Published August 26, 2023 – Managing sales tax compliance efficiently is a critical aspect of any business’s financial operations. Let’s delve into five prominent sales tax automation solutions that offer distinct benefits and functionalities.
Table of Contents
Davo
Exemptax
Avalara
Quickbooks Online
TaxJar
Enhancing Compliance at Greater Ease
1. DAVO Sales Tax: DAVO Sales Tax provides an automated service that seamlessly integrates with your POS system, ensuring daily sales tax funds allocation, timely filing, and payment. This hassle-free solution guarantees accurate tax calculations and offers set-up assistance, continuous support, and secure data handling.
2. Exemptax: Exemptax is a secure platform tailored to streamline the collection and management of tax exemption certificates. With versatile integration options, it helps businesses mitigate audit risks and simplifies customer communication while ensuring compliance.
3. Avalara: Avalara offers comprehensive tax automation software that simplifies compliance processes, from tax calculations to filing and remittance. Its cloud-native solutions cater to businesses worldwide, with accurate rate calculation and customized rules.
4. QuickBooks Online: QuickBooks Online’s Sales Tax Center provides a hub for efficient sales tax management. It automates tax calculations, offers in-depth reporting, and supports timely payments, enhancing accuracy and compliance.
5. TaxJar: TaxJar’s cloud-based solution covers the complexities of sales tax compliance across multiple sales channels. With features like real-time calculation, AI-driven categorization, and reliable support, TaxJar ensures accurate filing and proactive management.
Davo
DAVO Sales Tax is a fully automated sales tax management service that integrates directly with your point-of-sale (POS) system to set aside your sales tax funds daily, then automatically files and pays your sales tax on time and in full when due. DAVO automates every step of the sales tax process, from collecting to filing to paying. It works seamlessly with your POS, so there’s nothing you need to do. And because DAVO guarantees your taxes will be paid on time and in full, there’s nothing to worry about either.
DAVO is a stress-free, hassle-free sales tax solution for small businesses. It offers a free trial and costs only $49.99 per month after the trial period. There are no hidden fees or long-term contracts. DAVO Automated Sales Tax includes sales tax set aside daily, guaranteed on-time and in full tax filing and payment, state sales tax discounts calculated, collected and refunded, live set up assistance and continuous chat and tech support, daily sales and tax report emails, online access to review tax information, payment confirmations and daily sales, unlimited storage of sales tax reports, returns, and historical data.
DAVO is a safe and secure sales tax automation solution. It uses industry best practices to protect you and your business, including storage encryption of all account data, secure tax holding account separate from your general operating funds, the latest SSL for each web interaction, cloud backups, rapid data recovery, daily reporting, and account access for user oversight.
Pros:
- Sales tax is set aside daily
- Guaranteed on-time and in full tax filing and payment
- State sales tax discounts calculated, collected, and refunded
- Live set-up assistance and continuous chat and tech support
- Daily sales and tax report emails
- Online access to review tax info, payment confirmations, and daily sales
- Unlimited storage of sales tax reports, returns, and historical data
Cons:
- The concealed nature of the authorization to access funds gives rise to apprehension
- concerns about transparency and proper disclosure of access rights.
- Sales tax payments are typically deferred until the end of a quarter, spanning three months
- Bank-like Business Model: The entity’s business model essentially emulates that of a financial institution, with the capacity to access and manage funds. This entails a level of financial control akin to that of a bank.
- Risk Evaluation: The overall risk associated with the entity’s proposition is deemed excessive, particularly given the reported inadequacies in customer service.
Exemptax
EXEMPTAX serves as a secure and user-friendly platform designed to facilitate the collection, verification, and management of resale and tax exemption certificates for businesses. This versatile platform can be utilized as a standalone solution for managing tax exemption certificates or seamlessly integrated with other e-commerce sales tax calculation engines, ultimately contributing to the mitigation of audit risks.
Streamlining the complexities associated with collecting, validating, renewing, and auditing tax exemption certificates, EXEMPTAX offers a unified and secure platform. It accommodates a range of plans, add-on services, integration choices, and comprehensive managed services solutions, all presented with transparency and flexibility.
EXEMPTAX facilitates the seamless import of customer records through various means, including API, bulk file uploads, and integration with popular e-commerce platforms like Shopify and BigCommerce. The platform empowers users to efficiently search for certificates and assess audit risk through an intuitive dashboard. It provides insights into certificates that are invalid, missing, or nearing expiration, equipping businesses to take prompt action.
The platform further enables businesses to automate customer communication regarding certificate collection. Mass requests can effortlessly be dispatched via email and USPS, requiring no specialized training. EXEMPTAX guides customers through a straightforward process to complete their resale and tax exemption certificates. By utilizing this software, errors can be minimized, and the need for time-consuming back-and-forth communication with customers can be reduced.
Pros:
- Helps businesses simplify the process of collecting, validating, renewing, and auditing tax exemption certificates in one secure and easy-to-use platform.
- Offers flexible and transparent plans, various add-on services, integration options, as well as end-to-end managed services solutions.
- Enables you to easily search certificates and highlights your audit risk in an intuitive dashboard.
- Automates your customer communication with certificate collection campaigns.
- Guides your customers through a quick and easy flow to complete their resale and tax exemption certificates.
- Control your exposure and gauge your audit readiness in real-time.
- API was well-documented and had a straightforward integration.
- We were able to get up and running in just a couple of days, including final testing.
- Tech support was very supportive and provided speedy answers to configuration questions.
Cons:
- A company wanted to add some additional automation logic but that required manual customization
- A senior director would prefer these extra customization options be better documented
Avalara
Avalara is a leading provider of tax automation software that offers businesses a comprehensive solution to simplify and streamline tax compliance processes. Avalara’s cloud-native software automates tax compliance and can help improve accuracy while reducing costs. The platform is designed to automate tax calculations, ensuring accurate tax collection based on various factors such as product type and jurisdiction.
Avalara offers end-to-end solutions for tax compliance management, including:
- Rate calculation
- Returns filing and remittance
- Sales tax registration
- Certificate management
The platform leverages regularly updated, address-specific tax rates to improve accuracy and provides access to a database of tax content, rates, and rules for 190+ countries. Avalara also enhances the customer experience by applying custom rules to calculate rates at the point of purchase.
AvaTax Product: Avalara’s AvaTax product is a cloud-based software that delivers the latest sales and use tax calculations to your shopping cart or invoicing system at the point of purchase. It accounts for tax rates for each state, county, and city, as well as laws, rules, jurisdiction boundaries, and special circumstances like tax holidays and product exemptions.
Avalara Returns: Avalara Returns is a seamless end-to-end service that prepares and files your sales and use tax returns. The service manages returns according to an online filing calendar, handles disparate filing requirements in each state and county, and remits payments to each jurisdiction on your behalf.
Avalara CertCapture: Avalara CertCapture automates the collection, validation, management, and renewal of exemption certificates. It provides instant access to compliance documents via a central, secure repository.
QuickBooks Online
QuickBooks Online provides a comprehensive suite of tools for aiding businesses in their sales tax compliance efforts. The Sales Tax Center serves as a unified hub for overseeing all tasks related to sales tax. It facilitates the addition of multiple sales tax rates, encompassing combined rates. Moreover, it grants access to reports detailing sales tax liability, which are customizable by factors like date and agency. This center within QuickBooks Online also empowers users to input sales tax payments, consolidating recent payments within a singular location.
Additionally, QuickBooks Online incorporates an automated sales tax function capable of calculating sales tax automatically for invoices and receipts. This feature streamlines the process, ensuring precise calculations for easier and more accurate filings. The software further serves as a reminder for impending tax payment deadlines, aiding users in submitting their filings promptly and avoiding potential penalties.
Within the Sales Tax Center, users possess the capability to include and revise tax agencies, rates, and configurations. This encompasses the ability to fine-tune sales tax settings, adjust the sales tax center’s filter parameters, modify sales tax configurations, and deactivate specific tax rates.
Pros:
- Thorough record-keeping and comprehensive reporting; The entry-level plan comes with more than 50 reports.
- Robust inventory management in the Plus plan and higher.
- Choose from more than 750 app integrations, plus options to add in-house bookkeeping and payroll.
- Easy to share information with your accountant and to find QuickBooks experts and online resources if needed.
- Monday-Sunday phone support and live chat assistance in all plans.
Cons:
- Monthly plans are expensive compared to alternatives.
- Limited users with each plan; the highest-tier plan caps users at 25.
- The learning curve to getting started.
- Automatic time tracking costs extra, and the Simple Start and Essentials plans don’t support billable expense automation.
TaxJar
TaxJar offers a user-friendly cloud-based solution that streamlines your entire sales tax process, covering all your sales channels. This includes everything from calculations and tracking your tax obligations to generating reports and filing taxes. Using advanced technology and excellent customer support, TaxJar simplifies the complexities of sales tax compliance, helping your business grow smoothly. The platform’s modern architecture ensures top-notch performance, reliability, and adaptability as your business expands. TaxJar comes with ready-to-use integrations for popular platforms, a real-time calculation engine, a flexible API, and summarized transaction reports, all designed to reduce your administrative workload. Their dedicated support team is always ready to promptly help you find solutions.
TaxJar’s platform covers an impressive 11,000 jurisdictions, taking care of the complexities of sales tax compliance for you. It ensures proactive management of your economic nexus exposure, precise collection of the right sales tax rates for each product you sell, and punctual submission of required filings and payments. With TaxJar, expanding into new markets and maintaining sales tax compliance across multiple sales channels becomes straightforward. Leveraging the power of this cloud-based platform allows your business to grow seamlessly. Using AI-driven product categorization, a real-time calculation engine, a flexible API, and concise transaction reports, TaxJar effectively removes the burden of administrative tasks.
Here is a list of pros and cons of TaxJar sales tax software:
Pros:
- Inexpensive monthly subscription costs for sales tax engine
- Data can be manually uploaded
- Tracks FBA inventory for physical nexus
- Flexible and smooth integration
- TaxJar makes sales tax a breeze. It pulls sales data from multiple platforms and provides a consolidated report for each state that one can use to file their sales tax return.
- Generally easier to use. TaxJar has fewer advanced features than Avalara, which makes it easier to navigate and less overwhelming.
- Great for people using Square. TaxJar is a Square product, so it easily integrates with your POS system to identify taxable sales.
Cons:
- Additional costs for custom integration
- Strict filing deadline (5th of each month).
- The software does not work well if you sell on channels not integrating with TaxJar.
- This was hard to understand and navigate on my own. I had to have our CPA show me exactly where to find everything and how to set things up.
- It was hard to pay for an emerging startup.
