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How to handle both sales and excise taxes - Will's Whiteboard

  • May 5, 2016 | Will Frei

Will's whiteboard sales and excise tax

Does your business have to deal with both sales and excise taxes? Watch this video to learn about potential pitfalls of handling both types of tax and how you can do it more efficiently.


Hi, welcome to Will’s Whiteboard. I’m Will. Let me tell you a little story. We’ve got Jane, and Jane’s driving along the highway on her road trip when she notices her tanks a little low on fuel and she’s feeling a little hungry. So she pulls off the highway and goes to a convenience store. She fills up her tank with gas, goes inside, grabs a candy bar and a cola, pulls out her credit card and pays for the whole thing. Simple transaction from Jane’s perspective, but for the business, this is not so simple. See, this particular convenience store which happens to also be a fuel distributor, is now having to deal with excise tax and sales tax, completely different types of business tax systems. What does that mean? Let’s unpack that.

On the fuel side, dealing with excise tax means dealing with rates, rules, and regulations that vary from location to location, and that can be on the local, state, or even federal levels. Excise tax is also often calculated on a volume basis, which can be complex in itself. To manage all this, a lot of businesses customize their ERPs to be able to handle it, and often that takes time and energy. What about the sales tax side? Well, that cola and that candy bar in many places are subject to sales tax, completely different set of rules and regulations than excise tax, and again these rules vary from place to place on a state and local level. Sales tax is calculated differently. It’s not on volume, it’s on a percentage of the final sales price.

To handle sales tax on the technology side, many businesses either do it manually in spreadsheets or they create some sort of custom bolt-on. So now you’re dealing with two different sets of regulations and two different sets of custom software. Oh, it gets better. Those pieces of custom software need to be able to talk to each other so that you can keep your books straight and this also get to tribal knowledge. Maybe you’ve got Bill who works in your company and Bill’s the one who customized the ERP. What happens if Bill leaves? You’re gonna be asking yourself, “How the heck do we use this thing? How the heck do we fix it if it breaks?” Here’s the kicker, you have to file and remit both types of tax to the appropriate government authorities, and it’s a completely different set of paperwork. In a lot of cases, they’re totally different forms and it works differently.

As you can guess this takes up a lot of time and energy, and many businesses don’t get it right. The good news is, there’s a technology that can handle both of these, that can automate both of these. That technology is called Avalara. Avalara’s business tax automation solutions can automatically track the rules, rates, and regulations for both excise tax and sales tax. They can make tax determinations for you, for both business tax types. Avalara services will even file on your behalf, on time, every time, to the right government entities. Maybe best of all, you no longer have to create Frankenstein pieces of customized software, because Avalara integrates directly into whatever you’re using, whether it’s point of sale, ERP, financial application, or all of the above. So with Avalara solutions, you can save time and energy, and you can focus on growing your business. Thanks very much, I’ll talk to you next time.

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
Will Frei
Avalara Author Will Frei
Will Frei directs social media and blogging for @avalara. He is on a mission to help make sales tax less taxing for businesses of all kinds.