The Best Sales Tax Software for Ecommerce guide brings together the sales tax software solutions with the best features for your e-commerce business. These are designed to be applied to any circumstances, including cross-border selling and international expansion (with solutions specifically tailored for these circumstances). This is an in depth guide to sales tax from the point of view of a merchant.
The sales tax compliance requirements for ecommerce businesses have increased dramatically over the years. This is partly due to more online sellers starting their businesses and a trend towards online shopping amongst consumers in the US and around the globe. Tremendous growth of ecommerce has led to higher sales volume, additional management of complex tax rules and regulations and a substantial rise in compliance risks. Sales tax software solutions are available to help companies manage sales taxes online without straining their resources.
Sales Tax has been a hot topic for years. Software rules the market and there is a lot to choose from. Sales tax compliance software allows sellers to understand their tax obligations, calculate taxes automatically and file taxes returns in time. The sales tax compliance software market is growing every year and expanding. The main reason is the increasing complexity of sales tax system and increasing number of jurisdictions. As the mix of online and offline commerce grows, managing sales tax becomes more complicated for business owners.
Tax compliance software has been a fairly constant in the legal industry. In the past few years, the importance of ecommerce sales tax software has become even more important with the rise of online shopping. When it comes to sales tax software, there are several options for business owners. The one that you choose will depend on a variety of factors that make your company unique.
How Does Ecommerce Sales Tax work?
A sales tax is a consumption tax that is charged as a percentage of the sale of a taxable product.
Typically, you need to charge sales tax in states or regions where your business has a physical presence or significant connection.
The general rule for ecommerce sellers when collecting sales tax is:
- If your business has a nexus in a state (legal jargon for significant connection), you are obligated to collect sales tax from online customers in that state.
- If your business does not have a significant connection or physical presence, you typically do not have to collect sales tax for online sales.
Having said that, a US Supreme Court ruling in June 2018 has made it easier for states to make it obligatory for all businesses, regardless of physical presence, to collect sales tax.
Also, through some business activities (especially in cases of ecommerce business), a nexus is often created outside your home state too. This might include a location, inventory, affiliates, personnel, a dropshipping relationship, or an economic nexus where the sale exceeds the transaction amount set by the state.
Avalara
The tool I wish Nicholas Cage knew about. With the highest number of ratings on G2, Avalara is one of the leading apps that helps ecommerce companies to get their tax compliance right. Avalara’s Avatax removes the no.1 pain point of accounting overwhelm by supplying sales tax calculations and rules based on geolocation and product classification.
It offers more than 700 integrations. Use it to manage your data across various apps connected with your ecommerce platform. Apart from that, it removes tax from exempt sales and skillfully manages and organizes exempt documentation (no more tedious googling at the 11th hour!).
Avalara offers flexible volume-based pricing starting at $25 per month.
Pros
- A simple and clean interface
- Up to date tax rates and rules
Cons
- Customer service needs improvement
- Corrected transactions take a considerable amount of time to update
Vertex – Best tax management SaaS for small and medium businesses
Vertex helps you steer away from manual processes and eliminate audit risks with the help of their powerful content and technology. It sorts and takes care of the end-to-end tax lifecycle. It automates calculation, exemption certificate management, and tax returns, all with a single interface.
Use this tool to stay on top of the latest economic trends, audit activity, and regulations in over 11,000 state and local jurisdictions.
Vertex can help users streamline their workflow and processes through capabilities for centralizing, automating, and improving tax accuracy across all transaction billing systems that you use. Vertex Cloud indirect tax simplifies computing and reporting of sales tax and consumer use tax in the US and value-added tax abroad.
Pricing for Vertex is available upon request.
Pros
- Easy to navigate, very user friendly
- The Help option updates you about new tax laws
Cons
- Calculations stored differently than as represented on screen
- Customer service available by email only
Taxify by Sovos – The best tool to avoid tax gaps for online retailers
Taxify is a product of the Sovos brand, one of the world’s leading voices in tax for the last 30 years. With over 14,000 tax jurisdictions spanning across 50 states, Taxify will keep the overburdened ecommerce sellers tension-free with accurate rates. It helps you automatically comply with tax changes and offers an easy way to auto-file tax returns. Also, it has readily available tax experts that will cater to your nuanced needs and questions.
Taxify is priced at $47 per month with an option of a free trial.
Pros
- Helps avoid late fees by automating tax calculation and filing
- Automatically complies with changing tax laws
Cons
- Feature-lite compared to other software on this list
- More expensive compared to other software on this list
Sovos Intelligent Compliance Cloud
The International Data Corporation (IDC) MarketScape recently identified the software as a leader in sales tax and VAT automation. The Sovos tax compliance and regulatory reporting software includes sales and use tax and VAT determination. But it also includes exemption certificate management, sales and use tax filing and invoice reconciliation.
Additionally each business using this Sovos eCommerce sales tax software will benefit from VAT reporting, electronic invoicing compliance along with tax information reporting for 10-series forms and ACA. Oracle tax compliance, SAP tax compliance, Netsuite tax compliance, Magento and much more are also all part of Sovos.
Taxify Sales Tax Software
Sovos also offer a simplified and streamlined eCommerce sales tax software service called Taxify, which promises to save online sellers time and money by keeping them in compliance with sales tax reporting and remittance. The easy-to-use and self-service Taxify software has the ability to make reports for every State and local tax jurisdiction and they have easily contactable tax experts always on hand to answer your questions.
Quaderno
Quaderno has all the tools you might need for your eCommerce business. The software is compatible with WooCommerce, Shopify, and Amazon FBA.
With Quaderno, it doesn’t matter if you’re selling a digital product or selling from the most remote part of the world. Quaderno’s system has tax information for every country/region globally.
The Quaderno’s API securely accesses your sales data and automates all the sales tax processes in seconds.
You can integrate it with a content platform, shopping cart, or a payment processor to get started. It also supports multi-channel selling. So when you want to launch your product in some new region, you can rely on Quaderno for sales tax compliance.
It tracks your sales in 1000+ jurisdictions and alerts you of any complications or registrations required.
Features
- Know the tax threshold in every region, get registered in every region you sell, and start collecting taxes accordingly.
- Lets you verify buyers’ tax IDs to see the tax rates for each sale you make.
- Automate tax-compliant invoices for each transaction on your store all across the globe
- Quaderno reports give you a quick and better understanding of the tax situation so you can fill out the returns with ease.
- Automate billing and send a personalized bill to each customer; you can even provide a personal dashboard to enhance the customer experience.
You can start using Quaderno with a 7-day free trial. The software has four paid plans starting at $49 per month.
TaxJar
TaxJar is a product launched by stripe. This cloud-based platform can automate your entire sales tax life cycle. Over 20,000 high-growth businesses trust it.
It does calculations and even files reports, making it one of the best sales tax compliance software in the market.
Let’s look at some of the most prominent features that TaxJar offers.
- Deadline: Auto file fills all your reports and remittances automatically to all the enrolled states on your behalf; thus, with TaxJar, you don’t need to worry about deadlines
- Processing Time & Cost: Handles all the data input as you grow your business with sales tax collection in several states and prepares files state-wise for you to go through
- Human Errors: Automate the whole sales tax collection process and get rid of any human error
- TaxJar API: Has a 99.99% uptime; this helps your customer see accurate sales tax data during checkout
- Monitoring & Updating: The sales tax team of TaxJar monitors all the sales laws in every country, state, and city; it keeps updating them as and when they change
- Product Classification Tool: AI-powered classification tool evaluates the products in your store and suggests you their sales tax accordingly
TaxJar Integration
- Support the entire sales tax process from calculations to reporting
- Access all your integrations via the TaxJar dashboard
- TaxJar API lets you build your own solution via coding
You get to try TaxJar for 30 days with any plan you choose without giving them your credit card details. Paid plans start at $19 per month.
AccurateTax
AccurateTax is a sales tax compliance software owned by NetBlazon. The company’s vision is to provide an affordable tool for everyone from micro to macro eCommerce businesses.
Features of AccurateTax Sales Tax Software
- The tool provides exact and updated tax rates for every region in the US
- To make your sales tax return filing easy, Accurate Tax gives you interactive reports of usage and transaction details
- Has an address scrubbing tool that helps with sales tax calculations as well as ensures that no parcel is delivered at a wrong address
- Streamlined Sales Tax Project (STTP) certified software
AccurateTax Integrations
The tool can be integrated with:
- Abilitycommerce
- Magento
- MIVA
- Stone Edge
- Opencart
- osCommerce
- ShopSite
- WooCommerce
- Zen Cart
You can take a free trial of the tool first and then contact the company for a customized plan depending on sales and a few more parameters.
Ecommerce Sales Tax Software Comparison Criteria
What did I look for when I selected the best ecommerce sales tax software? Here’s a summary of my evaluation criteria:
- User Interface (UI): Is the ecommerce sales tax software clean and attractive? Is it easy to view and calculate the different tax rates?
- Usability: Is it easy to learn and master? Does the company offer good tech support, user support, tutorials, and training? Is it easy to launch and update sales details and compute taxes quickly?
- Integrations: Is it easy to connect with other tools? Any pre-built integrations? Is it easy to connect with various Point of Sale software, ecommerce CRM software, or other ecommerce tools?
- Value for $: How appropriate is the price for the features, capabilities, and use case? Is pricing clear, transparent, and flexible?
Conclusion
Tax compliance has become significantly easier with the use of an automated sales tax software application. Sales tax automation helps merchants to comply with the ever-changing attitudes of local, state and national governments. Merchants who work with automated sales tax software applications also benefit from a reduction in accounting costs.
SalSince the implementation of Amazon laws in the United States, retailers have needed to be smarter about their sales tax compliance strategies. And online sellers are at a disadvantage because of having to price out as many as 9,000 taxing jurisdictions. That’s where software comes in handy.