Sales tax compliance is crucial for businesses, but it can be a cumbersome and time-consuming task when undertaken manually.
Fortunately, sales tax automation software offers just the solution, allowing companies to focus on growing their brand while ensuring accurate and efficient sales tax compliance.
But how do you go about choosing the best software for your business?
We’ll show you as we explore the importance of sales tax automation, the complexities of multi-jurisdictional nexus triggers, and the difficulty of staying compliant in the borderless online game.
The importance of automating sales tax calculations
Calculating sales tax manually is not only time-consuming but also error-prone. With an automated sales tax calculator, global businesses can save valuable time and ensure compliance with tax regulations.
Here are some key elements that sales tax automation software assists finance teams with:
Ensure accurate tax calculations every time
Sales tax automation software utilizes up-to-date tax rates and rules to calculate taxes accurately, eliminating the risk of human error when having to apply the right amount of sales tax to products manually.
Simplify multi-jurisdictional compliance
With sales occurring across state lines at the click of a button, managing tax compliance in different jurisdictions becomes complex. Automation software can handle this complexity by automatically applying the appropriate tax rates based on customers locations and remitting the accurate amounts to state departments.
Get real-time updates on sales tax regulations
The tax world is still catching up to the swiftly expanding digital field, and as such tax regulations frequently change, making it challenging for businesses to stay up to date with their nexus. Sales tax automation software offers real-time updates to ensure compliance with the latest tax laws and regulations.
Understanding nexus and taxability rules
Nexus refers to the connection between a business and a taxing jurisdiction, determining whether the business is liable to collect and remit sales tax in that jurisdiction.
For companies who sell to customers across state lines in the USA, managing nexus regulations can be challenging.
To illustrate the complexity, here are the different types of nexus events that sellers need to be aware of:
Physical Nexus: A physical nexus is established when a business has a physical presence, such as a brick-and-mortar store or a warehouse, in a particular jurisdiction. But it can also be triggered when remote staff work in a different state or when promoting your brand at out-of-state trade shows.
Economic Nexus: Economic nexus is based on a business’s economic activity, such as reaching a certain sales threshold or a specific number of transactions in a jurisdiction, irrespective of physical presence.
Click-through Nexus: Click-through nexus is triggered when an out-of-state seller receives referrals or leads from in-state residents through affiliate links on their websites.
Affiliate Nexus: Affiliate nexus is created when an out-of-state seller has agreements with affiliates in a jurisdiction, who promote the seller’s products or services in exchange for a commission.
Cookie Nexus: Cookie nexus occurs when a business’s website places cookies on users’ devices, creating a virtual connection with a taxing jurisdiction.
Marketplace Nexus: Marketplace nexus applies to online platforms or marketplaces that facilitate sales for third-party sellers, and fall under different tax regulations than its sellers.
Third-party Nexus: Third-party nexus arises when a business uses third-party services, such as fulfillment centers or drop-shippers, that are located in a taxable jurisdiction, thereby establishing a nexus for that business.
To stay on top of each one of these nexus triggers can become a tiresome and draining process if done manually. That’s why international businesses need automated sales tax software to simplify the compliance journey.
Choosing the Right Sales Tax Automation Software
To effectively automate sales tax calculations, it’s essential to choose the sales tax automation software that aligns with your business’s operational framework.
Here are key factors you need to consider when choosing the right sales tax tools:
ERP and Business Software Integration
The ease of integration is one of the most important factors to consider. You need to look for sales tax automation software that seamlessly integrates with your existing ERP and business software, allowing for efficient data transfer and streamlined tax compliance processes.
A Centralized, Cloud-Based Solution
Opt for a cloud-based sales tax automation software that centralizes tax management from all of your different platforms, ensuring real-time updates, scalability, and accessibility from anywhere.
Flexibility and Responsiveness
Your automation software should be flexible enough to handle complex tax scenarios and adapt to changing regulations. It should also provide responsive customer support to address any concerns or issues promptly.
Why Complyt ticks all the automated sales tax boxes
Sales tax compliance is a critical aspect of running your business, but it doesn’t have to be a burden. By partnering with a versatile sales tax automation provider, you get to save time, ensure accurate tax calculations, and maintain a simplified compliance journey.
Complyt is that provider.
We’re a company that has simplified the sales tax compliance of businesses ranging from eCommerce and SaaS companies to startups through flexible and scalable products that are tailored to fit each requirement.
Our platform integrates seamlessly with established frameworks, whether they’re built on ERP databases or CRM logs, making it easy for businesses of any size to gain access to enterprise-level efficiency.
We provide the tailored solution that your business needs.
Our experience in the digital ecosystem has helped us build a tool that not only simplifies sales tax compliance, but helps you to benefit from exemptions you may not even have been aware of. Get in touch with our sales team to see how we can help you automate and simplify your sales tax compliance.