Avalara — AvaTax
From the August 2011 Review of Sales & Use Tax Systems
Best Fit: Businesses with sales across dozens, hundreds or even more taxing jurisdictions across the United States and Canada, with the need to automate tax rate lookup into their sales and ecommerce systems.
Avalara is one of the leaders in integrated sales and use tax compliance, offering systems that work in real-time with a business’ ERP or accounting system to instantly find, calculate and apply appropriate sales tax rates to a transaction or estimate in real-time. AvaTax is a suite of three products that can be purchased individually or in any combination: AvaTax Calc, AvaTax Certs and AvaTax Returns. The flagship AvaTax Calc system is available for virtually all accounting systems, including QuickBooks, Peachtree, Intacct and NetSuite, as well as systems for larger enterprises. Avalara also offers automated compliance services through which the vendor produces and prepares all jurisdictional reporting and can process payments. Avalara is also a Streamlined Sales Tax certified service provider. For businesses that don’t need integrated rate lookup, Avalara also produces TrustFile, a sales and use tax preparation system with e-filing capabilities, which is available for 12 states.
Basic System Functions:
AvaTax is a web-based solution that ties into a business’ accounting program. For this review, we used a QuickBooks company file, and after a guided implementation call with a support representative (which is offered to all users), the system then became an integrated component of the QuickBooks system. During this system setup, the inventory products, SKUs and other data is mapped to appropriate taxation rules, enabling the program to be automated afterwards.
From that point on, the program basically runs on auto-pilot, with little day-to-day interaction by users, since the system automatically finds the most up-to-date tax rates for a transaction, based upon nexus, customer location, shipping information, special tax rules, exemptions and holidays as they may apply to particular types of products in different states and localities. When the appropriate rates are determined, it appears as a line item in the transaction, with the ability to drill down to sub-jurisdictional taxation (state/county/city/district). Additional management options, including reporting, forms generation, exemption certificate management and tax liability reports, are available through a web-based management console, as is access to the outsourced option for forms compliance.
AvaTax can support companies with any number of locations, as well as multiple companies being managed using the same accounting system (multiple companies in QuickBooks in the case of this review), which allows it to be used by firms managing compliance for multiple clients. The web-based transactional reporting also gives users the ability to remotely check reports and filings from any location, even if their accounting solution does not have remote access options.
AvaTax maintains a live database with tax rates for more than 14,000 jurisdictions in the United States and Canada, and also offers VAT compliance for 39 countries. Since the sales tax engine is integrated into the accounting solution, all jurisdictions are tracked along with rules regarding mandatory or voluntary reporting compliance.
The back end of the tax engine uses the AvaTax Jurisdiction Assignment system, which considers various factors, including an advanced database and geospatial coding, to pinpoint any address or location within all applicable tax jurisdiction boundaries. All sales tax application details are available on drilldown screens that also segregate transactions by jurisdiction.
AvaTax does not include a built-in e-filing or payment system for use directly by preparers, but can be used for automated compliance as a service. The user functions of the program are designed to provide all sales tax application and related financial reporting and then offer form preparation for use in either paper filing or using a state-sponsored tax submission website. As previously noted, Avalara does offer the optional AvaTax Returns module, a managed returns service through which the vendor handles all of the compliance processes, including submission of returns to all jurisdictions and payments, while the business or their accountant can retain management overview of these processes.
As an integrated, web-based sales and use tax management system, all rates in AvaTax are kept updated by the vendor, with no action required by the end users.
The key feature in AvaTax is its direct and seamless integration with the accounting application being used by the business, particularly the sales, point-of-sale and e-commerce modules. The system can be integrated into more than 80 different financial, ERP and business programs, inputting sales tax data as necessary and automatically generating liabilities reports and other output such as detail and summary sales tax reports by company or jurisdiction. The program offers built-in alerts that remind users of filing deadlines, as well as approval routing processes. For data output, AvaTax can save to Excel, Word and PDF.
The online control center provides strong support features, including detailed user manuals and guidelines for particular processes, system documentation, integration support and educational resources available through Avalara University with classroom-style live and recorded training seminars. Technical support is included free with AvaTax.
Executive Summary & Pricing
For businesses with sales across dozens or even hundreds or more unpredictable jurisdictions, integration of AvaTax into an accounting system takes almost all of the routine and often tedious work out of sales tax management. The rates are maintained and updated by Avalara, and then automatically feed into the accounting system during a transaction, with liability reports and forms preparation generated by the program. The addition of the managed returns service can take even more of the headache out of compliance. Pricing for AvaTax depends on the accounting/ERP program into which it will be integrated, and the number of transactions that will be processed (rate lookups). For the QuickBooks version, pricing starts at $350 per year for low-volume entities (up to 700 transactions). For higher volume businesses with up to 7,000 transactions annually, the cost is about $0.35 per transaction.
2011 Overall Rating: