Sales & Use Tax Software -- 2005
A Brave New World Of Sales Tax Applications (Link to Article) (View pdf)
July 27th, 2005 08:42 AM EDT
By Mark Weinstein, CPA
Yes, compliance. Forms and remittances are due at regularly scheduled intervals. Sound familiar? Sure, it’s a monthly chore for most businesses, while others prepare forms and remit on a quarterly, semi-annual and annual basis. Today, remitted taxes are important to the operation of every level of government. The order of the day is for businesses to report accurately, to provide information in specified formats that are easily received by taxing jurisdictions, to remit faster, for returns to be prepared in scannable laser-printed formats, and to be filed electronically. Easier? I really haven’t run across that attribute yet.
Some businesses have a simple and clear-cut data path towards determination of sale and use tax due. These businesses operate in one city and state, and sell a handful of items or less, with sales tax collected based upon a single, simple-to-administer tax rate. Other businesses operate in multiple or all states, and in various cities, districts, parishes, etc. These businesses face the potential of applying rules that may be promulgated at the state, city and local levels. Conflicting rules be gone! NOT. Many of these companies require detailed, up-to-date sales and use tax rate databases, maintenance of which is a daunting undertaking to say the least.
Nexus — a five-letter word? Count again, please. Webster’s defines it as follows: Latin, from nectere to bind; CONNECTION, LINK; also: a causal link -- a connected group or series -- CENTER, FOCUS. Actually, I was certain that “NEXUS” just had to be a new book on the New York Times Bestseller List. Much to my chagrin, and to the doubt of affected clients at various moments in time, I began to learn the real meaning of the word nexus. Oh joy! Surely though I rode into the valley of death, I would meet a client who would greet my thoughts on nexus with other than skepticism and a burning desire to see me committed. This simple Latin word was definitely FOREIGN to all of us.
Quickly, we learned that if the rules of nexus applied there would be more states, cities and local jurisdictions for which my clients would have to collect, report, and remit sales and use taxes. Nexus — a compliance term that continues to evolve. Nexus results in added sales tax complexity, with increased responsibilities in calculation and determination of tax due, requiring intelligent understanding together with correct application of the underlying sales and use tax law and rules.
For sales and use tax purposes, Nexus means that a business has sufficient connection to another state, such that the other state can cause the business to collect and remit sales taxes. A business that has nexus to a state is, therefore, conducting or “doing business” in that state.
The good news is that no matter what your needs, the right sales and use tax application exists. Arguably, few areas of financial programming rely on DATABASE functions as do sales and use tax programs. It’s been said before, but return on software investment relates to the quality of information that can be extracted and used. So choose wisely. From small to large businesses, for preparers in public accounting or commercial enterprises, for administration in simpler or complicated environments, or for those involved in electronic commerce, the applications are here, and they are evolving as the needs of current users are met.
The Sales and Use Tax applications reviewed here can assist in automating the compliance process while reducing time spent in (formerly) manual tasks. Performance of specific compliance tasks is the real variable. Some applications are offered online or through hosted sites; others are loaded onto a local network or workstation, while still others function and work from programs and databases that reside on a CD-ROM. Some programs function to calculate and print forms from user-supplied input, while others can accept large amounts of detailed sales tax transactions in real time as they are linked to commercial accounting or electronic commerce programs. AND there are a number of programs that function in between the low and high end of things. Performance of related tasks like address validation is a real plus, allowing for fewer returns, lost shipments and improved collections. After all, the bill might not make it there either!
Form nuance to niche, let’s have a “look-see.”
Avalara -- AvaTax ST
AvaTax ST is somewhat of a newcomer to the Sales and Use Tax application marketplace and is aimed at small to medium-sized businesses. AvaTax ST is a hosted sales and use tax web service. We have all heard about hosted web services, but may not have given much thought to it. Examples of hosted web services are Fedex.com, UPS.com and Mapquest.com. AvaTax ST users connect their (order entry) accounting (or e-commerce) systems via an Internet connection to the web service database. Once connected — integrated — to the user’s accounting system, AvaTax ST sets to work validating the customer’s address, calculating sales tax for each transaction, and serving up dynamic, ready-in-a-flash, drill-down reports featuring a full audit trail.
AvaTax ST is an “on demand” web service. Rather than having to make significant investments, purchasing and/or subscribing to sales and use tax software, followed by installing the software and updating tax tables on a monthly basis, AvaTax ST provides subscribers with an inexpensive high-performance, constantly updated online sales tax database. AvaTax ST’s scalable pricing will appeal to all IT budgets. Users integrate with and can quickly deploy AvaTax ST. As this is a service, there is no hardware to buy, install or maintain. The appeal is clear: Other sales and use tax solutions can be expensive, time consuming and require extensive IT resources within an enterprise. AvaTax ST needs no IT resources to activate and use. Most important, correct sales tax calculations mean that accounting personnel are removed from making quick tax jurisdiction decisions. AvaTax ST is transparent and secure, and sales tax calculations are easy, automatic and accurate.
AvaTax ST presently comes integrated with QuickBooks, Great Plains, MAS 90/200, MAS 200 SQL, and ACCPAC Advantage Series. AvaTax ST can also be custom configured to run with e-commerce and third-party applications. For 3,300 transactions per year, Great Plains users will pay an activation fee of $449.95, with a monthly payment of $99.95. Additional transactions will cost $.47 each. As well, if you prepay annually, you’ll receive 5 percent off the annual subscription price. For QuickBooks users, pricing after the initialization fee is $9.95 per month (with no transactions) plus $.50 per transaction, which is for very low-volume users; and the entry-level package price is $29.95 per month. Specific and more detailed pricing is available at http://avalara.com/index.cfm/page/pricing.
Navigation & Data Entry – 5 Stars
AvaTax ST includes a user administrative module, which manages reporting entities, users, user rights, nexus, “rule” exceptions, taxability, report generation, street address validation (zip+4) and tax rate lookup.
Paper Filing, Electronic Compliance & Payment – 2 Stars
Presently, AvaTax ST does not prepare sales and use tax forms; there is no support for paper filing or electronic compliance and payment. Avalara has, however, announced a marketing and technology partnership with STF Services Corporation, the creator of SuperForm Products. By licensing SuperForm from STF, AvaTax ST, which automatically calculates and reports sales tax, will extend its functionality to include a forms utility that will identify, automatically populate, calculate and produce completed sales and use tax returns. AvaTax has been on the market for approximately 18 months, and I anxiously await future needed development.
Rate Updates – 5 Stars
Rate updates are performed and provided continuously by AvaTax ST. You simply connect to the web service and forget about updates.
Help/Training – 4 Stars
Support for AvaTax ST is provided by Avalara Technical Services including traditional telephone and e-mail customer support as well as instructional and troubleshooting materials. FAQs are also available online.
Relative Value – 4 Stars
AvaTax ST offers an excellent value as an alternative to traditional sales and use tax products that support small to medium-sized businesses. Lack of tax form preparation is certainly an issue, but according to Avalara an automated forms solution is under development and will be available by August 1. For companies who find they having a nexus in multiple states, AvaTax can be a literal lifesaver.
I spoke with users who seemed genuinely pleased with their decision to subscribe to the AvaTax web service. They were definitely an excited group. One user said, “It’s super easy to work with and has excellent training. AvaTax ST is a great product.” Another said that “data entry is seamless and automatic. We trained over the phone. There are no updates [because it] is all taken care of on the AvaTax side. Our cost savings has been great.”
2005 Overall Rating - 4 Stars
