This guest post is from our friends at TaxJar. Please refer to TaxJar.com for updates on the latest sales tax news.
For online retailers, managing state sales tax has increased in complexity ever since the South Dakota v. Wayfair ruling back in 2018. Under the Wayfair ruling, individual states can require online retailers to collect sales tax – even if the company doesn’t have a physical presence in the state – if they meet economic nexus thresholds. For online retail, the ruling created a state sales tax labyrinth which is further complicated by the economic impacts of COVID-19.
With new obstacles, online retailers are still expected to file accurately and on time, which is no small feat considering the ever-evolving nature and enforcement of interstate sales tax law. Because of the economic climate, some retailers are also forced to increase their business’s focus on online sales, uncovering new streams of revenue but triggering deeper levels of sales tax confusion.
So why do you need a sales tax solution in the first place? Keep in mind, all solutions aren’t created equal and the needs of businesses vary, online retailers generally seek sales tax solutions for the following reasons:
– Ensure sales tax compliance through economic nexus tracking
– Calculate sales tax obligations across where they do business
– Automate the manual, tedious aspects of sales tax management
Here are 5 questions online retailers must ask before selecting a sales tax solution:
1. Can you tell me about the average uptime and average response time of your API?
In retail, seconds matter, especially when it comes to creating a seamless checkout experience for your customers this holiday season. If an uptick in orders causes a site to slow down, that creates a poor customer experience and may lead to you losing a potential customer to a competitor. If the vendor isn’t forthcoming with this information or doesn’t know their API performance that could be a red flag.
2. Tell me how your team ensures sales tax rates and product tax rates and product tax codes in your database are up to date?
With thousands of product tax codes used to determine product taxability, your online store needs to provide accurate, real-time, rooftop-level rates upon checkout. Since states create and enforce unilateral state sales tax laws, your sales tax solution must keep all of these sales tax rates and tax codes up to date.
3 . Who else in my industry do you or have you worked with?
It’s not enough for your sales tax solution to tout expertise in their products, they also need to exhibit expertise in your industry. You want a solution well-versed in the online retail category because they’ll understand the nuances and trends relevant to your business. The vendor should have no problem providing customer stories to help you put things into perspective.
4. How “hands-off” can I be once things are up and running?
Even for mid-sized companies with dedicated resources to manage state sales tax compliance, things can still be overwhelming. To manage this frustration, online retailers need a sales tax solution that automates electronic filing, reporting, monitoring, and returns, helping you to minimize human errors. This gives you time to focus on high-value activities. Also, you want a partner who has a dedicated team to be there when you have questions or concerns. When it comes to investing in a sales tax management solution, you want a company that removes the heavy lifting, with a support team in place to answer all of your questions.
5. How do your integrations work and is there any upfront work on my end?
When selecting a sales tax solution, online retailers should ask about integrations . You want a solution that’s not disruptive to how you use other products. Having a way to easily build and support integrations and partnerships with well-known vendors including Netsuite, Salesforce, BigCommerce, Amazon, Shopify, and more, helps you streamline sales tax management.
Hiring a sales tax vendor is as difficult as it is navigating the sales tax world, so do your homework before meeting with a vendor. If you like these questions but want more, get your free copy of our “ How to Evaluate a Sales Tax Software Solution Guide.” today!
Please note: This blog is for informational purposes only. Be advised that sales tax rules and laws are subject to change at any time. For specific sales tax advice regarding your business, contact a sales tax expert.