How to Calculate Sales Tax in Your Shopping Cart

See how you can prepare your ecommerce business for rapid changes in the world of sales tax.

Automate sales tax transactions within your ecommerce shopping cart. Learn what sales tax legislation means for online retailers.

In the world of ecommerce and sales tax, things are changing fast. This demo will help you understand how you can prepare your ecommerce business easily and cost-effectively.


Hey, my name is Matt Grattan. I'm the Senior National Director for Avalara's Ecommerce team. And unlike some of the other people you see doing demos here at Avalara, I'm not a founding employee. But I do know a thing or two about how AvaTax, our powerful sales tax engine, can provide a higher level of sales tax automation and compliance for your ecommerce business.

Listen, sales tax is a pain. But it's something you have to do, and it's something you have to do right. AvaTax brings affordable automation to this arcane process, automation that calculates tax accurately to the rooftop level and supports varying tax rules for thousands of products and services. It's a powerful solution that provides out-of-the-box reporting, manages tax-exempt sales, and then automates the necessary filing to the various states and jurisdictions.

Hey, I don't need to tell you that things move fast in the technology world. And that's never been more true right now in the world of ecommerce and sales tax automation. The reality is that not addressing the issue of sales tax is really not an option for anyone in the ecommerce world. Change is coming, and it's coming fast. What I hear everyday is that people are looking for a solution that is affordable, compliant, and scales to meet the needs of their growing business.

There are really three things you need to know about AvaTax. One, it's easy to get up and running. Two, it's accurate and always up-to-date. And three, it's a complete end-to-end sales tax solution.

Getting going with AvaTax is simple. We have a pre-built connector, so it integrates directly with your ecommerce platform. You won't need any complicated programming assistance integrated into your system. When you sign up, you'll get a call from our go-live team. And they'll help you set up your AvaTax admin console. Like Captain Kirk at the bridge, your admin console's going to become your command center for all things sales tax, and will make your job a lot easier. Let me show you around.

Okay, now we're over at the AvaTax admin console. This is accessible via a secure https connection. And as you can see here, the interface is extremely user-friendly and contains a lot of information. For example, under Service Notices, we update our customers on any rate, rule, boundary changes we're making to sales tax. Nothing they have to worry about as Avalara updates all of that information in the cloud, but we want to keep you informed.

Under Organization, this is where you're going to set up and maintain your tax profile. So you can see here, your parent company, ABC Distribution. These sub-companies can represent subsidiaries or different sites or platforms you're integrating into AvaTax at. All that data reports up to ABC from a reporting perspective.

Within Nexus, this is where you're going to establish where you need to collect and remit sales tax at a country level. And then we'll drill down to the United States here. And you can do it at a state or jurisdiction level. The nice thing here is it's all point-and-click, easy to set up and maintain. So if you're business grows and your sales tax compliance requirements change, it's easy to make changes to the system.

I'm now going to jump over to Tax Codes. And these are the tax codes that Avalara maintains for products and services' varying tax requirements. We maintain thousands of different codes for products and services. But here's an example of one just for clothing and related products. And you can see all of the different types that we maintain here just for this product category. If you map this particular code, at a SKU item level within your item master, all of the appropriate logic will be applied at the invoice level, whenever you sell the product and where you sell the product. In addition, you can see you can manage exemptions here. For exempt customers, can be done via the Organization tab. So again, very flexible and easy to use.

I'm now going to jump over to the Transactions tab. Transactions coming from your shopping cart are going to be hitting this tab real time. And you'll be able to search them based on document code, customer vendor code, document types. So let's look at sales invoices here. Particular date range we'll choose is January 2010. And then the document status, let's look at committed invoices.

And this gives you access to your invoices, being able to drill down to see all the appropriate data, the origin address, destination address, the tax dates, the appropriate amounts, etc., as well as the ability to drill down at a line item level to see the appropriate taxing jurisdictions that were applied for this transaction.

And this gives you access where you can search transactions based on specific criteria for date ranges, states, and then have that level of granularity at a line item level that you may not have today.

I'm now going to jump over to the Reports tab. And the reports Avalara provide are out-of-the-box reports based on best practices to help you support sales tax process. Here's where I'm going to just pull a sales and sellers use tax report. And you can pull it by country, state, date range, tax type, as well as file format, HTML, Excel, or PDF, so extremely flexible, all point-and-click, and available to you on demand.

Finally, I'm going to jump over to the Tax Returns tab. And this is going to provide you a liability worksheet that populates between the first and fifth of every month for the states where you have Nexus. It's going to show your total sales, your taxable transactions, your non-taxable transactions, and your tax liability for that particular reporting period. It provides you a central zone to view all of your associated liabilities in the states where you have Nexus. And if Avalara's filing for you, all you need to do here is come in and click Approved, and we do everything from there. We file the return, whether it's paper or electronic. We do an ACH debit pull to pay the liability. And we even offer notice management services. So if a state has a question about one of your returns, we call them on your behalf as your outsource agent, and we answer any questions on your behalf.

And that's pretty much it.

Let's face it. You have better things to do than collect taxes for the government. It's time-consuming and takes away valuable time you could spend focusing on your business. So don't sweat it. Automate it instead.

At Avalara, we really mean it when we say "making sales tax less taxing."