Business execs weigh in: sales tax automation is a must for scale, growth
- Sales and Use Tax
- Mar 31, 2016 | Kerry Alexander
A recent study by Deloitte found that nearly half of all mid-market companies not only automate, but do it in multiple areas of their business. And why not? It’s a great way to offload time-consuming tasks and free up resources for more value-add activities. And what could be more tedious than sales and use tax compliance?
“It doesn’t make sense in this day and age to manage your own tax system,” says Kelly O’Hanlon, VP of Finance from global chemical distributor ChemPoint. “We don’t have the manpower to calculate sales tax, nor would we want to. You’re better off putting your resources in other areas and outsourcing the tax management.”
Aberdeen Research found that prioritizing compliance is a trait of best-in-class companies. Forward-thinking finance leaders are three times more likely to automate sales tax. The biggest motivator? Reducing the drain on resources that comes from trying to manually manage tax compliance.
Which is why ChemPoint and thousands of other leading businesses have chosen to offload sales tax to the experts. Avalara’s sales tax automation software is used by more than 20,000 companies on 500+ technology platforms to instantly and accurately calculate sales tax and apply rates and rules for 12,000 taxing jurisdictions to 4 billion transactions annually.
It’s made a difference. A TechValidate survey of companies that use Avalara’s tax automation software found that, on average, these companies reduced the time spent managing sales and use tax by 50% or more. Many saw even bigger results—reducing the time spent on sales tax activities from 20+ hours to less than one hour.
Reduce costs and risk
Cost savings is another reason top companies choose to automate sales tax. The average cost of managing transactional tax compliance is more than $60,000 annually for small businesses and nearly $400,000 for large organizations.
Face an audit and the costs and time involved can be even higher. Wakefield Research estimates that the average cost of a sales tax audit today is $114,000. Companies who’ve been through an audit typically spend an average of 37 days preparing for and dealing with auditors.
Automation alleviates much of this burden. Avalara customers who were audited after implementing AvaTax software spent only 8 days on audit-related activities and passed audits without penalty 50% more often than companies that don’t automate. And Avalara even offers its customers Accuracy Guarantee audit protection.
Grow with confidence
As businesses grow, their tax obligations grow as well. Expanded operations or new sales channels can create new nexus relationships (the obligation to collect and remit sales tax) in multiples states. Tax rates and rules vary widely from state to state and can change frequently. This can cause problems for companies that aren’t equipped to handle more tax obligations or apply new tax rules to their business. Avalara’s software removes uncertainty and ensures the right rates, rules and exemptions are applied to each transaction. The right amount of tax is collected, reported and remitted for every taxing jurisdiction, every time.
“We were collecting sales tax in three states where we had nexus,” explains Susan Smith, finance director for Natural Health Trends, a global ecommerce and direct seller of premium personal care, wellness and nutrition products. “Then we started to collect tax on behalf of our distributors and that put us in almost every state. That was not something we wanted to take on in-house.” With Avalara’s sales tax automation software, Smith says the company doesn’t have to worry about keeping up with the tax or preparing and filing individual returns for all the different jurisdictions. “Avalara does that for us. And we know it’s correct.”
It’s these outcomes and others that keep Avalara customers loyal to the process. More than 98% of the companies that made the decision to automate sales tax with Avalara are still doing so today.
Hear first-hand from two of those companies. Rick Gemereth, CIO of Lionel, and Louis Jimenez, CEO of BMC Tackle, will be panelists for a sales tax automation forum hosted by Avalara on April 20. These two industry executives will share their insights on why automating sales tax was an inevitable decision for their companies and how offloading tax compliance has helped them focus on growing their business. Register for the forum.