For businesses operating across multiple jurisdictions, the accurate and timely calculation of sales tax is non-negotiable. Modern ERP systems and tax engines like Vertex, Avalara, Sovos, and Thomson Reuters have transformed the process, allowing companies to handle high volumes of transactions with varying rates, rules, and exemptions.

But installing a tax calculation solution is only the beginning.

In today’s regulatory environment, failure to maintain and monitor your tax engine can lead to serious consequences: overcollection lawsuits, undercollection audits, class action liability, refund obligations, and whistleblower exposure in high-risk states.

This article explores why maintaining your tax engine requires continuous attention—and outlines the best practices that every company should implement to ensure their sales tax systems remain accurate, compliant, and defensible.

1. Sales Tax Engines Must Evolve With Your Business

No business is static, and neither is your tax system. Growth events like acquisitions, divestitures, or new product launches can render your initial tax configuration outdated overnight.

When the business changes, ask:

• Have we added new product types, tax categories, or customer exemptions?

• Are we now selling through marketplaces or e-invoicing platforms?

• Are we charging freight, handling, environmental fees, or other add-on charges that may trigger tax?

A single unchecked change in a selling channel, system configuration, or rate table can generate cascading compliance failures. That’s why continuous review of both tax logic and transaction flows is critical.

2. Implementation Is Only the Beginning

Implementing a sales tax engine—whether integrated with Oracle, SAP, NetSuite, or another ERP—requires careful planning across multiple touchpoints:

• Customer, vendor, product, and organizational data

• Tax scenarios and legal logic

• Configuration mapping and test cases

Yet many businesses treat implementation as the finish line rather than the starting point. Once live, these systems must be regularly evaluated to:

• Validate rule changes against evolving state laws

• Test connectors and API adapters after software upgrades

• Monitor data inheritance from source systems

Organizations must avoid the trap of relying on outdated mappings or assuming that post-implementation changes are automatically captured in tax logic.

3. Inherited Systems Can Be Dangerous

Many businesses rely on tax engines that were implemented years ago—or worse, inherited during an acquisition. Without a detailed understanding of how these systems are configured, companies run serious risks.

Best practice: conduct a sales tax solution “health check”, which should include:

1. Evaluating configuration logic and applicable tax rules

2. Reviewing key tax-sensitive product and customer data fields

3. Running test transactions through the system

4. Validating the results against current legal requirements

Without this validation, taxpayers may inadvertently overcollect tax, fail to apply valid exemptions, or miscalculate sourcing rules—leading to audit adjustments, refund demands, or reputational damage.

4. Documentation Must Match Reality

Good tax compliance starts with good documentation. That means not just keeping the original implementation plan, but updating it as the business evolves.

Key phases to document include:

• Requirements gathering: business and tax scenarios

• Solution design: data dictionaries, Visio diagrams, and functional specs

• Build and configuration: technical specs and configuration logic

• Testing: test scripts and validation results

• Deployment: business continuity plans and escalation protocols

Documentation must be treated as a living asset—especially during business model changes, ERP upgrades, or team turnover. If key personnel leave, your ability to support the system may evaporate unless records are complete and accessible.

5. Nexus Monitoring Is Non-Negotiable

One of the most common causes of tax engine failure is stale or incorrect nexus logic.

States continue to expand economic nexus rules, and companies must monitor:

• Thresholds for transaction and revenue volume

• Effective dates of nexus laws

• Sales to foreign markets or U.S. territories

• Affiliate or click-through nexus exposure

Failing to register in a jurisdiction where tax is due can create both undercollection liability and penalty risk. Conversely, collecting tax in a jurisdiction where you lack nexus may result in illegal overcollection—requiring customer refunds or class action settlements.

6. Data Reconciliation Must Be Routine

One of the simplest—but most overlooked—ways to prevent tax risk is to implement monthly reconciliation between the tax engine and the general ledger.

This should include:

• Comparing calculated tax vs. posted journal entries

• Reviewing exemption certificate usage

• Matching tax collected vs. tax remitted

Reconciling early and often allows companies to:

• Catch issues before filing deadlines

• Prevent large cumulative errors

• Avoid “fire drills” at the end of the month or quarter

Treat tax data like financial data—monitor it with the same level of rigor and control.

7. Maintain Internal and External Awareness

Staying current requires more than monitoring tax rate changes. It means engaging with:

• Software vendors and user groups

• Third-party consultants for implementation or audit reviews

• Certifications and continuing education for tax engine users

• User conferences where feature upgrades and legal updates are shared

Technology and tax law evolve quickly. Failing to monitor upgrades and legal notices may leave your system calculating tax based on outdated assumptions.

8. Risks of Noncompliance Are Rising

The cost of inaction is high. Businesses that fail to maintain their sales tax systems face:

• State assessments for undercollected tax

• Refund liabilities to customers for overcollection

• Class action lawsuits, particularly in states like California, Illinois, and New York

• Qui tam or whistleblower lawsuits, where third parties sue on behalf of the government

Some protections may exist under the Streamlined Sales and Use Tax Agreement, but these are limited and do not apply in most jurisdictions.

9. Updates Aren’t Just Technical—They’re Strategic

Sales tax solutions touch every part of the business: pricing, invoicing, procurement, finance, IT, and compliance. When any of these areas change, tax must be re-evaluated.

Be alert to:

• New product or service offerings

• Change in sourcing logic (drop shipments, fulfillment centers)

• Marketplace facilitator rules

• System upgrades or replacements

Failing to account for these changes in your tax engine can expose the company to multiple years of miscalculations.

10. There Is No One-Time Fix

Perhaps the most important takeaway: your tax engine is a living system. It must be nurtured, tested, and aligned with both business needs and legal requirements.

Successful companies treat their tax engine as a strategic asset, not a static tool. They:

• Allocate resources for ongoing support

• Budget for system reviews and upgrades

• Assign responsibility for monitoring changes

• Prioritize cross-functional training and communication

Conclusion: Maintenance Is the Price of Compliance

Sales tax systems are only as good as their last update. In a world of shifting tax laws, rapid business growth, and evolving software platforms, maintaining your sales tax engine is not optional—it’s essential.

Companies that treat tax engine maintenance as part of their core compliance strategy are far better positioned to reduce audit risk, maintain customer trust, and avoid expensive legal consequences.

In short: if your tax system hasn’t changed, it’s probably wrong.

© 2025 Jeanette Moffa. All Rights Reserved.