One of the bigger thorns in a merchant’s side is making sure proper sales tax is collected when making a sale. Why is sales tax such a big pain? Sometimes it isn’t if the state’s tax code is fairly simple, and in these cases some simple reporting is sufficient and the merchant just has to take the time to run the reports. However, many countries and states/provinces have complex sales tax requirements that can change every year or two. It could depend on what you’re selling. Or it could be across the board.
Fortunately there are companies that work constantly to keep up with sales tax requirements so the merchant doesn’t have to.
The Solution: Sales Tax Software
Sales tax software allows a merchant to input the information necessary for the software to determine which sales taxes apply to an order from a customer. Some of these will file the sales tax paperwork necessary each year, and some will simply give the merchant a report so they can report on their own.
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The Companies and Software
Here are a few companies that provide software that integrate into e-commerce solutions to accurately calculate sales taxes for you:
- Avalara — AvaTax is the name of the software that Avalara develops. It’s more of a service, but it can be integrated to desktop software (such as order management systems) as well. It has integrations with many of the big e-commerce platforms today and charges on a transaction basis. They base tax calculations on the zip code of the purchase and item codes. They will also submit the tax paperwork for the merchant. Account managers will assist in getting a merchant set up correctly.
- SpeedTax — SpeedTax is another SAAS based product that also has an API for developers to write integrations. The ready made integrations are fewer than Avalara has, but they hit the big software suites such as Netsuite, SAP, and Quickbooks.
- SalesTax.com — This is another sales tax solution that focuses mainly on the larger ERP solutions like Netsuite and SAP. However, they have an API for developers so anyone can write their own integration for them. There is a distinct lack of pricing on their site, so merchants would need to contact them.
Given the importance and complexity of sales tax collection in today’s world, and with the US government at least trying to figure out more ways of taxing online sales, investing in a solution that calculates the taxes and keeps up to date with these developments is a good investment. What are your experiences with sales taxes? Have you tried any of these services?