1. TAXWARE International’s Transaction Tax Server
as an eCommerce
Tax Solution
Presented by:
Dan Sullivan, CEO
Assisted by:
Scott H. Walters, Vice President, Research & Development
Jon W. Abolins, Director, Tax Department

2. Adapting Tax Technology
Sales/Use Tax & WORLDTAX Systems
Address driven (privacy)
Customizable by Merchant
Handles exempt sales by product or customer exemption
Creates Audit trails
Generates Tax Forms or records for electronic transmission
The Transaction Tax Server (TTS)
The “no fault” concept and TTS

3. Existing TAXWARE Systems The SALES/USE Tax System
MERCHANT
DATA
(Nexus,
Address, Etc.)
TAX
RATES
PRODUCT
TAX
RULES
STEP
(Customer
Exemption)
VERAZIP
(Address
Verify)
MERCHANT
PROCESSING
ReMIT
(Compliance)
TAX
CALCULATION
(S/U Tax)
(WorldTax)
UNIVERSAL
TAX LINK
(Data)
Determining Tax Jurisdictions
VERAZIP contains all TAXWARE Location Codes (consisting of the state code, the USPS Zip Code, and a two character tiebreaking “geo code”). The Location Code is the method through which we electronically identify a taxing jurisdiction. This database has been developed over twenty years. All other jurisdictional identifiers (i.e., zip+4, GIS, NPA-NXX) can be seamlessly converted into Location Codes.
Linking to TAXWARE’s Tax Systems
The Universal Tax Link (UTL) is the common API interfacing the TAXWARE Systems to electronic transaction accounting/GL systems. It is a key element of eCommerce, containing logic that determines the applicable taxing jurisdiction related to cross border transactions. The UTL will be used with all future ERP and eCommerce vendor interfaces.
Merchant Profiles
Merchant Tax Data Files allow vendors to implement their use tax collection obligation by turning off taxing jurisdictions in which they have no physical presence (point and click). Merchant Exemption Files allow vendors to implement exemptions based upon receipt of a direct pay or exemption certificate. During the tax calculation process, the vendor and customer locations are compared to determine the taxing location, and the type of tax (i.e., sales or use).
Exempt Transactions
TAXWARE’s products also have the ability to implement tax decisions related to various types of exemptions. Within TAXWARE’s systems there are three types of exemptions: product-based (product taxability matrix), entity-based (STEP), and usage-based (STEP and/or product taxability matrix).
Audit Trails and Producing the Actual Tax Forms for Submission to the Tax Authorities
After transactions are calculated, the results are sent to the merchant’s G/L system for entry onto the transaction document (i.e., invoice), and are stored in the Audit File. The ReMIT System places summary data from the audit file onto the appropriate space on the tax return.
Audit
File

4. Existing TAXWARE Systems The ReMIT System
Platform independent
Supports all TAXWARE systems
Internet-ready for eCommerce reporting
Currently in Use and Internet Ready
The ReMIT System, programmed in Java code and stored procedures, was designed to be internet ready. ReMIT includes scanned tax forms with calculation logic, and will eventually contain tax returns for all taxing authorities. Form and rate changes can be downloaded to Merchants over the Internet as required. This System currently contains over 400 sales and use tax forms.
ReMit for any Tax System which requires Tax collection and remission
It will be a simple matter to expand ReMIT to accommodate tax return forms other than sales and use taxes. Tax types related to Telecommunications and Utilities can be added to the system. Future development plans include adding meal and beverage tax returns to the system. ReMIT’s reporting capability has also been updated for internet taxing.

5. Transaction Tax Server
Buyer
Product
Tax Rates
Standard
Tax Rates
Address
Verification
Merchant
Transaction Data
Tax Data
TAXWARE Calculation
Engine
Systems Included in the Transaction Tax Server
The Transaction Tax Server (TTS) includes the UTL, the TAXWARE SALES/USE Tax System and the WORLDTAX System. In the future, it will also include TAXWARE’s Motor Fuel, Telecommunications, Natural Gas and Electricity Systems. The TTS will eventually provide tax calculation for any sale or purchase of any product or service anywhere on the planet.
Looking Toward the Future
TAXWARE has included billing address as a potential tax data element, in the event that internet tax rules implicate the billing address as part of a tax decision (i.e., taxes due to the jurisdiction of the billing address).
Special Internet Functionality
TAXWARE has updated the SALES/USE Tax System’s Toolkit for the internet. The Toolkit provides nexus functions for all jurisdictions, captures taxpayer registration numbers, performs product code mapping, generates tax reports and performs exemption certificate file processing functions.
The Future - No more In-house Systems
Through TTS, it will no longer be necessary to have an in-house tax system. No more in-house maintenance of file updates, of rates or software changes will be required, and set up and installation costs will be drastically reduced. The TTS may be a central server or series of servers located anywhere: at TAXWARE facilities, at one or many service bureaus, or in house at any retailer location.
TTS is not only an eCommerce System
Many different applications of the TTS are possible. Users would access the TTS to calculate taxes for; billing or purchasing, either over the internet or the intranet (for in-house TTS installations); business to business transactions; POS retail and mail order companies could calculate tax on any type of transaction. Even remote transactions using handhelds or laptops would be a candidate for the TTS.
Universal Linking
The TTS may also include components of other third party systems. It can also link to legacy (company-created) systems, greatly reducing implementation costs. Because implementation of the TTS merely requires understanding and use of a “link” into the system, it can be used by even the smallest of companies.
Merchant
Data
(Nexus, ID, etc.)

6. The Server Concept allows tax processing from a
variety of sources, using either batch or real time
processing.
Large scale
computer
Systems
TAXWARE
Transaction
Server
Laptops
Handhelds
Desktops
Transactions can be processed in various modes:
Batch mode
Invoice runs
Purchasing self-assessment
Over-the-counter cash transactions
POS batched
Etc.
Real time mode
All of the above
Over-the-counter credit card transactions
Internet transactions – retail
Internet transactions – business to business
Remote transactions with hand-held, laptop or desktop computers
On-site sales

7. “NO Fault!” Transaction Tax Server Merchant Merchant Buyer
Transaction Data
Buyer
Merchant
Product
Tax Rates
Standard
Tax Rates
Address
Verification
Merchant
“NO
Fault!”
Tax Data & Tax $$
Tax
Authority
Tax Data & Purchase $$
TAXWARE Calculation
Engine
TTS in Use With the “No fault” Concept
With the “No Fault” concept, the Merchandise amount would be credited to the Merchant, and the Tax Amount would be credited to the Tax Authorities along with Transaction Data.
Merchant
Data
(Nexus, ID, etc.)

8. Tax Authorities would make Exempt Certificate Files available to the
Transaction Tax Server
Product
Tax Rates
Standard
Tax Rates
Address
Verification
Tax Authorities
would make
Exempt Certificate
Files available to the
Transaction Server
TAXWARE Calculation
Engine
The Data Warehouse Concept
By developing a centralized Data Warehouse of Tax Exempt Certificate information, the TTS would have the ability to exempt sales “on the fly” by simply checking to see if the customer in question has a valid exemption certificate for that transaction.This cannot currently be handled on real time internet transaction.
It would also relieve the Merchant of the burden of collecting, storing and reviewing Tax Exempt Certificates, currently an expensive and error prone operation.
Merchant
Data
Tax
Authority
Exempt Certificate
Warehouse
Certificate Updates

9. Using TAXWARE’s ReMIT as a “Data Highway”
Tax Calc.
Audit File
TAXWARE’s
ReMIT
Summary
Tax Server
Tax Authority
TAXWARE’s
ReMIT
Internet
Transmission
Summary
Mapping Software
Audit File
Do Away with EDI and Move to the Future
The tax compliance system ReMIT would reduce the need for future development of EDI software applications used to transmit tax liability information. The same system used by taxpayers to prepare and transmit tax returns could be provided to taxing authorities that receive taxpayer returns. Thus, the pitcher (taxpayer) and the catcher (government) use the same system (ReMIT).
The forms and tax returns contained within ReMIT are furnished to TAXWARE by taxing authorities, ensuring accuracy and compliance. TAXWARE prepares and distributes monthly updates to the ReMIT System, and provides software updates to the taxpayer; we could do the same for taxing authorities.
The “Data Highway”
The TTS has the ability to electronically transmit tax amounts to tax authorities at the time of the transaction, while simultaneously transmitting the sales amount directly to the merchant. Tax data is transmitted via the internet to the tax authorities, either transaction by transaction or in a batch. As taxes are calculated using the TAXWARE System, an audit file is created which is used for tax compliance. The audit file is read and summarized by the ReMIT System (non-TAXWARE tax calculation systems may be used as input to the ReMIT System through the use of a mapping program).
There is no need to change existing Tax Authority back office Systems
Electronic tax return files could be submitted directly to the tax authorities, or to a third party processor for collection and distribution to the appropriate taxing authority. Tax authorities may then print transmitted returns, produce management reports, or review the return online. The data can be mapped to any format, allowing easy implementation into existing tax authority processing systems.
When received, tax data from individual transactions may be summarized and added to individual merchant records, reducing storage space. Additional detail may be included if desired.
The System is relatively easy and inexpensive to install.
Other
Tax Sources
Audit File

10. Merchant TTS Benefits to the Merchant
The Merchants would no longer have to;
-monitor tax rate changes
-monitor tax law changes
-maintain in-house tax Systems
Transaction based fees - even the smallest of Merchants
could afford it
If “no fault” is implemented
Benefits to the Merchant
No longer required to collect taxes
No longer required to complete & submit complicated tax
forms & payments
Fewer or no time consuming audits
Merchant

11. “No Fault” Benefits to The Tax Authorities
No need to change existing tax laws or rules
Tax Authorities receive revenues & data at the time
of the transaction
Tax Authorities can supply data directly to the server
and monitor the application of rates & laws
Tax Authorities can continue to use existing back office
Systems - the cost to convert is relatively minor
Audit overhead is reduced - Merchants are offered a
“fault free” option for using the TTS
The TTS Concept along with “No Fault”
offers the Tax Authorities an opportunity
to simplify taxes
Tax
Authority

12. Tax Data & Merchandise $$
Authority
Exempt Certificate
Warehouse
Certificate Updates
TAXWARE Calculation
Engine
Merchant
Transaction Tax Server
Data
(Nexus, ID, etc.)
Product
Tax Rates
Standard
Address
Verification
Transaction Data
Tax Data & Tax $$
Tax Data & Merchandise $$
THE
END