Cloud vs. On Premise Sales Tax Solutions
Which works best for your company?
Consider this. No one likes to do sales tax, but it is a mandatory requirement for all businesses. Manual or even semi-manual efforts can result in errors in sales tax rates and rules, collection and remittance and associated audit-related fines and penalties. When considering which sales tax solution software works best for your company, price is only one aspect of the decision.
The following chart highlights some of the differences between cloud-based and on-premise sales tax solutions, as well as the key attributes of both.
|What is it?||Cloud-based sales tax solutions deliver accurate calculations via the Internet from a remotely hosted tax decision engine. Sometimes called “software-as-a-service” or “SaaS” these solutions are accessed via the Internet.||On-premise sales tax solutions require use of hardware and software that is physically installed on a company’s own in-house computer systems.|
|Price||Depending on the solution, cost is often based on cost-per-transaction.||Purchase of hardware, software, and ongoing maintenance— including updates and technical support—can require a significant investment of $50,000 or more.|
|Management & hosting||The vendor typically hosts the tax engine. Companies effectively leverage off-premise technology to outsource their sales tax management process.||Other than software-specific technical support, the tax engine itself is typically handled and managed in-house by the IT department.|
|Address validation||Real time address validation that pinpoints sales tax calculations to “rooftop” levels.||Address cleansing, auto-jurisdiction to zip+4. May require mapping of geocodes.|
|Data centers & backup||SaaS is multi-tenant architecture. There are no customer specific technology requirements beyond high bandwidth Internet. Many cloud providers offer back-up data centers with fail-over capabilities.||Often requires multiple servers for backup and storage of tax-related data, development environment, and production environment.|
|Exemption certificate management||Exemption certificate management through entire cert lifecycle includes cert requisition, approval, storage, and application to transactions.||Limited Certificate Management to enter data and tag certificates. Cert requisition, approval, storage and application to transactions requires additional software through 3rd party.|
|Implementation and go-live||10-30 hour average implementation with 30-60 day average go live.||6-12 month implementation.|
|Integrations||Key cloud-based solution providers integrate with programs such as QAD, SAP, Oracle, Netsuite, Sage, Epicor, Intacct, Magento, etc. as well as SDK for .net, Java, PHP, COM.||Usually provides few integration options with only the most common enterprise accounting programs, including Oracle and SAP.|
|International||Some services provide integrations for VAT and other international taxes.||Some on-premise solutions provide international VAT and other international tax support.|
|Product taxability||Can automatically assign tax rules by mapping to product and service categories.||Can automatically assign tax rules by mapping to product and service categories.|
(Statement on Standards for Attestation Engagements)
|Several cloud-based service providers are SSAE certified, indicating strict accounting and security controls in place for software over the Internet.||Not applicable.|
|SST certified |
(Streamlined Sales Tax Governing Board Certified)
|Several cloud-based service providers are SST certified to provide companies compliant sales tax software.||Only 1 or 2 on-premise solutions are SST -certified as a provider.|