Supply Resource Management Product User Group

Boise Cascade and DuCharme, McMillen & Associates:

Best Practices in Sales/Use Tax Verification and Recovery

Sherry Depew, Boise CascadeMarci Struzinski, Boise CascadeZachary Reif, DMA

February 20, 2008Albuquerque, NM

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Presentation Purpose

Presentation Purpose: To discuss the results and perspectives that Boise Cascade has gained

in working with DMA, including:• Verify that sales/use tax decisions are correct• Recover overpayments• Prevent future errors in sales/use tax decision making

Presentation Objectives:

At the end of the meeting, we will have been successful by: Sharing the Boise Cascade case-study Reviewing many of the metrics used to measure performance Discussing the issues and initiatives in the adoption of best-practices

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Today’s Discussion

Background Timeline Results Results… how accomplished What Resources to Use? DMA’s Project Plan Sample Report of Findings Performance Metrics

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Background

Boise Cascade

Mfg. Wood and Paper Products $5.8 Billion in Sales #48 in Forbes Privately-Held Co. 10,000+ Employees Complex Manufacturing Process Complex Regulatory Environment Tremendous Internal Changes Multi-state operations

DMA

State & Local Tax Experts 18 Regional Offices 200+ Staff Members Complete Workflow Solutions

• Issues Development• Tax Advisory• Overpayment Recovery• Audit Defense• Outsourcing• Tax Technology• Training

Focus on Large and Complex Clients

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Timeline

DMA and Boise began working together in 1998 Audit Defense and Support – Single State Overpayment Reviews – Multiple Locations/Single State Training Overpayment review – Multiple Locations/Multiple States Training Tax Software Implementation

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Results

Over $8,000,000 in sales/use tax either recovered or pending• Overpayment reviews• Underpayment (risk) analysis• Audit defense• Issues development

DMA frequently conducts staff training to ensure that errors do not continue

DMA assistance with selecting and implementing new sales/use tax software

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Results…how accomplished

Utilization of PeopleSoft ERP data Extraction of data - queries Manipulation/sorting/filtering of data Pull and review of physical/electronic invoice copies Taxability decisions via interpretation of Law Compile findings in formal Report of Findings Seek refund from Taxing Jurisdiction

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Data Extraction

Query Boise has written to provide DMA with their required information.

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What Fields to Extract

Col Record.Fieldname   Col Record.Fieldname

1 A.BUSINESS_UNIT - Business Unit   17 C.TAX_AUTHORITY_CD - Tax Authority

2 A.VOUCHER_ID - Voucher ID   18 C.UNPOST_SEQ - UnPost Sequence

3 A.VOUCHER_ID_RELATED - Related Voucher   19 C.BUSINESS_UNIT_GL - GL Business Unit

4 A.INVOICE_ID - Invoice Number   20 C.ACCOUNT - Account

5 A.INVOICE_DT - Invoice Date   21 C.DEPTID - Department

6 A.VOUCHER_STYLE - Voucher Style   22 C.PRODUCT - Product

7 A.VENDOR_ID - Vendor ID   23 C.PROJECT_ID - PC Project

8 D.NAME1 - Name 1   24 C.CHARTFIELD1 - GL Project

9 A.ENTERED_DT - Entered on   25 C.OPEN_ITEM_KEY - Open Item Key

10 C.ACCOUNTING_DT - Accounting Date   26 C.MONETARY_AMOUNT - Monetary Amount

11 A.GROSS_AMT - Gross Invoice Amount   27 C.DESCR - Description

12 C.TAX_CD_SUT - Tax Code - Sales and Use Tax   28 C.PO_ID - PO Number

13 C.TAX_CD_SUT_PCT - Sales/Use Tax Code Percent   29 C.JOURNAL_ID - Journal ID

14 C.SALETX_AMT - Sales Tax Amount   30 C.JOURNAL_LINE - GL Journal Line Number

15 C.USETAX_AMT - Amount   31 A.DESCR254_MIXED - More Information

16 C.VOUCHER_LINE_NUM - Voucher Line Number      

Query Fields

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What Fields to ExtractWhat Fields to Extract

Query Criteria

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What Resources to Use?

Internal• Familiar with personnel and operations• Accessibility to data/records• May lack bandwidth• May lack tax expertise

External• Primary focus and primary area of expertise• Aware of pertinent law changes• Industry knowledge• Dedicated team of professionals

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DMA’s Project Plan

Kick-off meeting Data request Data verification Manipulation of data Collection of source documents Presentation of Report of Findings Pay only what is legally due Training to eliminate ongoing errors

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Report of Findings

TABLE OF CONTENTS

Executive Summary Review ProcessTax Savings Summary

Findings – “THE MEAT” – common issues, law changes

Next Steps Recommendations ConclusionSales Tax Refund ScheduleUse Tax Refund ScheduleB&O Tax Refund ScheduleDMA Codes

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Performance Metrics

US based purchases ($US)

Products / Services purchased

Products / Services sold

BU / Locations

Revenue ($US)

2 - 4 5 - 7 8 - 15 > 16

< $3B $3B - $11B > $85B$11B - $20B $20B - $85B

One

80 – 5,000 5,000 – 30,000 30,000 – 250,000 > 250,000< 80

15,000 –250,000 > 250,0006,700 – 15,000

2.4B – 5.8B

< 300

Median

< 1.3B 1.3B – 2.4B

300 – 6,700

5.8B – 23B > 23B

DMA benchmarks hundreds of data points to identify the performance metrics and best practices of the highest performing companies.

Sample of Current Data Population

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Sample Metric: As expected, specialized tax software is primarily used for sales tax calculations and use taxability determination

What tax software is used for sales tax calculations?

Median

Best

In

Class0%

0%

100%

0%

12%

12%

64%

12%

0% 20% 40% 60% 80% 100%

ERPTax softwareManually calculatedOther

Best

In

Class

What tax software is used for taxability determinations?

Median

0%

0%

100%

0%

22%

17%

44%

17%

0% 20% 40% 60% 80% 100%

ERPTax softwareManually calculatedOther

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Sample Metric: Technology – Primary systems utilized

-------------------------------Percent Utilizing---------------------------------------

Primary System Oracle People-Soft

Other ERP Home

Grown

Out-Sourced

Purchasing 20% 5% 60% 15% 0

Payables 20% 5% 65% 10% 0

Order-to-cash 19% 0 48% 29% 4%

Goods Movement 10% 0 58% 32% 0

ERP Spread-sheets

Home-grown

Journal Entries

Primary system for

inter-company

32% 11% 37% 20%

ERP Taxware Sabrix Vertex Manual

Tax software used for sales tax calculations

11% 22% 6% 50% 11%

Tax software used for use tax determinations

19% 12% 6% 44% 19%

Outsource Corp Sales Quantum Returns

Fastax Manual

Process for filing tax returns 6% 22% 22% 17% 33%

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YSample Metric: Lower performing organizations have 5 times the error rates as a percent of transactions and 7 times the error rate as a percent of dollars

1st Q 3rd Q

1 % 5 %

5X

Taxability Error Rate as Percent of Transactions

1st Q 3rd Q

.75 % 5 %

7X

Taxability Error Rate as Percent of Dollars

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Sample Metric: Consequences and Impact

Dollar Amount of Overpayments Recovered

Annually(in thousands)

$392

$875

$2,632

0.03

0.12

0.19

Overpayments Recovered as a % of Indirect Spend

Combined Overpayments and Underpayments as a % of

Indirect Spend

0.09

0.19

0.32

0.12

0.20

0.36

Interest Payments as a % of Final Negotiated

Assessment

1st Quartile Median 3rd Quartile

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Best Practices

Aligns with overall company strategy Reduces costs Improves productivity Promotes timely execution Enables better decision making Leverages existing and exploits emerging technologies Ensures acceptable levels of control and risk management Optimizes skills/capabilities of the organization Promotes collaboration across the extended enterprise

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Contact Information

Should you have any questions about the information contained in this presentation or about DMA and its services, please contact:

Zachary ReifTitle: Senior Tax ManagerOffice: 623-582-6655, extension 2555Email: zreif@dmainc.com