A Master Class in Sales Tax Recovery for Higher Education

Anyone who works at a university or college knows how to operate on a lean budget, cutting costs to ensure maximum funding can go toward fulfilling the school’s mission. Yet, many of these same organizations leave hundreds of thousands of dollars on the table every year because they don’t take full advantage of the sales tax exemptions to which they’re entitled.

The process is simply too complicated and too time-consuming for most to handle on their own.

“Organizations have to be registered as exempt in all the states where they make purchases — it’s not something that's automatically awarded to them,” explained Joe Healy, Chief Strategy Officer at Taxback International.

That’s the first step. Then, institutions must educate their faculty and staff to ask for exemptions when they travel or make purchases, and arm them with the right forms to do so. But, even with these pieces in place, there’s still bound to be people who forget, or don’t have time, or abandon the project because the hotel personnel or store clerk they’re dealing with didn’t know how to process a tax-exempt transaction.

Over time, those seemingly small dollar amounts can quickly add up to some pretty big numbers.

“Organizations have the opportunity to reclaim those exempt taxes on the back end, but that process involves going through thousands of individual transactions, identifying those that qualified for exemptions, and going through the recovery process, which differs from state to state,” Healy explained. “With some states, you go directly through the tax office for reclamation; with others, you have to work through the supplier to get the claim back. It’s not a straightforward process, nor one that most organizations have the bandwidth to effectively pursue.”

That’s why Taxback International, a long-time SAP Concur App Center partner, began developing and piloting a new service for sales tax reclamation. The goal was to create a solution that enabled universities, colleges, and other non-profit organizations to recoup as much sales tax as possible, without having to invest staff time or funding to do so.

The assignment: A less taxing reclamation process

“We had decades of experience in Value-Added Tax (VAT) reclamation, extensive internal audit expertise, and tight integrations with SAP® Concur® solutions already in place,” Healy said. “We knew we could leverage that expertise, and by building out a data base of each state’s rules, regulations and reciprocity mechanisms, expand our offering to include sales tax reclamation.“

Healy began introducing the new service to SAP Concur higher education clients at the annual Fusion conference, including one large university client that agreed to participate in the pilot. This institution was unique in that its finance and procurement teams had already done a great deal of work educating its faculty and staff on how to get tax exemptions at the point of purchase. They had even created pre-filled forms to simplify the process — something few other colleges were doing at the time.

“This was an excellent test case for us. We knew that if there was still sales tax to be reclaimed after all of the time and effort this institution had put into getting exemptions upfront, then we had a very viable service here,” Healy said. “We couldn’t promise what we would find, but we could promise that our client and his team wouldn’t have to lift a finger, and that that we were taking on all of the risk.”

The process began with a “health check,” an analysis by audit to scope the reclamation opportunity. The integration with the SAP Concur platform made data exchange a seamless process.

“The client goes into our app in the App Center, clicks “connect,” and all of the data and receipt images flow directly from Concur Expense into the Taxback International environment,” Healy explained. “From there, our technology stack takes over, matching the receipt images to the line items of data, and using artificial intelligence and machine learning to identify the receipts with paid sales tax that qualified for exemptions. This data is then run through a recovery rules engine to segment those from jurisdictions that allow direct reclamation submissions.”

With this information in hand, the Taxback team began the actual reclamation process, working directly with the various tax authorities and filing the appropriate paperwork on their client’s behalf.

Not unexpectedly, the process came with its share of challenges.

“In some cases, the tax offices hadn’t seen this type of claim volume come in at one time before, and were a little overwhelmed. Others had not worked with corporate card claims before. So, they required the actual card supplier to connect these payments back to the specific expenses, which required a little more legwork on our part,” Healy said. “A number of tax authorities were operating remotely, or with a skeleton crew, so, we had to work around those obstacles, as well.”

But, despite all of these challenges, as well as being in the middle of a global pandemic with restrictions changing daily, Taxback was still able to deliver on its promise. 

Passing the test with flying colors

At the end of the pilot, the university had recovered $150,000 in sales taxes, without expending resources, staff time, or incurring any upfront costs.

 “I can very comfortably say that we literally gave Taxback our [SAP] Concur data and they managed the entire process. We had to sign some of the recovery forms, but, the research, the paperwork — they did it all on their own,” this client said. “I didn’t have to get involved,”

In addition to the “found money” the university could put toward its mission, Taxback also provided them with reporting data that pinpointed where the leakage occurred, so the university’s finance leaders had the insight they needed to refine and improve their front-end processes, as well.

At a time when a lot of colleges and universities are under budgetary pressures and challenged to trim costs, Taxback offers a better means of getting there than by cutting staff or cancelling programs.

“If they’re tax exempt, and if they’re trying to close budgetary gaps, Taxback International offers another tool in the toolbox to do so,” Healy said. “There’s no downside, there’s no risk. We simply offer an opportunity to ensure that these colleges and universities take full advantage of the tax exemptions they’re entitled to.”

To learn more about, or engage with TaxBack International, please contact your account manager. To learn more about our solutions for Higher Education, please visit us here.