Leveraging Big Data Analytics and AI to Combat the Sales Tax Gap

Summary

Across the United States, State Comptrollers and Departments of Revenue are tasked with tax collection, audit activities, and criminal investigation. The task of tax auditing has largely been performed using many of the same technologies and methods for decades and has been patterned after the IRS compliance enforcement model. This model works well for the income tax where more than 85 percent of all income is verifiable through the filing of information returns and the returns contain a large volume of information for evaluation. A big data approach to the sales tax gap leverages the cloud for large scale data storage and sophisticated algorithms to be leveraged against all sales tax data, not just randomly sampled records or automatically rule-based flagged returns. Properly handling all the available data with cloud computing and storage allows sales tax audit activity to be performed fairly and uniformly across all the data.
Published December 12, 2022. TaxNotes.com