Experts say thesales tax softwaremarketwill be worth more than $13.5 billion by 2028. It’s not surprising, considering businesses faceever-changingtax rates and regulations.
This software makes Sales Tax Calculations and Sales Tax Return Filing a lot easier for businesses of all sizes. But there are many other benefits to consider too.
Read on to learn more about sales tax software and some of the best software providers available.
What IsSales Tax?
Business financesand taxes involve several pieces, one of them being sales tax. Sales tax is a consumption tax the government imposes on the sale of goods and services.
It is usually levied at the point of sale. The retailer collects the tax and passes it on to the government. The end-user is responsible for paying the sales tax.
But because most goods pass through several manufacturing stages, businesses need to document who the end-users areso they know who is responsible for paying the tax.
States, counties, and municipalities each levy their own sales taxes, and often, these jurisdictions overlap with each other, further complicating sales tax calculation.
What IsSales Tax Software?
Sales tax software helps businesses calculate the correct tax rates when billing customers. There are more than 45 different sales tax rates in the U.S. alone!
And that doesn’t even include different tax rates for various products and services.
For example, certain items may be entirely exempt from sales tax or be exempt under a certain threshold. Often, sales tax doesn’t apply to food.
Tax softwareautomates the process of calculating sales tax rates, so your businessdoesn’t have to worry about this time-consuming and stressful task. It knows the appropriate tax rate for where your customer is located and will apply it to the invoice.
Benefits of Tax Automation Software
Manually calculating sales tax for each customer is highly burdensome. Tax software eliminates this burden and makes management easy while saving time and improving accuracy.
Further, tax jurisdictions continue to leverage technology to identify tax fraud and crackdown on compliance. Thus, even small businesses need to have a firm understanding of sales and use taxes.
Using tax automation software makes compliance and meeting tax deadlines easy. The software will alert and remind you tofile your taxes on time. It also stays up-to-date with changing sales tax policies, so you don’t have to learnnew laws each time they change.
Sales tax software is a game-changer, especially for businesses that sell products and services to customers in different parts of the state, country, or world.
Best Sales Tax Software Programs
By now, you must be convinced you need this software for your business. Let’s review some of the best softwareproviders your company can choose from.
Avalara is arguably thebest eCommerce sales tax softwarefor companies of any size and industry. It has a customer base of more than 30,000 across 95 countries.
It’s great for managing customers worldwide since it uses geolocation to calculate sales tax, not zip codes. Unfortunately, zip codes have become outdated and inaccurate.
Further, Avalara has a simple and clean interface for ease of use.
It offers more than700integrations with sales processors, meaning you can manage your data across different apps connected to your eCommerce platform. Some of the best tools Avalara offers include:
- SalesTax registration
- Rate calculation
- Return riling and remittance
- Certificate management
This tax software might be your best choice if you run an online business. Avalara comes with a 60-day free trial, so you don’t have to commit right away. After the free trial, paid plans start at $25 per month.
DAVO, an Avalara product, is a great software to consider if you own a brick-and-mortar business.
It collects sales data from the point-of-sale (POS) system and then sets aside the daily sales tax amount.It will also file and pay the owed taxes on time and in full to the state. These auto-filling and payment capabilities are significant advantages for DAVO.
You can integrate DAVO with most major POS software applications, including:
- Quickbooks Online
The user interface is organized, making it easy to manage and track your data.
DAVO offers afree trial, and pricing starts at $39.99 per month.
EXEMPTAX helps businesses with tax exemption certificates for tax-exempt customers. The software collects, validates, and renews these certificates in a secure and easy-to-use platform.
Businesses can easily see which certificates are:
- Expiring soon
This way, they can take action when necessary. The software also provides an audit risk to users. In addition, you can integrate EXEMPTAX with major third-party applications like Big Commerce, Shopify, Stripe, and more.
Give EXEMPTAX a try with your14-day free trial. After that, the standard plan starts at $250 per year.
Sovos was designed to solve the challenges of the digital transformation of taxes.Unlike some other options, Sovos isa cloud-based software.
The company has more than 7,000 customers in more than 70 countries and covers more than 12,000 tax jurisdictions.
Although it has businesses of every size operating its software, Sovos’ customers include half of the Fortune 500.
The software’s top offerings are:
- Tax determination
- Continuous transaction controls
- Tax reporting
Sovos goes one step further by helping to minimize compliance risks and centralizing administrative tasks associated with sales tax filing. For instance, you can streamline your electronic tax return using e-filing and electronic data interchange.
Its tax calculation and transaction tracking abilities make it one of the best sales tax software programs. Talk to one of their experts tostart using Sovos.
TaxCloud is another cloud-based software, and it’s known as one of the best state-subsidized compliance programs. That’s because it’s the only sales tax software with a free state-paid option for 25 states.
The software already has over 28,000 customers as it focuses on simple processes and low-cost products.
The software determines the correct sales tax rate and collects sales tax at the point of transaction.Additionally, youcan use the software to file and pay tax returns to state and local jurisdictions.
Their team will also provide direct support for audits and state notices.
The customer interface is easy to navigate and offers several useful tools. Integrationsare easy with popular third-party applications such as:
- Big Commerce
- Square Up
- Woo Commerce
TaxCloud offers customers a free trial, and paid services begin at just$10 per month.
Taxify, a Sovos product, has been leading the way in business taxes for more than 30 years. It spans all 50 states and more than 14,000 tax jurisdictions.
Taxify helps you comply with tax changes and offers auto-filing features for tax returns. This is great for avoiding late fees.
The company also has tax experts on staff to help answer your specific questions. This is something you won’t find with many other software providers.
Taxify is more expensive than other software options. Luckily, you can try the free trial first to see ifit’s for you.After that, expect to pay $47 per month.
If you like Taxify but find the price too expensive, considera different Sovos product.
Calculating salestaxes for your businessjust got much easier with TaxJar.
TaxJar is anothertop-rated tax software for your small business to consider. It covers more than 14,000 tax jurisdictions, and more than 20,000 companies use the software. This includes companies like:
The software allows your business to arrange and organize sales tax data and fetch return-ready reports. In fact, the software was designed to help you manage the entire tax lifecycle.
It automates tax calculations and has an auto-file option to submit tax returns. Integrating TaxJar with eCommerce and other third-party platforms is easy, making it a favorite for online businesses.
Further, it’s powerful enough to handle the busiest of shopping days with zero downtime. That’s why large companies love it.
Yet, TaxJar is low-cost, so smaller businesses love it too. You can tryTaxJar forfree for 30-days, then choose a plan for as low as $19 per month.
How to Choose the Right Software
While these sale tax software programs are all excellent choices, there are a few specific things to look for when choosing the rightone for your business.
Thefeatures you must look for are:
- Address validation
- Automative invoice application
- Exemption certificate tracking
- Tax calculator
- Tax filing
- Transaction tracking
Next, you need to ensure the software you choose integrates with the other platforms your business uses.It should also allow you to adjust the functionalities of your platform as required.
The software should have the ability to sync withaccounting softwareor systems, integrate with ERP apps, and connect with inventory software.
Finally, you want a software program that will track activities and provide easy-to-read reports. You want a clear idea of your sales tax bill and when your business paid it.
Invest in a Sales Tax Software Today
With so many great sales tax software programs available, there’s no doubt your business should invest in one. The benefits far outway the costs, so continue to do your research to see which software is best for your company.
To learn more about all things small business taxes, check out ourTaxes section. We add new business and tax information regularly.
California Sellers Permit: Helpful Guide
Sales tax software is a valuable tool for businesses of all sizes, as it helps automate the process of calculating sales tax rates and filing tax returns. It is especially useful for businesses that sell products and services to customers in different parts of the state, country, or world. By using sales tax software, businesses can save time, improve accuracy, and ensure compliance with ever-changing tax rates and regulations.
What Is Sales Tax?
Sales tax is a consumption tax imposed by the government on the sale of goods and services. It is usually levied at the point of sale, and the retailer collects the tax and passes it on to the government. The end-user is responsible for paying the sales tax. However, because most goods pass through several manufacturing stages, businesses need to document who the end-users are so they know who is responsible for paying the tax. Sales tax rates vary among states, counties, and municipalities, and these jurisdictions often overlap with each other, further complicating sales tax calculation [[SOURCE 1]].
What Is Sales Tax Software?
Sales tax software helps businesses calculate the correct tax rates when billing customers. In the United States alone, there are more than 45 different sales tax rates, and that doesn't even include different tax rates for various products and services. Sales tax software automates the process of calculating sales tax rates based on the location of the customer, so businesses don't have to worry about this time-consuming and stressful task. The software knows the appropriate tax rate for where the customer is located and applies it to the invoice [[SOURCE 1]].
Benefits of Tax Automation Software
Using tax automation software offers several benefits for businesses:
- Time-saving: Manually calculating sales tax for each customer can be highly burdensome. Tax software eliminates this burden and makes management easy while saving time and improving accuracy.
- Compliance: Tax jurisdictions continue to leverage technology to identify tax fraud and enforce compliance. Tax automation software helps businesses stay compliant and meet tax deadlines by alerting and reminding them to file taxes on time. It also stays up-to-date with changing sales tax policies, so businesses don't have to learn new laws each time they change.
- Global Reach: Sales tax software is particularly beneficial for businesses that sell products and services to customers in different parts of the state, country, or world. It ensures accurate tax calculations regardless of the customer's location.
- Streamlined Processes: Sales tax software automates tax calculations, filing, and remittance processes, making them more efficient and reducing the risk of errors.
- Integration: Many sales tax software programs offer integrations with other business applications, such as sales processors, accounting software, and inventory management systems, allowing for seamless data management across different platforms [[SOURCE 1]].
Best Sales Tax Software Programs
Here are some of the best sales tax software providers available:
Avalara: Avalara is a widely recognized and trusted sales tax software provider. It offers a range of features, including sales tax registration, rate calculation, return filing and remittance, and certificate management. Avalara is suitable for companies of any size and industry, with a customer base of more than 30,000 across 95 countries. It uses geolocation to calculate sales tax, ensuring accuracy. Pricing starts at $25 per month, and a 60-day free trial is available [[SOURCE 1]].
DAVO: DAVO, an Avalara product, is ideal for brick-and-mortar businesses. It collects sales data from the point-of-sale (POS) system and automatically sets aside the daily sales tax amount. DAVO also handles filing and paying the owed taxes on time and in full to the state. It integrates with major POS software applications and offers a user-friendly interface. Pricing starts at $39.99 per month, and a free trial is available [[SOURCE 1]].
EXEMPTAX: EXEMPTAX specializes in tax exemption certificates for tax-exempt customers. The software collects, validates, and renews these certificates in a secure and easy-to-use platform. It provides visibility into invalid, missing, and expiring certificates, helping businesses take necessary action. EXEMPTAX offers integration with major third-party applications and provides an audit risk assessment. Pricing starts at $250 per year, and a 14-day free trial is available [[SOURCE 1]].
Sovos: Sovos is a cloud-based sales tax software designed to solve the challenges of the digital transformation of taxes. It has more than 7,000 customers in over 70 countries and covers more than 12,000 tax jurisdictions. Sovos offers tax determination, continuous transaction controls, and tax reporting. It helps minimize compliance risks and centralizes administrative tasks associated with sales tax filing. Pricing information is available upon consultation with their experts [[SOURCE 1]].
TaxCloud: TaxCloud is a cloud-based sales tax software known for its state-subsidized compliance programs. It determines the correct sales tax rate, collects sales tax at the point of transaction, and facilitates tax return filing and payment to state and local jurisdictions. TaxCloud offers direct support for audits and state notices and integrates with popular third-party applications. It has a free state-paid option for 25 states and offers a free trial. Paid services start at $10 per month [[SOURCE 1]].
Taxify: Taxify, another Sovos product, has been a leader in business taxes for over 30 years. It spans all 50 states and more than 14,000 tax jurisdictions. Taxify helps businesses comply with tax changes and offers auto-filing features for tax returns to avoid late fees. It also provides access to tax experts for specific questions. Taxify offers a free trial, and pricing starts at $47 per month [[SOURCE 1]].
TaxJar: TaxJar is a top-rated tax software that covers more than 14,000 tax jurisdictions. It allows businesses to organize sales tax data, fetch return-ready reports, automate tax calculations, and submit tax returns. TaxJar integrates easily with eCommerce and other third-party platforms and can handle high volumes of transactions without downtime. It offers a free trial, and pricing starts at $19 per month [[SOURCE 1]].
Choosing the Right Software
When choosing sales tax software for your business, consider the following factors:
- Features: Look for software that offers address validation, automated invoice application, exemption certificate tracking, tax calculation, tax filing, and transaction tracking.
- Integration: Ensure that the software integrates with the other platforms your business uses, such as accounting software, ERP apps, and inventory software.
- Customization: Choose software that allows you to adjust functionalities according to your business requirements.
- Reporting: Select a software program that tracks activities and provides easy-to-read reports, giving you a clear idea of your sales tax bill and payment status.
Investing in sales tax software can greatly benefit your business by saving time, improving accuracy, and ensuring compliance with tax regulations. Consider the features, integration capabilities, and reporting functionalities of different software programs to choose the one that best suits your business needs [[SOURCE 1]].