The sales tax implications of running a small business can be huge.
There are thousands tax of jurisdictions in the United States, an unmanageable number for business owners to process manually. And don't expect the United States Post Office to lend any clarity. "Zip codes don't follow jurisdictional boundaries," explained Avalara co-founder Rory Rawlings.
To add another layer of complexity, certain types of goods are often taxed differently or not at all in some cases. In short, there are no shortcuts in calculating sales tax.
Avalara provides an online sales tax automation technology that helps small businesses navigate the tangle of sales taxes. The company's platform offers more than 200 connectors that integrate with popular business, accounting and point-of-sale systems. UPC code mapping eliminates the uncertainties of dealing with different product types.
A tax specific geo-location engine offers pinpoint, "rooftop" level accuracy. Businesses can further streamline the process by optionally subscribing to Avalara's automated sales return generation and filing services.
Automating Sales Tax for Efficiency
Calculating sales tax using traditional business software tools, Excel, or worse, pen, paper and a calculator, can be a big burden for small shops and startups. In a recent survey conducted by the company, accounting pros end up spending 11 hours a week filing sales returns and sending payments— nearly six workdays a month.
No company owner would disagree that this is time better spent growing the business. Some small business owners may be playing a dangerous game of chicken with auditors. More than a third of those polled by Avalara "can't remember the last time their company updated their sales tax
compliance," said Rawlings.
It's a regulatory minefield that more small business face as the Marketplace Fairness Act wends its way through Congress. Avalara's tech is ready, regardless of the politics involved. "Our business model is to make any statutory requirements easy," said Rawlings.
Armed Against Audits
Logos.com, a maker of Bible study software, uses Avalara for both its shopping website and its internal sales force. For the company's CFO, Andy Skipton, the sales tax automation technology lifts a huge burden. "We don't have to concern ourselves with the literally thousands and thousands of tax jurisdictions," he told Small Business Computing. Integrating the technology was a "trivial" process, he reported.
Efficiency gains aside, Avalara provided Logos.com a powerful defense against audits. Skipton recounted the time when a sales tax audit for the state of Texas was going badly for his company. Armed with data from Avalara, Skipton and his team were able to prove that they were indeed compliant.
Calculations made on Avalara's platform were accurate and in keeping with the latest tax laws. "The book the [Texas auditor] was using was out of date," said Skipton.
At the end of the day, the tax automation platform helps Skipton do more to grow the company worry less about sales taxes. "Things are simpler," said Skipton.
Pedro Hernandez is a contributing editor at Small Business Computing. Follow him on Twitter @ecoINSITE.
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