This blog was last updated on June 6, 2022

Omnichannel retailers know that they cannot overlook sales tax, but it is a time-consuming and complicated process. Especially when retailers operate in numerous jurisdictions and balance in-person and virtual sales, it is difficult to properly manage sales tax.

A recent Sovos survey interviewed full-time finance and accounting decision makers at retail companies with annual revenues of $25 million to over $1 billion. Respondents reported that operational inefficiency was the greatest risk to the company from a sales tax perspective (43%). Additionally, inefficiency of current indirect tax processes (31%) was one of the most significant sales tax challenges organizations are facing.

Over half of those surveyed (52%) said their companies sell products and services on at least three online platforms or marketplaces, leading to more complexity and an increased need for streamlined processes to avoid risk of error. Accuracy issues are often caused by manual processes, meaning that data consolidation is likely an area where efficiency could be improved for many organizations. One of the greatest organizational risks related to sales tax (40%) was the inability to accurately consolidate data from multiple transaction systems, according to respondents.

The survey also found that 86% reported that their company spends four or more days on sales tax compliance each month. When nearly one-quarter of the working days in one month are being spent on sales tax compliance, organizations face a greater risk of burnout as well.

So how can organizations address – and overcome – inefficient sales tax processes?

Integrate a reliable tax engine

• The right tax engine is regularly updated by tax experts, not your team of multi-taskers. Respondents said updating transaction systems to reflect rate changes (36%) and researching tax rates (35%) consumes the most time for finance and accounting teams.

• Along with tax rate maintenance, retailers can ensure they have the correct product and service-specific taxability, as well as customer taxability.

Consider a cloud-based sales tax solution

• A cloud-based sales tax engine keeps an up-to-date repository that clients access as they apply tax on transactions. The majority of respondents (86%) are either in the cloud, currently migrating to the cloud or are dreaming of making the move to the cloud. The availability, scalability, flexibility and security of a cloud-based sales tax engine will help retailers keep pace with updates and stay compliant.

Consolidate data from disparate channels

• Connecting an automated filing solution to your tax engine will streamline data from all your connected transaction systems onto sales tax returns for faster filing. Omnichannel retailers have difficulty aggregating tax information from multiple sales channels. With increased risks by having multiple transaction platforms, organizations need to streamline processes and avoid the potential for errors.

Long-term efficiency depends on the scalability of your sales tax processes. An automated solution can keep pace with the complex, constantly changing tax landscape. Omnichannel retailers need that flexibility to account for product and service expansion, especially as their organizations move into new jurisdictions. Don’t wait for out-of-date forms to create larger issues – such as audit inquiries. Optimize your sales tax solutions today to ensure short- and long-term success for your e-commerce retail business.