Will's Whiteboard: How Sales Tax Software Works
- Mar 13, 2014 | Will Frei
Software can dramatically simplify sales tax management for businesses, saving them time and resources and reducing their risk of error. In this video, Will covers the basics of how best in class software, like Avalara AvaTax, puts manual tax processes to shame.
Hi, welcome to Will's Whiteboard, I'm Will. Today we're going to talk about
sales tax software. Whether you're a business that sells all over the
country into many different tax jurisdictions and you're looking to get a
better handle on your sales tax management process or you simply want to
save time and money by automating sales tax management, sales tax software
can help. Here is how. Let's take the example of a shoe company that sells
shoes all across the United States. For each transaction they make they're
going to have to answer at least four fundamental questions when it comes
to sales tax. Number one, is the product taxable in this transaction? In
some states, clothing isn't taxed. So in Rhode Island for example, the
shoes wouldn't be taxable.
Question number two. What's the right sales tax rate to charge? In Newark,
New Jersey the rate is going to be different than in Phoenix, Arizona for
the same pair of shoes. Number three, is the customer tax-exempt? If you
have say a non-profit that's purchasing running shoes for children and
they're tax-exempt, well you need to get the necessary paper work to prove
that's the case. Number four, when and how do I file to the correct taxing
authorities? Different states have different filing schedules and different
states require different methods of filing. For example, some want you to
file electronically instead of with paper.
Now at each stage of the way this information has to be communicated to
your financial application. As you can imagine, if you're selling all over
the country and you have to handle all of this information each time you
make a transaction, this can be a lot to manage especially if you're doing
the process manually. That's where sales tax software comes in. Sales tax
software can automate this entire process for you. In other words, it
answers these questions on your behalf. Each time you make a transaction it
can make a smart decision because it knows whether or not the product is
taxable. It also keeps up with the exact rates anywhere you make a
transaction. In addition, it can handle exemption certificates for you that
prove that the customers are exempt.
Finally, it can also file and remit on our behalf to the correct taxing
authorities, on time, every time. Sales tax software basically offers you
real time sales tax management and it communicates all of this information
to your financial application so you can access the records whenever you
need them. All of this frees up your time and your resources so you can do
what you do best whether that's selling shoes or ships, or whatever. Thanks
very much, I'll see you next time.