Vertex Indirect Tax for Retail. Product Guide

Transcription

1 Vertex Indirect Tax for Retail Product Guide February, 2011

2 TABLE OF CONTENTS Introduction...1 Vertex Position in the Retail Industry...1 Benefits of Automating The Retail Tax Operation...1 Vertex Indirect Tax O Series...1 Overview...1 Architecture...2 Comprehensive Content Supported by Vertex Research Professionals...3 Requirements for Initial Setup of Vertex O Series...4 Product Grouping Codes...4 When Product Grouping Codes are not Sensitized for Tax...6 Sales Tax Calculation The Process...6 Customer Exemptions...8 Vertex Address Cleansing...9 Vertex Indirect Tax for Retail Overview Transactions Unique to Retailers Vertex Retail Deployment Models Retail Tax Extract (RTE) Deployment Local Indirect Tax Engine (LITE) Deployment Reporting and Compliance Reporting Vertex Reporting and Analysis Vertex Sales & Use Tax Returns Vertex Indirect Tax O Series an End to end Enterprise Tax Solution Capability to Start anywhere for Centralized Tax Automation Hardware and Software Requirements User Interface Database Server Application Server and Java API Support of Virtualization Environments About Vertex Inc About Vertex Consulting Services Appendix A: Standard Reports Appendix B: Software Requirements for the Application Server and the Java API Web Service Java API Application Servers Glossary Vertex Inc. Proprietary and Confidential

3 INTRODUCTION VERTEX POSITION IN THE RETAIL INDUSTRY Vertex has over 30 years of experience delivering high quality solutions for tax professionals in the area of indirect tax calculation and compliance. With more than 300 retail customers, and partnerships with major Point of sale (POS) and Enterprise Resource Planning (ERP) system vendors, Vertex has acquired a firm understanding of the special needs and requirements of the retail industry and the technology trends that will impact your infrastructure. Vertex is a member of the National Retail Federation (NRF). Vertex is also an active contributing member of the Association for Retail Technology Standards (ARTS) committee of the NRF. ARTS is chartered to help define the standards for calculation of sales tax and the consolidation of tax results, both domestically and globally. BENEFITS OF AUTOMATING THE RETAIL TAX OPERATION Automating the processing of indirect taxes delivers immediate tangible benefits. Retail customers of Vertex have experienced most, if not all, of the following: Cost savings from elimination of manual processes Fewer problematic audits Less reliance on IT resources Increased accuracy of tax calculations across all channels Positive ROI in a short timeframe Ability to scale to adapt to growth Overall improved company bottom line VERTEX INDIRECT TAX O SERIES OVERVIEW Vertex Indirect Tax O Series (Vertex O Series) is an integral component of all Vertex Indirect Tax for Retail (Vertex Retail) implementations. Vertex O Series manages tax on both sales and use tax transactions; it is completely scalable to support growth and expansion; and since it is also capable of processing value added taxes (VAT), it delivers compliance for companies operating in the global marketplace. With Web based access, Vertex O Series enables you to centrally manage and maintain all tax compliance activities from a single instance. In addition, since Vertex O Series will interface seamlessly with your company s ERP or financial system, implementation is efficient and cost effective. The Vertex O Series platform provides an advanced architecture for integrating a broad range of tax compliance features into a single, seamless application suite (Figure 1). Vertex Inc. Proprietary & Confidential Page 1

4 Vertex O Series significantly reduces the complexities and expense of multi state and global tax compliance processes for your organization. To achieve and maintain an efficient tax compliance process, Vertex O Series calculates tax based on a combination of Vertex tax research and your customizations of jurisdiction rates, exceptions and exemptions. It also supports precise situs determination, tiered tax, maximum basis tax, maximum tax amount tax, compound tax and complex rounding rules. Compliance is achieved with the addition of Vertex Sales and Use Tax Returns. And, the system provides users with extensive reporting capabilities. Figure 1 Vertex O Series Platform ARCHITECTURE The Vertex O Series platform provides an advanced architecture for integrating a broad range of tax compliance features into a single, seamless application suite. Vertex O Series is completely platformindependent for maximum flexibility and cost savings providing easy, flexible deployment in a variety of operating environments. It can fit into any existing IT infrastructure, making deployment comparatively easy and low cost. Platform independence also enables Vertex O Series to adapt to changing IT infrastructure without constraining platform choices. Businesses are free to invest in any hardware, databases, and software required to run day to day operations, as well as to integrate IT infrastructure from acquired organizations. Vertex Inc. Proprietary & Confidential Page 2

5 By using object oriented techniques and Web technologies, Vertex O Series efficiently combines functionality for data maintenance, tax calculation, system administration and external interface to a financial host system that can be shared by multiple applications. COMPREHENSIVE CONTENT SUPPORTED BY VERTEX RESEARCH PROFESSIONALS Leveraging the skills and experience of over 50 tax research professionals, Vertex has incorporated directly within Vertex O Series a data set of tax rates and rules compiled from comprehensive taxability research. This data set contains coverage for approximately 10,220 U.S. taxing jurisdictions including local county, city, and district jurisdictions, and for nearly 240 countries. Collection of this data involves well managed processes which are reviewed by third party auditors as part of a periodic audit program performed in accordance with Statement on Auditing Standards (SAS) No. 70. Routinely Updated Vertex continuously maintains this data set and provides Vertex O Series users a downloadable update file with the effective dates for each change. The update file is made available on a regular monthly schedule, and contains only the changes since the last update. Since all rates and rules are driven by effective dates, the history of this data is always available. Updates can be applied to the system by a non technical individual using a built in update utility so no IT assistance is required, allowing for quick response to the posting of these updates. It s a simple, one step process that keeps your tax calculations compliant with even the most recent changes imposed by country, state, provincial and local taxing authorities. As a result, maintaining maximum tax compliance with Vertex O Series is efficient and delivers extremely high value to your tax department. Standard Rates and Rules and Special Transactions Ordinarily, staying current with the constant changes in each jurisdiction s tax legislation would be an overwhelming and expensive task for any tax department. But, as described above, the comprehensive set of tax data included with the system unburdens your tax professionals from laborious, timeconsuming research, freeing them to perform more productive tasks. Included in this comprehensive data set are: Standard rates for goods and services in over 9,000 U.S. and non U.S. jurisdictions, including country, state/province, county, city, and district jurisdictions Situs or Place of Supply rules Taxability based on what the product is or how it is used with an associated tax result of exempt, non taxable, or non standard (reduced) rate for taxability categories Intra European Union (EU) transactions including triangular supplies Reverse charges (self assessment of VAT) Tiered tax structures Vertex Inc. Proprietary & Confidential Page 3

6 Maximum tax where maximums are set for the tax amount or the basis amount Percentage basis rules when a reduction in the basis is applied as a percentage Specific rules regarding the precision with which rounding is calculated Discounts Jurisdiction override rules Sales tax holidays REQUIREMENTS FOR INITIAL SETUP OF VERTEX O SERIES In order to properly implement Vertex O Series you will need to identify, or define certain attributes of your business and product line, such as: Taxpayer structure or hierarchy Locations where you are registered to collect tax for each of your company s filing entities Store locations Assignment of all products to taxability categories Customer exemptions Taxpayer structure can have up to three levels company, division, and department. This structure can be useful in reporting or to isolate the taxability setup to a particular part of your organization. Registrations for taxpayers can be at the state level and include all locals, or you can specify local jurisdictions within a particular state. Store locations which are defined as part of a filing entity can be added through an import feature. While these store locations are important for filing returns in some jurisdictions, they are also required so the appropriate taxing jurisdictions can be identified for in store sales. PRODUCT GROUPING CODES Product groups or classes are assigned to the Vertex taxability categories to apply the appropriate rule (Figure 2). These are not Vertex codes, but the codes that either already exist in your inventory or POS system. Vertex Inc. Proprietary & Confidential Page 4

7 Figure 2 Taxability Categories Most products are simply taxable at the standard rate. In order to simplify the setup effort, Vertex requires only that you identify products, product groups, or services that will have special taxability or rates. The default behavior of the system is to tax at the standard rate and assumes items to be tangible personal property. A careful review of the item categories in Vertex O Series should provide the basis for your decision on mapping products to Vertex item categories. While the category list in Vertex O Series is fairly comprehensive, you may find it advantageous to define your own taxability rule for a particular jurisdiction, which the system allows you to easily accomplish. Vertex Inc. Proprietary & Confidential Page 5

8 WHEN PRODUCT GROUPING CODES ARE NOT SENSITIZED FOR TAX Vertex Retail Solutions Let s say that your inventory or POS system does not permit the assignment of a product group that would be useful for taxability. Perhaps that field is reserved for store aisle or store department. Tax Assist rule builder will let you create a new identifier (Figure 3). With Tax Assist, any input data element on the transaction can be used in a logical IF/THEN rule to set results that are used by the calculation when determining taxability. Figure 3 Tax Assist Rule Builder If you can group SKU s into a taxability group, that group can be defined in a Tax Assist rule. That new group code can then be linked to a taxability category. It would not be necessary to assign each SKU, but only the taxability group code. For each transaction, that code will be determined from the group code with a lookup against the Tax Assist rules. Then it is used to find the appropriate taxability category and apply the correct tax rule. SALES TAX CALCULATION THE PROCESS During transaction processing, the Vertex O Series calculation engine applies logic to determine the most accurate, current, and compliant tax treatment for the given set of inputs supplied from the financial system. Described below is the process Vertex O Series typically applies in the calculation of sales tax. Vertex Inc. Proprietary & Confidential Page 6

9 Starting with the following information for each transaction: The Dispatcher Address information or the Physical Origin of the transaction The Seller Address information, also referred to as the Administrative Origin The Customer Address information or Destination And the Benefit Received Address, also called the Administrative Destination Vertex Retail Solutions Vertex O Series will then: Accurately determine the Situs and identify all of the appropriate taxing jurisdictions Next, using the tax rule that is based on the product or product group code involved in the transaction, Vertex O Series will determine if one or more of the following should be applied: Exemptions from tax Special Rates Tax holiday exemptions from tax Using the monetary amount of the transaction, Vertex O Series will then: Adjust the basis as defined in the jurisdiction for coupons and discounts Calculate an accurate sales and sellers use tax amount for each jurisdiction using any applicable threshold, tier, or maximum tax rules Apply the appropriate rounding rules or bracket schedules when required Apply any other tax impositions or environmental fees, white goods fees, etc. Vertex O Series next determines if any of the following transaction items need to be applied: Refunds Delivery charges Rental charges Restocking fee Non merchandise fees Sale of Warranties Component/Packaged issues Delivery Method Taxability Multiple ship to locations Drop shipments Service Charges After performing all of the applicable steps described above, Vertex O Series calculates and returns the final tax results in an XML response message. This data exchange between the financial system and Vertex O Series can be scheduled by the user or executed continuously in real time. Vertex Inc. Proprietary & Confidential Page 7

10 CUSTOMER EXEMPTIONS Exemption certificates need to be obtained (or created), and stored for each customer who qualifies for an exemption of sales tax. Vertex recommends that in these cases you include exemption certificate information for specific customers. This is easily accomplished using Exemption Certificate Manager (ECM) which is embedded within every Vertex O Series. ECM will accept contact information on the exempt customer and expiration date of the certificate, and permit you to limit the exemption to certain products and product groups (Figure 4). The exemption will only apply to transactions meeting the criteria that have been set up for that customer. Or, if you prefer, customers or classes of customers can receive specific taxability or rates by defining a custom rule. Figure 4 Managing Exemption Certificates ECM includes a library of jurisdiction forms, batch letter processing for sending certificate related notifications, and certificate non compliance and audit reporting. With the essential information about the certificates all in one place, compliance can be monitored more efficiently. ECM also enables you to give auditors direct access to select certificate data, eliminating the time consuming and labor intensive process of manually managing paper certificates. Vertex Inc. Proprietary & Confidential Page 8

11 VERTEX ADDRESS CLEANSING Vertex Retail Solutions For transactions in the United States, Vertex recommends the use of nine digit (ZIP+4) codes for greatest accuracy in determining taxing jurisdictions. If ZIP+4 codes are not included in your host system data, TaxGIS, which identifies taxing jurisdictions using Geographic Information System (GIS) processing tools, can assign them using the Vertex Address Cleansing solution. Vertex Address Cleansing ensures data quality and enhances the accuracy of tax jurisdiction assignment for locations in the United States by evaluating U.S. addresses and returning validated information which includes full ZIP+4 postal codes Vertex Address Cleansing can be used in conjunction with TaxGIS. A GIS analyzes a specific location using multiple overlapping layers of geographical information. A tax area represents a unique set of jurisdictions, while a Tax Area ID is an identifier that enables you to access specific tax area information that resides in the TaxGIS database. Vertex has partnered with Business Objects, an SAP company, to deliver an integrated address cleansing solution for U.S. address data. Vertex Address Cleansing includes the following functionality: Assigns nine digit ZIP+4 codes to addresses provided with only five digit ZIP codes Uses all address components, including street address, for determination of accurate ZIP+4 code Corrects all address components including street address Lookups are supported by United States Postal Service (USPS) Coding Accuracy Support System (CASS) certified database Updated monthly to include the latest changes in the USPS database For users with a North American regional license, Vertex Address Cleansing can be licensed as an add on feature of Vertex O Series and Vertex Retail. Vertex Inc. Proprietary & Confidential Page 9

12 VERTEX INDIRECT TAX FOR RETAIL OVERVIEW Vertex Indirect Tax for Retail (Vertex Retail) is an extension of Vertex O Series that provides an end toend solution to manage tax at the enterprise level. Vertex Retail combines industry leading tax research and technology, plus a knowledgeable team of implementation support consultants to provide your tax department with the tools necessary to deliver accurate and consistent tax calculation for every transaction. Vertex Retail is designed to overcome many of the special tax challenges commonly faced by retailers: The high volume of retail transactions that amplify audits and penalties which in turn require large amounts of cash be kept in reserve as a contingency fund Transactional complexities resulting from deliveries, installations, send sales, Internet and mobile device purchases and returns Business to business taxability and business to consumer taxability at every store location Sales tax sourcing complexities involving products that can be sourced from the retail location, from a warehouse, or offered to consumers and businesses from a Web site The difficulties of complying with new jurisdictions and new tax rates and rules for additional new stores Additional nexus from company acquisitions that immediately impact the liability of the company s core business Exposure to class action lawsuits from inaccurate tax calculations that can lead to costly settlements, customer dissatisfaction and negative publicity The complexities associated with tax holidays The laborious administration of thousands of exemption certificates to manage Who and Use exceptions Vertex Retail will reduce your company s exposure to audits while saving time and money through the elimination of error prone manual tasks. Vertex Retail also ensures that sales and use tax is applied accurately and consistently across all sales channels including: Store point of sale locations E commerce sales Store kiosks Catalog sales Call center sales Mobile device transactions Handheld devices Vertex Inc. Proprietary & Confidential Page 10

13 A single installation of Vertex Retail will deliver all of the following from one central location: Continuous updates of tax rules and rates that reflect the most recent changes in state and local law Accurate identification of all jurisdictions authorized to apply tax for each transaction The application of special calculation and rounding rules including bracket schedules Assistance to meet returns filing deadlines for all jurisdictions to which your company is required to remit taxes Scalability that will maintain compliance when an acquisition dramatically increases the number of stores Centralization of tax results and activity logs to permit process analysis for Sarbanes Oxley compliance Enhancement of your ability to effectively support audits by enabling you to generate concise and accurate reports on demand without IT involvement Tax processing support for global expansion Vertex Retail also delivers significant benefits to the IT department as well. Due to a scalable, Webbased, service oriented architecture, Vertex Retail provides you with the flexibility to work with any POS, E commerce or back office system offering seamless integration with all retail systems, new or legacy. Another reason Vertex Retail is capable of achieving tax compliance in such a complicated environment is the capability to connect with all operations that support sales, including: Back office Store level Procurement Inventory movement Asset transfer Since most retail operating environments are fragmented infrastructures composed of multiple, disparate vendor systems, the integration flexibility of Vertex Retail provides the IT department a quicker and easier implementation as well as less ongoing maintenance. TRANSACTIONS UNIQUE TO RETAILERS Vertex Retail also ensures that sales and use tax is applied accurately and consistently across all types and variations of sales transactions retailers often encounter, including: Deliveries Services, such as installations, which are rendered at a customer s home address In store purchases shipped to another destination (send sales) Vertex Inc. Proprietary & Confidential Page 11

14 Store returns from another jurisdiction Sales of non core product types that have diverse taxability (store within a store) Internet purchases returned in store Mobile purchases for in store pickup Vertex Retail Solutions And, because of Vertex s comprehensive tax research, you will also be compliant with tax holidays, tiered taxes, threshold and compound taxes, taxes levied by origin and modified origin states, bracket taxes, and more. Vertex Inc. Proprietary & Confidential Page 12

15 VERTEX RETAIL DEPLOYMENT MODELS RETAIL TAX EXTRACT (RTE) DEPLOYMENT This deployment model for retail exhibits a great deal of flexibility depending upon the capabilities and parameters of the customer s POS system. RTE relies on a company s native POS tax calculations so it does not require a Vertex O Series instance deployed at each store location, only the one at central headquarters. The scalability of the RTE deployment is virtually unlimited provided there are an adequate number of servers implemented. Most of the components required to implement this deployment are readily available in most company infrastructures. An overview of the Retail Tax Extract (RTE) process is illustrated in Figure 5 below. Retail Tax Extract Process The RTE Process begins when data is extracted from one or both of the following Vertex O Series databases: The Tax Processing System (TPS) Database which contains records pertaining to the tax rate and rule data supplied by Vertex and also data defined by you The Tax Geographical Identification System (TaxGIS) Database which contains records for over 80,000 jurisdictions that can levy tax Depending upon the type of transaction taking place at the store level, there are two optional extracts that can take place: By business location for in store sales the system uses the taxpayer business location for determining applicable tax rules for a jurisdiction and extracts data from the TPS database only By registration location for send sales the system uses taxpayer registration locations for determining applicable tax rules for a jurisdiction outside the business location, which requires tax data to be extracted from both the TPS and the TaxGIS databases Once the data has been assembled from the TPS and/or the TaxGIS databases, Vertex O Series runs a series of sales tax transactions for each combination of Date, Location (business and/or registered) and Product Classes to determine and identify changes in taxability results. Vertex O Series utilizes Product Groups which are logical categories or classes of products with similar taxability rules. The use of Product Groups eliminates issues encountered when there are thousands or even tens of thousands of individual product offerings (SKUs). Output from these sales tax transactions are then written to database tables (RTE Staging Tables). Retail Tax Calculation Process From these database tables, there are several options available to extract and load data from the staging tables to the store (POS) levels. The selected option is partially determined by the type of POS systems installed at the store level. Vertex Inc. Proprietary & Confidential Page 13

16 Vertex Consultants have extensive experience in identifying which of the following options would deliver optimum performance for your infrastructure: Use of an extract transform load (ETL) program to pull data from the tables for use at the store (POS) levels this process will replace the current native methodology used to feed tax data to the POS, but it does not alter or replace the current POS tax calculation logic The system can be configured to generate an XML data file from the staging tables this option may be the most applicable for customers with POS systems capable of reading XML data files The system utilizes an algorithm to build a tax bracket schedule this option is applicable to POS systems that can only handle a bracket or a schedule structure for looking up tax amounts Vertex Consulting can also provide you with the services required to implement and support your retail solution. Once the data is loaded into the POS Tax Data Interface Tables, each POS has access to the data necessary to accurately calculate sales tax for each transaction. Retail Consolidation Process The calculation results from each POS instance are recorded and temporarily stored in the POS system Transaction Log files (T Logs). Next, all calculations from all POS instances are consolidated into one file and transferred to the POS Log Tables. Vertex Inc. Proprietary & Confidential Page 14

17 Figure 5 Retail Tax Extract Deployment The Batch Client Interface Process To support central reporting of tax calculations, tax results created from the native POS system in the form of POS T log files, which are consolidated as described above, need to be uploaded to the central Vertex O Series instance located at central headquarters (Figure 5 above). This is accomplished using distribute tax transactions to make sure the data is in a format acceptable to Vertex O Series with proper jurisdiction breakout. This also yields data that is suitable for tax reporting and business intelligence reporting purposes. Transaction data temporarily stored in the POS Log Tables can be uploaded to the full instance of Vertex O Series at central headquarters very efficiently with the Batch Client Interface. Vertex Consulting can be engaged to support your integration process. The Batch Client Interface (BCI) comes standard with Vertex O Series and is recommended by Vertex. Alternatively however, users can create their own Java API. Although use of the BCI is simpler than developing a Java or Web service interface, it will still be necessary to create flat files or database tables for BCI input. Vertex Inc. Proprietary & Confidential Page 15

18 Successful use of the Batch Client Interface utility requires: A basic knowledge of creating and maintaining Excel spreadsheets Running scripts through the command line in both Windows and UNIX SQL scripting LOCAL INDIRECT TAX ENGINE (LITE) DEPLOYMENT This deployment model for retail consists of a full Vertex O Series instance residing on a server at central headquarters, and a deployment of the Vertex O Series calculation engine residing on servers at each POS location. These store level deployments are light weight versions of Vertex O Series and include just the number of files needed to successfully calculate tax. Ultimately, tax results are accumulated at the store level POS location server and are uploaded back to central headquarters for consumption by the full instance of Vertex O Series for reconciliation or remittance. Refer to Figure 6 below to follow the flow of data in the LITE Deployment. The first step in this deployment model is the creation of the Tax Engine Extract file using a utility provided by Vertex. The primary purpose of this utility which is located at central headquarters is to extract from Vertex O Series all the data required to accurately calculate tax at each individual location and efficiently move the data to each location. This file should be re created whenever there are changes in the Tax Data, or when Vertex provides the monthly data update. It is recommended that you use the same name for the Tax Engine Extract file so that the latest version will simply overwrite the outdated version. There are two data extraction options available with the Tax Engine Extract utility: All Stores This option produces a single Extract Transform Load (ETL) zip file that contains the jurisdictional data related only to the Tax Area IDs associated with each store location. National Data A single ETL zip file is extracted that includes all ZIP Code locations throughout the continental US and Canada. This single file is then distributed to all individual POS locations. Because all POS locations will now have all jurisdictional data not just the data related to the store s Tax Area IDs this option will supports send sales and the recalculation of merchandise returns on the local server. After the ETL zip file is created, it is necessary to transfer the file from central headquarters to individual store (POS) locations. This is easily accomplished using any readily available third party data distribution service capable of placing the files on a designated directory on the dedicated POS location server. This data distribution service must reside on all servers and the ETL files must remain in zip format. Vertex Inc. Proprietary & Confidential Page 16

19 As tax transactions are processed at the individual store locations, the LITE writes the calculation results to a Tax Journal zip file. When this zip file reaches a specified size, or at predetermined time intervals, the current Tax Journal File zip file is closed and a new one is opened. A third party data distribution service is then required to deliver the Tax Journal zip files to central headquarters. Located at central headquarters, the Tax Journal Import Service, which runs with the Vertex Central Web application, loads the Tax Journal Zip files into the Reporting Database of the full Vertex O Series deployment at headquarters. Figure 6 Local Indirect Tax Engine Deployment Vertex Inc. Proprietary & Confidential Page 17

20 REPORTING AND COMPLIANCE REPORTING Standard Reports Vertex O Series contains a Standard Reports function that can quickly and easily generate reports based on data in the Tax Journal and Reporting databases. Standard Reports have a selectable set of filter criteria and a fixed output layout available in portable document format (PDF). These reports enable you to: List the total tax collected in a particular jurisdiction in a particular year Display total sales, taxable sales, nontaxable sales, and exempt sales by country, state, or local jurisdictions for a particular time period Schedule report time and frequency Standard Reports are useful for audit preparation, audit support, general ledger reconciliation, returns preparation, and day to day management of transaction taxes. The seven Standard Reports available with Vertex O Series for Retail are described in Appendix A. Data Extract Data Extract is a tool for creating custom reports from Transactional or Taxability Manager data. Data Extract allows a non technical user to be able to quickly and easily access the data needed for compliance purposes without involving IT. This powerful tool gives O Series users the ability to define columns and export data to a delimited file, XML file, PDF, RTF, or an HTML file which can then be imported into your choice of external applications. Data Extract enables you to: Create custom extract definitions for data based on Vertex supplied Data Extract templates Define grouping or sort criteria for the report or export View Sample Extracts or copy them to create your own reports Select either a simple tabular report format or a delimited export format, using the delimited characters available: Define a function for the field you are selecting such as average, count, or max. and the list of functions will change depending on the field you selected Define operators such as Equals, Does Not Equal, and Less Than to help narrow the data Build "AND" or "OR" statements in SQL without having to know the exact SQL format Save your filters Vertex Inc. Proprietary & Confidential Page 18

21 Sample Extracts are twelve Vertex supplied reports that you can copy and use to create your own reports as illustrated in Figure 7 below. Figure 7 Data Extract Sample Reports VERTEX REPORTING AND ANALYSIS Reporting and Analysis is a powerful reporting tool integrated with Vertex O Series that enables you to analyze trends, spot irregularities, and turn tax data into invaluable information for tax savings strategy. It is a Web based reporting and analytics application developed with market leading Business Intelligence technology from IBM Cognos. Reporting and Analysis offers additional flexibility over the standard reports provided within Vertex O Series, enabling you to meet your tax reporting needs by creating custom tables, pivots, charts, and reports that contain the information you need, in the format you require. Vertex Inc. Proprietary & Confidential Page 19

22 VERTEX SALES & USE TAX RETURNS Vertex Retail Solutions Automating compliance is easily achieved with the addition of Vertex Sales & Use Tax Returns (Vertex Returns) to your Vertex Retail implementation. Vertex Returns is a Windows based PC application that produces signature ready sales and use tax returns for taxing jurisdictions in the United States, Canada, and Puerto Rico. To produce the returns, the system uses jurisdiction summary tax data or combined totals imported from Vertex Retail. Vertex Returns calculates, formats, and prints the forms you need to file, including sales and use tax returns, schedules, worksheets, payment requests, and consolidated tax returns for both state and local jurisdictions. In addition, Web filing is also available for a select number of states. Vertex Inc. Proprietary & Confidential Page 20

23 VERTEX INDIRECT TAX O SERIES AN END TO END ENTERPRISE TAX SOLUTION Vertex O Series is an enterprise tax processing solution that manages tax on both sales and procurement transactions. It is completely scalable to support growth and expansion; and it delivers compliance for companies operating in the global marketplace. And, with the addition of Vertex Sales & Use Tax Returns, Vertex O Series will provide your company with all the benefits of a true, end to end indirect tax processing solution, including: Precise determination of taxability and jurisdictions Maintenance of an accurate rate and rule database Calculation of complex transactions Complete automated management of exemption certificates Automatic production of signature ready sales and use tax returns Advanced data management tools, custom reporting capabilities and exemption certificate management Greater visibility into your tax processes to aid audit preparation and support strategic financial decision making Centralized maintenance and management of all tax compliance activities from a single instance CAPABILITY TO START ANYWHERE FOR CENTRALIZED TAX AUTOMATION Vertex O Series is an intelligent tax calculation engine that automatically knows which type of tax to calculate and how to calculate it based on the messages (or data) passed into it from various ERP, POS, and financial systems. Since the same central instance of Vertex O Series can manage sales tax, the accrual of use tax, and the verification of tax on vendor invoices, with no additional installation you can build upon your Vertex O Series for Retail instance to process all indirect taxes simply by licensing additional databases. Or, if your company already is processing sales, use, or value added taxes with Vertex O Series, you can simply build upon that implementation to process all retail taxes. This is possible, because Vertex O Series: Is built on a scalable, web based, service oriented architecture Is flexible and enables seamless integration with all of your multi channel operational systems (such as store, back office, and ecommerce systems), both legacy and new Provides a single, data driven calculation engine that supports real time transactions Determines taxability based on a comprehensive tax data model that covers all possible sales, consumer use, and VAT tax permutations In essence, you can simply start anywhere within your tax processing arena with a Vertex O Series instance and build out until all indirect taxes are being processed with one platform and one tax calculation engine. Vertex Inc. Proprietary & Confidential Page 21

24 This allows your IT department to eliminate multiple, siloed applications and unify enterprise data. The result is a substantial reduction in the total cost of ownership (TCO) for tax technology, since IT will have fewer systems to manage and keep current. Vertex Inc. Proprietary & Confidential Page 22

25 HARDWARE AND SOFTWARE REQUIREMENTS USER INTERFACE Accessing Vertex O Series can be accomplished through any computer that supports any one of the major Internet browsers including Microsoft Internet Explorer 7.0 or 8.0, Apple Safari 4 or Mozilla Firefox 3.5 or 3.6. The supported Internet browser plug ins include Adobe Flash 9 or 10; and, to review reports, the computer will require Adobe Reader or later. DATABASE SERVER Vertex O Series operates with the following databases: IBM DB2 UDB, versions 9.1, 9.5 or 9.7 for Windows; UNIX or Linux; Microsoft SQL Server 2005 or 2008; and Oracle Database 10g Release 2 or 11g (with minimum patch level ). All database servers have the same minimum criteria (requirements are based on processing 20 transactions per second using an embedded calculation engine with a single database server): CPU Memory Network connection Item Minimum Requirement Two GHz Processors 2,048 MB 100BaseT or equivalent The amount of disk space required for all three servers will vary depending upon your transaction volume and data retention requirements. APPLICATION SERVER AND JAVA API A list of the specific software requirements for the Application Server and the Java API can be viewed in Appendix B. SUPPORT OF VIRTUALIZATION ENVIRONMENTS While it is not feasible for Vertex to test the Vertex O Series product in each of the numerous virtualization technologies, Vertex fully supports virtualization technologies and will make every effort to reproduce and resolve any issues a customer may encounter in their specific native environment. Vertex Inc. Proprietary & Confidential Page 23

26 ABOUT VERTEX INC. Vertex Retail Solutions With more than 30 years of experience, Vertex Inc. is the leading provider of enterprise corporate tax solutions and process management services worldwide. Vertex solutions help companies streamline and integrate tax provision and compliance processes, and leverage information to discover new strategic tax savings across every major line of business tax, including income, sales, consumer use, value added, communications, and payroll. To serve its customers, Vertex works in partnership with the world s leading providers of ERP software and related services. Founded in 1978, Vertex is a privately held company that employs more than 600 professionals at its headquarters in the U.S. (Berwyn, PA) and its offices in Europe (London), Brazil (São Paulo), Atlanta, Chicago, Dallas, Phoenix, San Francisco, Sarasota and Washington DC. For more information about Vertex, visit our Web site at ABOUT VERTEX CONSULTING SERVICES Vertex Consulting is an experienced staff of dedicated tax technologists, researchers, and project management professionals. Over 500 clients in all major industries across both North America and Europe have increased the value their tax departments add to their organizations by partnering with Vertex Consulting to implement tax and tax technology best practices. Since Vertex does not provide external auditing, there are no Sarbanes Oxley restrictions or conflicts of interest on tax consultation with clients. This allows Vertex Consulting to combine recognized industry expertise in both tax and technology to provide clients with a single point of contact for their tax technology needs. Vertex Inc. Proprietary & Confidential Page 24

27 APPENDIX A: STANDARD REPORTS The seven Standard Reports available with Vertex O Series are: Invoice Tax Detail Report The Invoice Tax Detail Report lists each line item of an invoice, grouped by jurisdiction and based on the report criteria. Use this for tax audits. Depending on the Business Event you select, Invoice Tax Detail will only report on supplies or procurement transactions. Use a meaningful name so that you can easily identify the report by Business Event. Returns Export State Report The Returns State Report enables you to gather and export tax data to complete United States and Canadian tax returns. It sorts the information by export state. Returns Export Location Report The Returns Export Location Report enables you to gather and export tax data to complete United States and Canadian tax returns. It sorts the information by export location. Returns Export Tax Type Report The Returns Export Tax Type Report enables you to gather and export tax data to complete United States and Canadian tax returns. It sorts the information by export tax type. Taxability Category Report The Taxability Category Report lists Vertex provided or userdefined taxability categories. This report includes category descriptions, paths, codes, and effective dates. Transaction Recap Report The Transaction Recap Report summarizes jurisdiction totals at the highest jurisdiction level. Within the United States, the state is the highest level to display jurisdiction totals. For the rest of the world, the country is the highest level to display jurisdiction totals. Use this report for a quick overview of your tax liability for a specific period. Transaction Summary Report The Transaction Summary Report lists a synopsis of tax information at the country, state, province, county, city, and district levels for each jurisdiction. Use this for remittance preparation. Vertex Inc. Proprietary & Confidential Page 25

28 APPENDIX B: SOFTWARE REQUIREMENTS FOR THE APPLICATION SERVER AND THE JAVA API WEB SERVICE Vertex O Series operates with the following software: Item Operating System Servlet Container Java Software Requirement The following operating systems are supported: HP UX 11i (Itanium) HP UX PA RISC 11 IBM AIX 5.3 or 6.1 IBM i5/os (OS/400) V5R4 or V6R1M0 SUSE Linux 10.x, (2.6 kernel) Red Hat Linux 4 (2.6.9 kernel), or 5 ( kernel) Sun Solaris 9 or 10 Windows XP, Windows 2003 Server, Windows 2008 Server, Windows Vista, or Windows 7 Red Hat Linux 4 and 5 are redistributed as part of the Oracle Unbreakable Linux program The Itanium platform is not supported for Microsoft operating systems The following application servers are supported: Apache Tomcat 6.0 Oracle WebLogic 10.3, 11 JBoss Application Server 5.1 Oracle Application Server OC4J SAP NetWeaver 7.1 Service Pack 3 or higher IBM Websphere 6.1, with IBM Java Virtual Machine (JVM) SR3 Java Runtime Environment 5.0 Update 8 or later Java Runtime Environment 6.0 Update 4 or later Vertex Inc. Proprietary & Confidential Page 26

29 JDBC Driver Flash Player Item Requirement A Type 4 JDBC driver appropriate for your database. Vertex supplies the following drivers with O Series: Microsoft SQL Server: jtds JDBC Driver Oracle: Oracle JDBC Driver Universal Driver The following versions of the Adobe Flash Player are supported: Adobe Flash Player version 9 Adobe Flash Player version 10 Web Browsers Microsoft Internet Explorer 7 and 8, Mozilla Firefox 3, Apple Safari 4 JAVA API The Vertex O Series Java API operates with the following software: Item Operating System Requirement The following operating systems are supported: HP UX 11i (Itanium) HP UX PA RISC 11 SUSE Linux 10.x, (2.6 kernel) IBM AIX 5.3or 6.1 IBM i5/os (OS/400) V5R4 or V6R1M0 Windows XP, Windows 2003 Server, 2008 Server, or Windows Vista, Windows 7 Red Hat Linux 4 (2.6.9 kernel) or 5 ( kernel) Sun Solaris 9 or 10 Red Hat Linux 4 and 5 are redistributed as part of the Oracle Unbreakable Linux program. The Itanium platform is not supported for Microsoft operating systems Vertex Inc. Proprietary & Confidential Page 27

30 Item Java Software JDBC Driver Requirement Java Runtime Environment 5.0 Update 8 or later Java Runtime Environment 6.0 Update 4 or later A Type 4 JDBC driver appropriate for your database. Vertex supplies the following drivers with O Series: Microsoft SQL Server: jtds JDBC Driver Oracle: Oracle JDBC Driver DB2 UDB for Windows, UNIX, or Linux: IBM DB2 Universal Driver APPLICATION SERVERS The application server running Vertex Central must meet the following minimum requirements: CPU Item 2 GHz Processor Minimum Requirement Disk Space Required Memory Network Connection 5 GB 512 MB (with a 32 bit operating system) 768 MB (with a 64 bit operating system) 100BaseT or equivalent These requirements apply only to the Vertex application. Requirements of any third party products, such as a relational database server or a J2EE server, are not included. Vertex Inc. Proprietary & Confidential Page 28

31 The application server running Vertex Web Services must meet the following minimum requirements: CPU Item 2 GHz Processor Minimum Requirement Disk Space Required Memory Network Connection 5 GB 768 MB (with a 32 bit operating system) 1,280 MB (with a 64 bit operating system) 100BaseT or equivalent These requirements apply only to the Vertex application. Requirements of any third party products, such as a relational database server or a J2EE server, are not included. It is possible to deploy Vertex Web Services and the Vertex Databases on the same computer, but they compete for system resources and diminish system performance. Vertex recommends that you deploy Vertex Web Services and Vertex Databases on different computers. If you choose to run both Vertex Central and Vertex Web Services on a single application server, the application server must meet the following minimum requirements: CPU Item 2 GHz Processor Minimum Requirement Disk Space Required Memory Network Connection 10 GB 1,280 MB (with 32 bit operating system) 2,048 MB (with a 64 bit operating system) 100BaseT or equivalent Notes: These requirements apply only to the Vertex applications. Requirements of any third party products, such as a relational database server or a J2EE server, are not included. It is possible to deploy Vertex Web Services and the Vertex databases on the same computer, but they will compete for system resources and diminish system performance. Vertex recommends that you deploy Vertex Web Services and Vertex databases on different computers. Vertex Inc. Proprietary & Confidential Page 29

32 GLOSSARY Vertex Retail Solutions Administrative Destination: Administrative Destination is equivalent to the Bill To: location. A common synonym is benefit received. For service transactions in the U.S. and Canada, the administrative destination is the benefit received location and the destination is the service performed location. For tangible personal property transactions, the administrative destination is examined when checking for the triangulation condition of an intra EU transaction from the buyer's perspective. Administrative Origin: Administrative Origin is equivalent to the Bill From: location. Common synonyms include order taken, order acceptance, place of principal negotiation, and place of business. Association for Retail Technology Standards (ARTS): a retailer driven membership organization dedicated to creating an open environment where both retailers and technology vendors work together to create international retail technology standards. ARTS is a separate council within the NRF governed by a council of retailers and technology solution providers. Batch Client Interface (BCI): A utility that processes multiple calculation requests used with the Retail Tax Extract deployment of Vertex Indirect Tax for Retail. BCI provides a single method for loading batch calculation requests into the Vertex Indirect Tax O Series instance located at central headquarters. BCI performs this function without the need for writing special integration with the financial system. Bracket schedules: Vertex Indirect Tax for Retail enables you to produce bracket schedules if your POS system cannot use database tables or ARTS related XML to calculate tax at register locations. This option is only available for By Business Location In Store Sales. Bracket Schedules are created only for Single Rate tax rules and Tiered Tax rules that have a taxable rate tier. The Calculation Engine identifies bracket tax jurisdictions and applies their associated bracket tax schedule logic. It calculates bracket tax by multiplying whole dollar amounts by standard rates and then applying fractional dollar amounts to jurisdiction specific bracket tax schedules to determine the correct tax. Distribute Tax Event: In Vertex Retail, you use the Distribute Tax event to accept a combined total tax amount for a purchase and then distribute that tax to the appropriate jurisdictions. The combined rates for the taxing jurisdictions are used with the total tax amount to determine the taxable base and then to redistribute the calculated taxes to each level for remittance. E commerce: Consists of the buying and selling of products or services over electronic systems such as the Internet and other computer networks. Enterprise Tax Solution: An end to end solution that integrates all tax processes with host Enterprise Resource Planning (ERP) and Business Intelligence (BI) systems on a single platform utilizing a tax data warehouse. Extract transform load (ETL) program: In managing databases, extract, transform, load (ETL) refers to three separate functions combined into a single programming tool. Vertex Inc. Proprietary & Confidential Page 30