UPDATED Best Sales Tax Apps for Online Sellers in 2023 | Avalara, TaxJar & Taxify | Summary and Q&A

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December 7, 2022
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LedgerGurus
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UPDATED Best Sales Tax Apps for Online Sellers in 2023 | Avalara, TaxJar & Taxify

TL;DR

This video provides a review of popular sales tax automation tools, explains the complexity of sales tax for e-commerce sellers, and discusses the difference between sales tax engines and filing tools.

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Key Insights

  • 📊 Sales tax is complicated for e-commerce sellers due to varying state regulations, tax rates, and definitions of products and services.
  • 🔧 Using a sales tax tool is essential to efficiently manage sales tax calculations, collection, and reporting in today's e-commerce landscape.
  • 💡 Sales tax automation tools offer sales tax calculation engines and filing tools, which are distinct but complementary functions.
  • 🌐 Sales tax rates and regulations are subject to change, making manual management challenging for sellers. Automation tools help stay updated and compliant.
  • 🌍 Sales tax calculations require detailed tracking of sales by county, city, and special jurisdictions, adding complexity to manual management.
  • 💰 Avalara is a comprehensive and robust sales tax software with extensive integrations but costlier for smaller businesses.
  • 🎯 TaxJar offers a more affordable sales tax tool with flexible integrations, but its filing process has limitations and strict deadlines.
  • 💪 Taxify (by Sovos) provides excellent customer service, flexibility in data control, reasonable pricing, and longer filing windows, making it a solid option for businesses under $10 million in annual sales.

Transcript

sales tax is very complicated for e-commerce sellers not only do you need to collect tax calculate it make sure it's at the right rate when a customer checks out you have to remit it to the states and file it on the correct return at the correct time of the month and make sure you are taking the right deduction exemptions and vendors credit so all ... Read More

Questions & Answers

Q: Why is sales tax so complicated for e-commerce sellers?

Sales tax is complicated for e-commerce sellers because each state sets its own rules and regulations, resulting in different tax rates, filing frequencies, and definitions of taxable items.

Q: What is the difference between a sales tax engine and a sales tax filing tool?

A sales tax engine calculates the sales tax rate and integrates with the sales platform, while a sales tax filing tool pulls data from sales channels and prepares and files tax returns on behalf of the seller.

Q: What are the advantages of using Avalara as a sales tax tool?

Avalara is a comprehensive sales tax software with a robust database for calculations. It integrates with numerous platforms, offers geolocation-based tax rate accuracy, and provides good customer support. However, it can be costly for small businesses.

Q: How does TaxJar compare to other sales tax automation tools?

TaxJar offers a more affordable option, starting at $19/month, but it has limitations, such as rigid filing deadlines and calculations that may not match the actual sales tax collected. It is suitable for smaller businesses with simpler sales tax needs.

Q: What are the benefits of using Taxify and Sovos for sales tax management?

Taxify and Sovos provide excellent customer support, flexibility in managing data, and transparency in calculations. They have longer filing windows, support local filings, and offer more control over the filing process. However, they may have fewer platform integrations compared to other tools.

Q: Can sales tax automation tools handle international filings?

Avalara and Sovos support international filings, while TaxJar focuses on U.S. sales tax. However, international filings may require additional customization and higher costs.

Q: Why is sales tax so complicated for e-commerce sellers?

Sales tax is complicated for e-commerce sellers because each state sets its own rules and regulations, resulting in different tax rates, filing frequencies, and definitions of taxable items.

Summary & Key Takeaways

  • Sales tax for e-commerce sellers is complicated because every state has its own rules and regulations for tax rates, filing frequency, and taxability.

  • Sales tax rates, definitions, and regulations are subject to frequent changes, making it challenging to stay up-to-date.

  • E-commerce sellers not only have to deal with state-level sales tax but also need to track taxes at the county, city, and special jurisdiction levels, adding to the complexity.

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