If there’s one thing that’s clear to e-commerce business owners it’s this: sales tax is complicated.
As a result of 2018’s South Dakota v. Wayfair Supreme Court ruling, e-commerce businesses face the substantial burden of having to collect tax in thousands of jurisdictions across the country. And each of those jurisdictions could have a different tax rate and different reporting requirements.
In the past, this kind of challenge might have required a team of talented tax professionals to ensure compliance and reduce risk.
Today, there are powerful (and affordable!) software solutions designed to help e-commerce businesses collect and remit sales taxes across state lines.
It should come as no surprise that there a number of software options. Since my focus is on small businesses, let’s look at the three options I think will best suit the owner of a small e-commerce business.
The “heavy hitter” of the bunch. Avalara is an option for small, medium, and large businesses. If you currently use other software in your business, odds are Avalara can integrate with it. Promising easy set-up, Avalara offers a suite of services:
- Automated tax calculation
- Automated returns filing
- Product taxability
- Exemption certificate management
- Address validation
Sovos is Taxify’s parent company, and they have a long history in the world of sales tax compliance. The company touts:
- Real-time tax rates
- Automated filing and remittance
- Flexible auditing and reporting trail
- Print-ready tax forms
A newer player in this field, Tax Jar offers a “sales transaction checker”. Simply link your sales platform, and Tax Jar will tell you where you have reached economic nexus. What a great feature for e-commerce businesses! Tax Jar also offers:
- Return-ready reporting
- Real-time calculations
- Automatic filing
Not surprisingly, all three of these programs focus on simplifying the sales tax process. How to pick the right software solution for your e-commerce business? Likely that will come down to either the user interface or the pricing.
WHAT WILL IT COST?
Most sales tax software solutions begin with a monthly or annual fee. Basically, this is your charge for using the software. Depending on the number of transactions you process, you can expect to pay as little as $50 per year or as much as $247 per month.
In addition to the software usage fee, you will pay additional fees for the filing of your returns. These vary from $25 to $54 per return. If your e-commerce business is filing in multiple states each month, those fees can really add up!
It’s important to know that you aren’t required to use the software service to file the returns. If you prefer, you can file the returns yourself. As with anything you consider for your business, you’ll need to weigh the time and opportunity cost of doing the work versus the freedom to “outsource” a tedious – and critical – task.
I strongly recommend you select sales tax software that meets your needs as soon as possible. The longer you wait to begin collecting destination-based sales tax, the higher your risk of being out of compliance.
If you want professionals to walk through this implementation with you, please reach out to us by booking a call today.