Optimizing the Invoice Tax Validation Process

August 15, 2018

Invoice tax validation can be tedious but is critical for compliance and cost validation/allocation. Purchasing organizations often approach us with questions about this intricate process.

In this blog, we will take a look at the most common questions we receive regarding the invoice tax validation process and dive into The Shelby Group’s unique methodology for optimizing invoice tax validation through our custom software: CTX™.

How Can I Validate Tax on an Invoice?

Suppliers are typically expected to charge tax but, in some cases, they do not include it in the invoice. Either situation raises questions – How can I make sure that the tax amount is correct if charged? How do I know how much I owe if they did not include tax in the invoice?

This is where tax engines (Avalara, Vertex, OneSource, etc.) play a vital role. These tax engines determine the tax calculations based on the predefined rules for the sales or purchases without manual intervention. For instance, when the supplier submits an invoice, the buyer can get the calculation from the tax engine to compare it against the supplier charged tax. Straightforward, isn’t it?

In addition, tax engines can also keep track of all of these invoice transactions in their system. This means that the buyer can pull tax accrual reports. In short – if you want to accurately validate the tax on an invoice in a timely fashion, get a tax engine.

When Do I Validate Tax on an Invoice?

Organizations with legacy invoicing systems don’t have the ability to integrate with tax engines. This means that the system cannot validate tax until the invoice reaches the ERP for payment processing. Once the invoice reaches the ERP for the payment, handling tax problems becomes complicated and the AP side needs to work with the internal tax team and supplier to resolve the issues.

Validating the tax within a procurement platform will streamline the invoicing process. Modern procurement platforms like Coupa have robust invoicing modules and offer options to communicate with the tax engine. They also provide flexibility in setting up approval chains and route the invoice to relevant people to accommodate the tax validation failure process. Also, the suppliers can be updated regarding any issues on the invoice through the supplier portal. So, using Coupa with a tax engine eliminates the cumbersome tax validation process.

The CTX™ Connection

If Coupa is your procurement platform and you want to validate tax through a tax engine, then a tool like Shelby’s CTX™ is the right fit to bring the two systems together.   CTX™ will translate the messages between Coupa and the selected tax engine and facilitate the validation process.

CTX™ is Shelby’s proprietary tool which has built-in connectors and translators to facilitate the communications between The Coupa Procurement Platform and any popular tax engine. Coupa can leverage Shelby CTX™ for the invoice tax validation, calculating estimated tax for P.O. so that supplier knows the expected tax and any additional business logic on the invoice processing.


Validating tax amounts is a key aspect of both compliance and cost validation/allocation.  Leveraging a tax engine within a modern procurement platform is a great path to meeting this challenge.

If you have any questions on this subject or would like to discuss your specific situation, please contact Shelby at or 312.445.8500.

By: Dhivya Somasundaram, Senior Platform Engineer and Venkat Bharath Gunneri, Platform Engineer – Technology