This blog was last updated on May 3, 2024
Sales tax is a necessary evil for all businesses but you don’t want to spend more time thinking about it than you have to. Implementing the right sales tax technology solution can help your business continue to grow while ensuring you meet all sales tax obligations. Choosing an efficient, reliable, always-up-to-date solution will help you keep pace with evolving sales and use tax laws without having to sacrifice any aspect of your business.
Why is scalability important for sales tax technology?
The “one size fits all” idea might be great for oversized sweatshirts or baseball hats, but when it comes to sales tax technology you need an automated solution that can keep up with the complex, constantly changing tax landscape. Your sales tax obligations will multiply as your company expands, meaning you will need the ability to process increased transaction volume. Having greater flexibility with your product and service expansion will also be key. Furthermore, a scalable solution that grows with your business will make the audit process more efficient and less time consuming.
Sales tax complexities are also increasing. Following South Dakota v. Wayfair, Inc., more states are collecting more sales and use tax. Subsequently, they’re subjecting sales tax collections to higher levels of scrutiny. There are more than 12,000 tax jurisdictions across the US and you’ll want to be sure that you can accurately calculate sales tax in each one you have sales.
Overall, businesses need greater flexibility to meet the needs in this new reality. Online shopping is growing, further fueled by the COVID-19 pandemic. The fourth quarter of 2020 saw a 32.1% increase in e-commerce sales, compared to the same period in 2019, according to the US Department of E-commerce. Total retail sales increased 6.9% in that same time frame, while total e-commerce sales for 2020 were estimated at $791.7 billion, an increase of 32.4 percent from 2019.
Whether your business has always had an e-commerce component or you recently integrated it into daily operations, it is essential to maintain compliance in every area you sell.
Consider your short- and long-term needs
A scalable sales tax solution will also help your business overcome immediate issues and ones that may arise farther down the road. Random glitches and out-of-date forms might cause problems at any point, but can you guarantee data integrity as your business expands? What about long-term contract pricing with your vendors? Are you confident that you know how business growth will impact those costs?
For example, manufacturers reported that increased audit frequency – and the cost to support them – was a top challenge. Business evolution, such as mergers, new products and online sales were also a key pain point.
For smaller businesses that are still using manual processes, errors are going to start to appear – especially once you start to grow. A scalable and automated sales tax solution can help you avoid numerous headaches, including ones you may encounter as the company grows.
Customers say sales tax technology makes ‘economical sense’
A scalable sales tax solution is critical for many organizations, and Sovos has proven that we can make a positive impact on businesses.
“We knew we had to look at a new solution to satisfy our filing obligations in the wake of Wayfair,” said Mark Oulds, Director of Taxation, Boscov’s. “We didn’t have the resources to go out and get the licensing done for each state that we’re selling into through our ecommerce site and manage all new returns in-house. It didn’t take much effort on our side to implement, and we spend next to no time now on ecommerce tax compliance.”
Take action
Business growth is great but it has the potential to cause you grief without a scalable sales tax solution. Reach out to our experts to see how we can help you meet all sales tax obligations at every stage of your business.
