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Harnessing the Cloud for Effective Sales Tax Management

Sales tax calculation is rife with complexity and fraught with risk. An incorrect calculation can have serious consequences for your business — both for the bottom line and for regulatory compliance. Fortunately, a wide range of tax solutions are available to help companies address this challenge.

However, many commonly used enterprise tax engines require expensive on premise hardware, a lengthy implementation time, monthly data maintenance, and rigid licensing agreements. A cloud-based approach can lift these limitations, enabling organizations to avoid infrastructure costs, get up and running quickly, minimize maintenance, and gain the flexibility needed to access up-to-date information and meet rapidly changing business requirements.

Here we look at four common scenarios in which a cloud-based approach can save companies time and money, freeing them to focus resources on growing the business and maintaining a competitive edge.

1. Expanding ecommerce systems

Almost any business using an ecommerce system to sell products online needs to integrate that system with a solution that can handle the complexities of calculating sales tax. Integrating on premise sales tax solutions with an ecommerce system typically requires a dedicated implementation project involving multiple systems and costly consulting services.  You also generally need to obtain a new license for the on premise solution to coordinate the ecommerce tax engine with the tax engines located in on premise ERP systems.

A scalable and flexible cloud-based sales tax solution can integrate quickly and easily with various ecommerce solutions and hundreds of ERP systems, enabling an accelerated implementation and lower overhead, while facilitating real-time information updates.

2. Integrating with multiple ERP systems

Many organizations have multiple on premise ERP systems running in their landscapes. Companies often assume that the native tax solutions in these systems are handling sales tax automatically. However, integration issues often arise, and keeping the solutions up to date with changing rates and rules across a range of tax types — for example, if you’re a manufacturer, you’re responsible for sales tax, seller’s use tax, and exemption certificates — can be expensive, time-intensive, and risky.

A cloud-based, automated sales tax solution reduces the complexity of these scenarios by integrating various ERP systems through white labeled, custom SDK, or out-of-the-box modules. It also provides greater accuracy without the fixed costs of ongoing maintenance and tax table updates.

3. Incorporating mergers and acquisitions

Acquiring a company involves either migrating its systems into the acquiring company’s ERP landscape, or leaving them on the existing system. If the sales tax module in the existing system is different from the module in the acquiring company, the dual systems will require intensive IT staff time to update, maintain, and coordinate the software. It will also require increased time for the compliance team that needs to accurately reflect tax information to tax authorities, which can affect the entire business, from the online store to subsidiaries to point-of-sale systems.

A cloud-based sales tax solution eliminates the resource drain involved in these scenarios. You can expand sales tax compliance to an acquired company’s system by simply creating a connection to the new system.

4. Managing upgrades           

As vendors phase out earlier versions of older on premise tax systems companies often need to invest in upgrading their existing solutions. This means absorbing implementation and consulting costs all over again to get up and running with the newer version. And opting out of the upgrade isn’t an option — outdated sales tax functionality leaves your company vulnerable to audit penalties and fines.

With a cloud-based sales tax solution, the solution provider hosts and maintains the solution so it is always up to date and compliant.

Harnessing the Cloud

By using the cloud to bring scalability, flexibility, and accuracy to enterprise tax solutions, Avalara offers organizations the chance to fix their sales tax problems — and forget them. We help companies using ERP solutions harness the cloud to handle sales tax, and to take advantage of reduced overhead, lower implementation and maintenance costs, greater accuracy, and the flexibility to connect to many systems.

Learn more about how sales tax automation works.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Avalara Author Avalara
Avalara helps businesses of all sizes get tax compliance right. In partnership with leading ERP, accounting, ecommerce, and other financial management system providers, Avalara delivers cloud-based compliance solutions for various transaction taxes, including sales and use, VAT, excise, communications, and other indirect tax types. Headquartered in Seattle, Avalara has offices across the U.S. and around the world in the U.K., Belgium, Brazil, and India.