Finances & Money

Why Ecommerce Businesses Should Care About Tax Automation

With all the technological advances and new software available more and more companies are starting to automate various functions of their business. Sure, this might be taking some jobs away, but it really is changing the way that many companies are operating. Not only are these companies becoming more efficient, but also the automation functions take out all the guesswork, meaning there is little room for error. Over the past couple of years you have probably heard many companies talk about tax automation. Maybe you have considered converting your company over, but you are still on the fences because you don’t know anything about the process and what it has to offer.

Removing The Complexities

For online retailers the tax landscape has truly become complex over the past couple of years. Numerous states in need of revenue are increasing and changing their sales tax on a yearly basis. In fact, last year there were over 400,000 tax rules that changed. Making sure that you are charging the right customer the right sales tax can be quite the job. And, this is not to even mention all the legal ramifications that will apply if you make a mistake. Several companies have already found themselves in hot water for not charging the right sales tax. And, this is exactly where tax automation can come in handy.

Using software programmed with the right criteria will automatically calculate the correct sales tax when your customer makes a purchase. Tax automation really removes all the complexities of having to figure out the sales tax and taking it on manually.

Allows For Quick Expanding Across States And Countries

The goal of any business or company is to expand as much as possible. Whether you are bringing in new customers in other states or other countries, this means that you are making more of a profit and expanding your brand. While this might be profitable, it could potentially put you in need of a tax relief attorney if you are not careful. Operating in different states and countries means that you are going to have to comply with a variety of new sales tax laws. Calculating and managing these sales taxes manually could potentially slow down your expanding opportunities. Automation software can really simplify the whole process and speed of the expanding.

Having a program to automatically calculate the correct sales tax will remove the guesswork and let you focus on expanding.

Ensuring Accuracy

Ecommerce businesses do not have the luxury to spend hours computing sales taxes for every one of their customers. While they do want to ensure accuracy, they operate on a tight schedule, so they have limited time for this task. This is why they rely on sales tax automation software, which is incorporated into their payout system. This software automatically utilizes the customer’s location to compute the amount of sales tax owed.

Considers Additional Sales Tax Rates

While states oftentimes charge higher percentages compared to cities and countries. However, countries and cities sometimes have additional sales tax rates that are added to the state tax rate. The software also considers these additional sales tax rates at the checkout.

Considers Tax Exemptions

Depending on the type of products you sell, some of them may be considered tax-exempt in some states, countries and cities. For example, food items are often taxed at a lower rate or completely exempt from sales tax. The sales tax automation software is designed to compute these deductions at checkout.

 

Feeling Clever? Join our newsletter!

Subscribe to get the latest from "Clever Dude."

Powered by ConvertKit

About the author

Susan Paige

Leave a Comment