INTERNET APPLICATION DEVELOPMENT
MID MARKET ERP DEVELOPMENT
By Hrayr Galoyan
With Internet sales tax legislation looming, many business owners may be wondering how they will handle the additional burden of collecting and reporting sales taxes for all states. Fortunately, technology exists to help; and best of all, much of it is free.
Let me start with a paid option. Avalara is a company based in Washington that provides software to handle sales taxes. In the company’s words “AvaTax Calc is an easily integrated, dynamic tax decision engine.” It is already integrated with many accounting, ecommerce, and POS systems. For the complete list, visit Avalara. They also provide a free lookup of sales tax rates on their site.
The other option is a company called TaxCloud. Tax Cloud itself is free, and provides tax rate lookup for any US address. If you use the Streamlines Sales Tax Agreement, it can also keep track of sales transactions and tax amounts collected and file sales tax returns. Programming interface is available to integrate with any ERP, e-commerce or POS system, and many already have done so. See the list here. If you have an ERP system that you want to integrate with TaxCloud, CodePartners will be happy to talk to you.
If you just want to lookup a tax rate, you don’t even need to register at TaxCloud. Simply click on the map, or enter the address. Below is an example for Dallas, Texas.
Sales taxes can get more complicated than just one rate. At the same address, some items may be taxed differently than others. For example, alcohol may be taxed at a higher rate than consumer electronics, and some grocery products may not be taxable at all. Tax Cloud supports “Taxability Codes”.
This requires your accounting package to be integrated with TaxCloud. Each item in your product list is assigned a taxability code, and when the software requests the tax rate from TaxCloud, it automatically provides the correct rate for the type of product you are about to sell.
For more information about sales tax, here are a couple of articles I thought were interesting. This article discusses what to expect from Internet sales tax legislation.
This article looks at possible compliance pitfalls, and I highly recommend you read it if you have out-of-state customers, even if you don’t have a nexus in those states.
Darryl, wow that was feedback that I am sure many business owners will agree with. Looking from purely consumer perspective, I would obviously prefer not to pay sales taxes. I was upset when Amazon started charging them. But then I keep hearing all the stories of budget deficit, fiscal cliff, and stuff like that, and I think to myself, will it break me if I had to pay sales tax on internet purchases? Not really. If it helps the economy, so be it. So on personal level, I came to accept this as necessary even. Of course, I don't own a business, so I leave the consideration you brought in your comment for others, who do. Hopefully, we can all figure out what's the best way of doing it.
Will, I did not know that Avalara provides free tax rates under Streamlined Sales Tax Agreement, thank you for clarification! My understanding is that Avalara has more products and services than Tax Cloud. It is great to have multiple options for users to choose from.
Proponents of this bill say it will be easy. REALLY? Have they ever tried to integrate tax software into a customized shopping cart? LOL!! Even if we take them at their word "only one state tax rate" and "perfect running software to calculate", HOW DO PAYMENTS GET REMITTED to all 46 states? Do we write 46 monthly checks? Fill out 46 separate monthly sales tax returns?NO ONE CAN HONESTLY ANSWER THIS QUESTION BECAUSE THEY DID NOT STUDY THE APPLICATION OF THIS LEGISLATION BEFORE RUSHING IT THROUGH THE SENATE.Not all small merchants are order automated and to input additional information by hand is both time consuming and interferes with normal business operations. What about audit risk? Can the tax board in Tennessee come after a merchant in Florida? Is it moral to burden an out of state merchant to collect taxes on behalf of a state they don't live or work or vote in? Why not ask China or Mexico to collect Tennessee taxes? Is this constitutional? Will surely be challenged in the courts, but why this legislation is truly harmful is that in such a weak recovery (check labor participation rate, wage growth, hours worked, etc.) you are burdening the very small businesses that are one of the only sources of growth in our economy. Hiring in this sector will freeze or decline and companies that are mobile and of large enough scale will simply move offshore. Our tax code is already written in a manner that encourages large companies to domicile offshore, this legislation encourages the medium and even portable smaller sized USA businesses to join them in order to compete with websites that won't have to collect this tax in the Caribbean, Mexico,Canada, etc. The tax revenue will come right out of the pockets of the average American family and the extra $$$ our citizens will have to pay means LESS money in their pockets to spend locally.HOW ABOUT AN OPT OUT OPTION? We agree not to ship to states that want us to collect sales tax and then we are not forced to multiple file and take the audit risk?One million dollars of revenue does not make you a big business.......at a 5% profit (small margins are common online) you are making a whopping $50K of gross profit annually......this will ensnare and burden a TON of small businesses if passed in its current configuration.
Thanks for the summary, Hrayr. This is an extremely timely issue, with Internet sales tax legislation making its way through Congress. I wanted to clarify a couple things about Avalara . Avalara's flagship service, AvaTax, is also free for those transactions covered under the Streamlined Sales Tax Agreement (all certified service providers are). AvaTax also does calculation, exemption cert management, reporting, and filing in every state. We have 200+ pre-built connectors, and a free API so you can integrate our service with any custom solution (http://developer.avalara.com/).