogged down the team and created inefficiencies. The client noted “It was very time-consuming and cumbersome for our team.”
- Even in the sales tax arena, where the client was using a tax software provider, the manual process of pushing data to the tax system was a time drain and morale killer.
Challenges in Finding a Solution
This global tobacco distributor and wholesaler already used a software provider for sales tax calculation in their B2C e-commerce markets. Internally, that vendor was a known quantity and moving to a new software vendor would be a significant change; getting alignment from all the stakeholders with such a significant change was a challenge.
The client’s finance team conducted several test scenarios with their current software provider to determine if each transaction would be taxed correctly when adding excise tax to the mix.
6 out of 10 excise tax testing scenarios came back with the wrong tax calculation. The finance team had no comfort that they could accurately tax transactions without additional manual validation.
With those results, it quickly became apparent that another solution would have to be found. Executive buy-in became much more straightforward. Those on the fence about a new solution became IGEN’s biggest advocates and have spearheaded a rollout of IGEN’s tax automation platform across their other North American entities.
This tobacco distributor and wholesaler partnered with IGEN for our tax compliance platform, including Form generation, Tax determination, and License maintenance, starting with their wholesaler entity, quickly joined by a newly formed tobacco distributor entity. Three other entities followed in 2022.
“I felt very comfortable speaking highly of IGEN in front of the executive committee,” said their Director of Finance. “We were looking for a system where we could achieve accuracy and efficiency, but the relationship we built with the IGEN team and the client interviews we conducted really sealed the deal.”
Once the initial solution was in place for the first entity, most of the work was already done. The solution architecture easily scaled to include both additional jurisdictions and multiple entities within the client’s footprint.
The client’s team leveraged our Accelerated Onboarding program, which guarantees the fastest time-to-value in the industry.
“It was very easy to transition. IGEN trained our IT and finance teams. We had full transparency and responsiveness during testing. I can't think of something that I was even a tiny bit disappointed in.” said the Director of Finance.
“Our total experience has been excellent. I always felt that IGEN was two steps ahead and knew my questions before I asked. IGEN guided and directed us, so we never felt uncomfortable with such a big change in our processes.” said their Director of Finance.
The real success is in the business outcomes the client has achieved with IGEN. Their finance team has:
- Significantly reduced the risk associated with late fees and penalties
- Transformed their tax process from heavy manual effort to automation from tax calculation on the invoice through to filing
- Minimized human error and inaccuracies
- Elevated two full-time team members to positions of greater organizational impact
- Saved 2,080 hours a year in calculating and validating taxes, equating to over $100,000 annually
- Achieved efficiencies across their North American entities for excise tax calculation, compliance & reporting