We posted once previously here about a solution to the cumbersome and time-consuming problem of managing sales tax billing and collection (not to mention exemption certificates) for those companies required to collect taxes in multiple states. That solution was from a west coast company called Avalara. Today we’ll take a quick look at how they actually help solve this problem.
Face it: As Avalara puts in on their website: “Sales tax is compulsory, complex and costly for any business. Automating the process saves time, money and effort.”
The fact is, there are over 11,000 different taxing jurisdictions in the U.S. alone. And getting it wrong, if or when you’re audited, can be a costly mistake. If you’re looking for a solution to consolidate and simplify your reporting, your remittance, and your sales tax exemption certification management, take a look at Avalara.
In brief, here’s how it works:
With Avalara (actually, that’s the company, the product is called AvaTax) integrated into your ERP system (and they have connectors for nearly 300, and an API for any others), you simply code your customers in the sales tax areas as AvaTax (as opposed to their actual state or taxing district). AvaTax takes it from there. It intercepts the transaction, bumps the sales tax calculation and storage into their cloud based application, checks your recorded customer address against an up-to-date USPS address listing, and applies the relevant tax.
It does all this as the transaction takes place, in less than a second, via a secure, encrypted Internet connection without disrupting your workflow. Rates are calculated “behind the scenes” and are automatically applied to each transaction. Reports are generated on demand. And of course, the system keeps track of all rule changes and tax updates.
Best of all, you minimize your sales tax audit risk, as you have a clear trail and reporting on all transactions, balanced against current rates that someone other than you keeps current. In some cases, the elimination of audit costs and penalties alone can be worth the investment.
The system basically takes care of four key areas:
- Calculating the correct tax
- Managing and automating all your exemption certificates
- Filing and remitting taxes
- Preparing and managing audit exposure via reporting
You can learn more at their website: www.avalara.com. With eager state legislatures and taxing authorities searching for increased revenues, and increasingly aggressive state tax collectors, not to mention proposed changes to tax collections over the Internet, we think this is a company, and a product, with a healthy future – one that has identified a need and provided an efficient solution.