Avalara > Blog > Ecommerce > Should I Use a Fulfillment Service?

Should I Use a Fulfillment Service?

  • Jun 16, 2016 | Jessica Sillers

Delegation is an important aspect of running a business. Whether you use Amazon, Etsy, Shopify, or another selling platform, you may reach a point where using a fulfillment service makes more sense than handling all of your shipping yourself.

If you’re considering outsourcing your shipping, read on to decide whether a fulfillment service is right for you.

How Fulfillment Services Help Businesses

Many sellers investigate fulfillment services because they’re sending more long-distance orders than they were before. When your market expands from local customers to people across the country or even overseas, delivery times start to vary more and more.

By using fulfillment centers across the country (or even abroad), it’s easier to deliver orders quickly. Especially during the holidays and other busy seasons, it’s great to be able to offer prompt, consistent service, no matter where your customers happen to be.

A fulfillment service can also take a lot of time-consuming work off your hands. Shopping for shipping materials, packing orders, addressing packages, and making post office runs can get in the way of developing your business. Outsourcing these menial but necessary tasks can free up time to work on fresh ideas.

If you run your business from home, you might also regain space that you had dedicated to storing inventory and shipping supplies.

Problems to Watch Out For

The biggest drawback to using a fulfillment service is that you lose some control over shipments, but you’re still responsible for quality assurance. If an order slips through the cracks, is delivered late, or is damaged because of poor packing, you’ll look bad even if the mistake wasn’t your fault. It’s important to ask questions before signing on with a fulfillment service so you can verify that the center runs efficiently.

You’ll need to devote some of your working time to managing your relationship with the fulfillment center(s) that store your products. One of the simplest practices is to have your fulfillment service contact send you regular reports listing the inventory in store and details about any recent shipments.

Tax Tips

Sales tax can get complicated, especially if you, the fulfillment center, and the customer are all located in different states. States don’t always agree on what counts as a taxable transaction, and online sales are only adding new complications to tax law.

If you decide to work with a fulfillment service, these steps can keep tax matters running smoothly:

  • Track your inventory to monitor nexus. Amazon offers a map of their fulfillment centers. We’ve published a guide to tracking where your inventory is stored. If you contract with another fulfillment service, be sure to update your records of the states where you have nexus.
  • Provide fulfillment centers with any exemption certificates they need so they aren’t hit with unnecessary tax charges.
  • Update your automated sales tax collection systems on whichever sales platforms you use. If you haven’t automated tax calculation, collection, and remission, do so as soon as possible. With thousands of tax jurisdictions in the country, it’s too intensive of a project to do by hand.

Growing your business always involves weighing risks against potential rewards. Fulfillment services aren’t right for every business, but for others they can be an important next step to keeping customers happy. Manage your relationship with the fulfillment center and your new tax obligations well, and you’ll be happy, too.

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
Jessica Sillers
Avalara Author Jessica Sillers