Excise tax returns automation

Overcoming the small business challenges of preparing accurate, timely fuel excise tax returns

Building a successful fuel supply company requires many important decisions. Amid the many mission-critical moves made each day, one significant area tends to get repeatedly pushed down on the priority list: excise tax compliance. Because it’s a complex side of operations that often leaves those responsible searching for answers, questions around excise tax returns may be left unaddressed. However, leave that box unchecked for too long, and the implications can be massive.

This whitepaper serves to help distributors and petroleum marketers better understand excise tax returns risk factors, and learn how automation can help simplify and streamline an otherwise problematic process.

The many complexities of maintaining fuel excise tax compliance

When it comes to maintaining excise tax compliance, the process is anything but simple. From accurate calculations to timely remittance and precise reporting, there’s a lot to manage. And as a business grows, so do the complexities. Even fuel distributors that only do business in a handful of jurisdictions or no more than one state have a lot of considerations to factor in. Ensuring compliance means being prepared to handle two critical areas:

Accurate calculations

Because rules and rates change frequently, excise tax calculation is a very dynamic process. It’s important to continually watch for updates and to note the many variations that exist from one jurisdiction to another. The more a company can do to be certain transactional data takes the individual requirements of each taxing jurisdiction into account, the lower the audit risks will be.

Reconciliation, returns, and reporting

While accurate calculations lay the foundation, end-to-end excise compliance requires much more. Keeping a business consistently compliant requires several essential elements on the returns side:

  • Proper schedules. Returns should always be filed in a timely manner. A lack of understanding or an overlooked deadline is never a sound defense, even if the volume and complexity of reporting becomes overwhelming.
  • Correct formats. Some states require signature-ready forms, while others ask for electronic returns. These requirements can vary greatly from one jurisdiction to another. From EDI to Microsoft Excel files, every distributor should be prepared to provide returns in the exact format specified within each state.  
  • Centralized data. It’s equally important to have all transactional data consolidated in one central location. This not only allows the company to file returns in a timely manner, but also makes it easier to quickly locate information should the company be asked to provide additional details or answer follow-up questions. 

Each part of the returns process is essential and can have a significant impact on a company’s ability to avoid costly penalties and interest

Challenges to keeping excise tax returns risk low

Smaller suppliers often make the mistake of assuming the limited number of fuel deliveries they make compared with the industry’s bigger players helps shield them from the risk of an intensive audit. Unfortunately, this is often a false hope. Companies of all sizes are likely to come under scrutiny if excise tax returns are inconsistent or inaccurate. Even one small oversight can lead to costly penalties and interest. And while a large enterprise may be able to weather the storm of sizable penalties and fees, one costly audit can take a tremendous toll on a small company or even put it out of business.

Unfortunately, there are risks at every turn - whether the business is aware of them, or not.

Each time a return is filed incorrectly, it raises a red flag and increases the risk of an audit. And if the same company files incorrectly multiple times, some states may nullify licenses and force the business to reapply. What’s more, there are instances when not filing can trigger unintended consequences. Failing to file a zero-dollar return can cause licenses to be cancelled in some states and lead to noncompliance in others.

Needless to say, the volume of returns and reporting the average distributor manages can become very overwhelming, very quickly. The challenges become even more pronounced as the business expands or faces times of uncertainty within the industry at large. If critical teams feel strapped or strained, the implications can be significant.

The question to ask is:
What more can the company do to prepare for and prevent these risks?

The answer lies in automation.

Getting ahead with excise tax returns automation

Despite the complex nature of excise tax returns, there are several steps companies can take to streamline the filing process. And with the latest advancements in excise tax compliance software, they don’t have to be manual steps or involve extra work for staff.

With the right automation solution, companies can:

Centralize transactional data  

First and foremost, it's important to have all transactional data consolidated into one central location. This not only allows the business to file returns in a timely manner, but also makes it easier to quickly locate information when staff is asked to provide additional details or answer follow-up questions. Rather than spending hours combing through multiple spreadsheets or identifying gaps in original data, the consolidated collection of data makes it possible for staff to extract information within minutes.

Stay ahead of rule and rate changes

Once data has been consolidated, the next step is to get ahead of the latest filing requirements. Waiting until it’s time to file to get up to speed on new regulations is one of the biggest mistakes a business can make, since rushing the process can increase the chance of missing an update that in turn leads to costly penalties. Instead, the company should continually monitor and track changes in every jurisdiction where it does business to ensure accuracy when it’s time to file.

Prepare for a wide variety of formats

Filing excise tax returns isn't always as simple as filling out an electronic form and adding a signature. Some states want to see submissions in a Microsoft Excel format, some want signature-ready forms and others require EDI. There’s also the possibility that a jurisdiction will require a specific format one month, then switch to a different one the next. For this reason, it’s important to have a system in place that makes it easy to generate returns in many different, and potentially frequently changing, formats. 

Staying ahead with Avalara Returns Excise

Historically used at the enterprise level, Avalara Returns Excise makes it possible for petroleum marketers and other small fuel companies to generate signature-ready returns — without having to invest in a complex or costly system. It includes all the advantages of an enterprise system, but at a small business rate.

Avalara Returns Excise can now be used by small businesses to:

Consolidate transactional data 

To eliminate issues that can arise when the right information is unavailable or difficult to locate

After uploading a spreadsheet to import data, everything is centralized in one location for fast, highly accurate, and affordable preparation of fuel excise tax returns. Avalara Returns Excise not only uses raw transaction detail to automatically prepare forms, but also makes it easy to identify and extract data as needed.

Automatically apply updates

To reduce the risk of missing important new requirements

Because rates, rules, and form updates are regularly made at the jurisdiction level, excise tax returns automation eliminates the need to scour state websites. It’s the same monitoring process used by enterprise-level excise companies but included in software that’s been scaled to meet the needs of small businesses. As a result, it’s much easier to avoid the inefficiencies and errors commonly caused by manual tracking.

Generate the correct formats 

To reduce the risk of improperly filed returns

With Avalara Returns Excise, there’s no need to determine which type of return needs to be filed in each individual jurisdiction. Signature-ready returns are automatically generated on schedule and in the correct format at the federal, state, county, city, and local levels. All that’s left to do is review, sign, and submit.

Because it’s a SaaS offering, the system is simple to use and doesn’t require a complex IT project to implement. There’s no need to load software, maintain a server, or even update your technology. All that’s required to get started is a one-time spreadsheet upload. Avalara Returns Excise will then use raw transaction details to automatically prepare forms that can be quickly reviewed, signed, and submitted when ready. 

Stay ahead of fuel excise tax returns complexities with Avalara Returns Excise

Say goodbye to inefficiency and errors caused by common manual processes

You don’t have to be a big company with a large budget or huge IT staff to get timely, highly accurate excise tax returns and reporting. Avalara Returns Excise is cost-efficient to use and easy to implement. Stop taking risks — and start focusing on moving your business forward.

Learn more about Avalara's Excise Returns solutions or contact an expert for a personal consultation.

Import data for preparation of excise tax returns
Import data for preparation of excise tax returns
Create signature or e-file-ready returns
Create signature or e-file-ready returns
Maintain accuracy with regular rate, rule, and form updates
Maintain accuracy with regular rate, rule, and form updates
Run ad hoc reports with detailed schedule data
Run ad hoc reports with detailed schedule data
Prepare terminal operator reports
Prepare terminal operator reports
Use the filing calendar to track deadlines
Use the filing calendar to track deadlines
Get started today
To learn more about Avalara Returns Excise