Data mining is a huge industry in today’s marketplace, as companies take action based on the tools now available to them to control data points for customers and business partners. New software programs and methods allow for expanding and automating collection. Cloud software in particular handles those aspects of a data operation efficiently. Acumatica, a cloud ERP software vendor, also offers software tools for data mining and analysis.

A key economic player in the market – State tax auditors – are turning to large-scale data mining to aid in analysis and compliance. The flexibility and ease of use for cloud software services allows for rapid industry analysis and data collection. This aids the auditors in discovering non-compliance and instances of non-collecting. This is especially the case for remote sellers, as after a recent Supreme Court decision in South Dakota v. Wayfair Inc, states can now collect tax obligation from out-of-state entities.

States such as Connecticut, Illinois, Indiana, New York, Ohio, Oklahoma, and Pennsylvania have already engaged in data mining operations in order to analyze and locate sellers that are either unaware of their tax obligations or are actively avoiding collection. Other states are soon to follow.

Auditing across states

In the wake of the Wayfair decision, states are working to enforce the tax obligations, although they also have a long history of analyzing compliance outside of their borders. State tax authorities routinely send auditors to other states, or partner with in-state auditors, in order to enforce collection or uncover fraudulent reporting.

In certain cases, auditors may even go door to door to educate businesses. Regional information-sharing agreements can also provide education to states on how to enforce the tax collection or investigate whether a company is acting accordingly to collect the tax.

Companies such as Acumatica can partner with these auditors to provide needed software services and industry expertise. The cloud software suites they sell offer a proven solution for auditors, with hundreds of companies identified as non-compliant in one case alone. The software works by taking associations from available data sources, and then providing one aggregate conclusion.

Financial nexus and sales threshold for states

State tax auditors and Departments of Revenue are spending more time and efforts on activities relating to an economic nexus, which is financial activity in the virtual realm rather than as a physical presence.

The current and future legal ramifications of the Wayfair precedent do allow for collections based on an economic nexus; however, auditors do need to be aware of certain exceptions, such as South Dakota’s law on remote sellers. Only remote sellers with over $100,000 in sales or a certain number of transactions in a given year can be taxed. In most other states, small businesses are exempt from this as well.

This is a key focus for data mining operations for tax auditors. They need to fall within those standards when enforcing collections and policy. The revenue services for states also need to work with their in-state and out-of-state businesses to know when the various laws take effect and how they are applied. Data analysis software can point to these factors during an operation and reveal any deficiencies in compliance or procedures.

Visit our customer service page on Acumatica.com to learn how our software suites can help your organization. Our cloud software can manage a data mining operation, and our customer-first work ethic ensures we will provide a vital and efficient service.