test.com - business credit card

• Home
• business credit card
• small business credit card
• best business credit card
• credit card processing for business
• new business credit card
• secured business credit card
• visa business credit card
• bad credit business credit card
• business accept credit card
• credit card services for business
• business credit card machine
• business card consolidation credit credit debt debt finances from homehome insurance work
• citi business credit card
• chase business credit card
• business card credit ebay prepaid
• compare business credit card

Tax Issues in the electronic age - corporate credit cards track tax information

Taxes are an inevitable part of doing business. But card-based payment technologies can assist with some of the administrative headaches.

E-business may be making companies more efficient and productive, but that hasn't relieved them of one of their more onerous chores: complying with numerous local, state and federal tax rules.

If anything, it raises new challenges. As companies buy online from more geographically dispersed vendors, the job of tracking state sales and use tax liabilities and IRS compliance is evolving. Even though Congress has imposed a moratorium on new Internet sales taxes, more than 7,000 state and local jurisdictions, some overlapping, already tax most retail purchases at various rates. The move from paper to electronic record keeping has other tax implications, most notably in how companies document deductions for travel, entertainment and office supplies.

Fortunately, technology is creating solutions to its own opportunities. Advanced corporate procurement systems, coupled with payment card solutions such as the MasterCard Corporate Purchasing [Card.sup.TM], can simplify the tracking of sales and use taxes. And card-based expense-reporting systems generate loads of data that can not only slash administrative costs and strengthen management controls, but also enhance tax record keeping.

Sales and Use Taxes: Untangling the Data

When companies buy supplies and equipment, they, like consumers, are taxed on the value of the purchases. Depending on the state and the nature of the transaction, vendors may add on the tax and remit it to the appropriate government agencies. When buying from out-of-state suppliers, purchasers may need to pay a use tax in lieu of a sales tax to the states and localities where the products or services are used. In any case, corporate buyers are obliged to pay tax at the time of the transaction -- and prove it if necessary. Failure to do so can result in stiff penalties.

Traditionally, authorities have accepted paper invoices as evidence that tax obligations have been met. But most e-purchases don't generate such documents. Sophisticated electronic procurement software from companies like Captura Software, Clarus Corp. and CommerceOne do a good job of estimating sales and use taxes, but they don't prove that they have been paid. However, corporate purchasing cards, which are often used in conjunction with such systems, can help.

Unlike consumer credit cards, which generally provide the user with basic information, such as the amount, place and date of a purchase, commercial systems like the MasterCard Corporate Purchasing Card can capture much more detailed transaction data. Although the level of detail depends on the capability of individual merchants, most large vendors of business products and services routinely supply what is known as "Level II" data, which includes the vendor's zip code and the amount of sales tax paid. Many suppliers are implementing systems that can provide more comprehensive "Level III" data, such as product codes, product descriptions, quantities, and freight and duty costs, on purchasing card bills. Software like Smart Data for Windows(R), from MasterCard International, convert this raw data into management reports, including itemized sales and use tax payments.

In a recent study by the consulting firm, Gunn Partners, Gunn analyzed purchasing card use by 22 large companies with revenues ranging from $1 billion to more than $100 billion. Eight had their sales and use tax records audited by states. None incurred a penalty.

Employee Expenses: Down With Paperwork

Technology also helps corporations address tax issues arising from employee spending on travel and entertainment. The IRS requires detailed records of such expenditures. Traditionally, employees are required to fill out expense reports and attach receipts, which are subject to tax audits.

Corporate payment cards -- T&E, fleet, purchasing or, increasingly, "one cards" which combine the functionality of all three -- can dramatically reduce administrative overhead. Using the cards and the software employees are able to generate highly detailed reports that contain virtually all of the information required on a traditional expense report. In some cases, employees use the itemized statement as a substitute for a traditional expense report. Other companies use the electronically delivered data to automatically "pre-populate" -- or fill in -- electronic expense reports.

All the employee has to do is certify the accuracy of the charges. When using a program like Captura Software's Captura Expense program, the whole process can be undertaken using a Web browser. If the employee is responsible for paying the card bill, he or she gets reimbursed; otherwise the company pays the card issuer directly.

Card data can also streamline the preparation of corporate returns by making it easy to categorize purchases by type of tax deduction. As individual employees gain the authority to make larger purchases with purchasing cards, companies must differentiate between items that are considered operating expenses -- paper and janitorial supplies, for example -- and capital items such as fax machines or office furniture -- that must be depreciated over several years. Detailed billing statements allow companies to sort expenditures automatically.

Until recently there was some concern among corporate financial managers that electronic documentation might be more likely than paper receipts to be challenged by IRS auditors. Thus, many companies ware-housed paper backups. However, data from corporate card vendors who "exercise reasonable controls to ensure the integrity, accuracy and reliability of the data, and to protect it from additions, alterations or deletions" are acceptable alternatives to receipts, under certain circumstances. This requires, among other things, that companies need to use a vendor that holds the data in a secure warehouse that is not subject to tampering by the corporation. The MasterCard Corporate [Card.sup.TM], MasterCard Corporate Purchasing [Card.sup.TM], MasterCard Corporate Fleet Card(R), and MasterCard Corporate Multi [Card.sup.TM] meet this requirement.

Complying with state, local and federal tax laws will never be completely painless. But technology can make the process simpler and much less expensive.

Niles Howard. Formerly an editor at Money and Business Month magazines, he is president of Niles Howard Associates, a Connecticut consulting firm.

COPYRIGHT 1999 CFO Publishing Corp.
COPYRIGHT 2000 Gale Group