How to get the most out of your ecommerce platform for tax compliance

You may wonder if your ecommerce platform already takes care of sales tax for you. This is an excellent question to ask, and it’s important to know what your ecommerce platform is, and what it isn’t. Your ecommerce platform is what enables your customers to buy and sell things over the internet. Examples of ecommerce platforms include Shopify, GoDaddy, and Wix.

These platforms are different from marketplace facilitators like Amazon or Etsy. Marketplaces list or advertise the goods or services for sale and enable payments between the seller and the customer. Payment from the customer goes directly to the marketplace, which then pays the seller and gets compensated in the process. This distinction is important because whether you’re selling on an ecommerce platform or a marketplace has a significant impact on how your sales tax is handled.

One of the key differences between marketplace facilitators and ecommerce platforms is that most marketplace facilitators are obligated to collect sales tax on behalf of their sellers. With an ecommerce platform, the seller is responsible for collecting and remitting sales tax themselves. Because that responsibility is placed on the shoulders of the seller, it’s important to have an understanding of your ecommerce platform’s sales tax capabilities. 

As it turns out, you may already have access to sales tax compliance software through your existing platform. 

Some ecommerce platforms may include a simple tool for calculating sales tax. However, these offerings often don’t have the power or content to provide the level of comprehensive tax compliance that you get from a solution specifically designed for compliance.

That’s why some platforms work with leading sales tax software providers, like Avalara, to provide robust sales tax solutions for their sellers. This can help to provide a level of compliance that may not be available with your core platform. 

It’s no secret that keeping up with sales tax rates can be complicated — this is where dedicated sales tax compliance software can come in handy. On top of state sales taxes (where applicable), there may also be additional taxes at the county or local level that must also be calculated. Some states allow home rule where local governments and municipalities can administer their own local sales tax. As you might imagine, home rule can further complicate things when it comes to calculating sales tax correctly.

If that wasn’t enough, you can’t count on a ZIP code to always give you the right local rate. Avalara AvaTax uses street-level tax rates, instead of ZIP codes, to provide more accurate tax rates for more than 12,000 U.S. sales and use tax jurisdictions. This helps to provide rates with greater accuracy than other methods and reduces the risk of incorrect taxation or compliance errors.

There’s more to sales tax compliance for ecommerce sellers than just calculation. It’s important for sellers to also manage their product taxability and their exempt sales. Depending on the size of your online store, this can quickly become complicated and cumbersome.

Software from one of your ecommerce platform’s partners does more than just help sellers with finding tax rates and calculating sales tax. It also helps merchants determine product taxability settings for the items or services they sell, as well as specify exemption settings for any customers that may be exempt from sales tax.

If it sounds like a lot to keep track of, it’s because it can be. If your ecommerce platform has an included sales tax solution, all you need to do is activate it to start helping your business save time and stay compliant while selling in more places. And with the right software, you can also create detailed tax reports so your business will be prepared if it ever gets audited.

Ultimately, your ecommerce platform is here to help you do business the right way. That’s why it’s important to leverage all the tools it provides to make sure you get the most out of it. If you don’t activate your available sales tax software, you’re essentially leaving additional value from your ecommerce platform on the table. 

By working with a provided solution from a company specializing in tax compliance, you can rest assured knowing sales tax compliance is all your solution provider does. That means you can be confident you’re working with the right tools to maintain sales tax compliance for your business.

If you already use an ecommerce platform such as Wix, Shopify Plus, or have a Commerce Plus plan with GoDaddy then you may already have access to Avalara AvaTax. All you need to do is activate your included version of AvaTax. Then, it’s a matter of following your platform’s instructions, like this setup guide from Wix. Avalara has an online course to set up tax calculations for Shopify Plus or you can visit the Avalara Knowledge Center for more information about Avalara products for GoDaddy as well as other ecommerce platforms.