Wal-Mart, Target and CostCo do it. So do Bob’s Hardware in Ostego, Michigan,
the Valentine Diner in Clinton, Oklahoma, and even the Belly General Store in
Atlanta, Georgia. Every business that sells, rents or leases a product collects
and remits sales taxes to a variety of jurisdictions. For very small entities
with one physical location, or nexus, doing business in only one city or state,
compliance is generally not too daunting a task, but rather a monthly or quarterly
task with which the business owner may need minor assistance.
But as a company’s geographic sales base grows more diverse through
the addition of more stores and crossing state lines, the chore of reporting
and remitting collected taxes grows ever more time consuming. Although not as
complex an issue as income tax compliance, managing sales and use tax for a
large company requires the constant monitoring of ever-changing tax rates in
potentially thousands of jurisdictions, making sure the appropriate rates feed
into the sales or financial management applications used by the company, ensuring
that collected tax revenues feed into the proper GL accounts, and maintaining
and completing returns for each of the appropriate authorities. For very large
companies, sales tax compliance requires a dedicated full-time staff, but even
for smaller companies doing business online or in a multi-state area, sales
tax compliance can be a challenge, and dedicated in-house staff isn’t
always an option.
Sales and use tax compliance software provides relief for most of these problems,
automating much of the process and helping to prevent errors through the inclusion
of reporting tools, management features and filing reminders. Such programs
vary widely in their capabilities and, therefore, the companies that will benefit
most from their use also vary, depending upon the needs of the business. For
smaller entities, the primary need is keeping up with tax rate changes for all
of the jurisdictions within that state. For larger firms, more complex systems
The good news for small businesses is that there are many programs on the
market that provide support for one or a handful of states. These systems need
only monitor rate changes in a smaller area, which reduces the costs associated
with the system, and the programs generally offer less integration capability,
acting instead as an after-the-fact reporting and remittance tool. These factors
combine to keep costs low for these small entities.
At the higher end of the spectrum are systems geared toward businesses with
more complex compliance needs, offering tax tables for virtually all of the
more than 8,000 taxing jurisdictions in the United States and Canada, from states
and cities, to counties and special tax districts for transportation and emergency
services. The vendors maintain these vast databases, keeping up with changes
at every level and providing frequent updates to the tables that are offered
either online or in CD format. In the case of web-based tax compliance systems,
the tables are updated automatically by the program vendor. The programs in
this group tend to offer greater sophistication, with integration and automation
capabilities that allow the tax system to feed rates directly into the company’s
financial management system, and automatically populates compliance forms with
appropriate data, leaving the in-house manager or public accountant with primarily
review and filing functions.
The continued use of the Internet by state taxing authorities has eased the
filing and remittance process for many locations, allowing businesses to file
and pay online. Most of the programs included in this review allow such functions.
That said, these programs offer a diverse approach to sales tax compliance,
based upon the needs of the business. From CD and online systems, to single
state or omni-jurisdictional programs, to integrated programs that automate
almost everything, sales tax compliance does not have to be the headache it
once was and still may be for some businesses. Help your client assess his or
her business’ needs, then find a solution that meets both those needs
and their budget.
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- Avalara – AvaTax Connect
- AvaTax is a web-based sales tax compliance system
that integrates directly with a business’ accounting software to
automate much of the processes involved with sales tax compliance and
remittances. As a hosted solution, the system is constantly updated by
Avalara to maintain accurate rates for more than 8,000 jurisdictions in
the United States and Canada.
- BNA Software — BNA Sales
& Use Tax Rates And Forms
- BNA Software offers BNA Sales & Use Tax Rates
and Forms, a lookup and compliance system that can be used with just rates
or just forms, or as a comprehensive system that includes a rates file
generator for integration with accounting systems. The BNA system supports
all taxing jurisdictions in the United States.
- CCH, a Wolters Kluwer Business
– ZIPSales Returns
- CCH offers a broad selection of sales and use tax
applications, from its web-based SalesTax.com, to the CertiTax suite that
integrates with a business’ accounting system and provides shipping
address verification, and a half dozen industry-specific sales tax programs.
The company also offers rate lookup through its ZIPSales Database.
- CFS Tax Software – CA
Sales Tax Preparer/NY Sales Tax Preparer
- CA Sales Tax Preparer and NY Sales Tax Preparer
are separate programs offered by CFS Tax Software for the calculation
of state, city and local taxes for their respective jurisdictions, and
are both approved by the state taxing authorities. Both programs, as well
as most programs developed by the vendor, share the same interface and
general navigation functions.
- efilesalestax.com is a web-based sales and tax return
preparation and remittance system supporting only compliance for businesses
and individuals filing with California, Louisiana or Florida. The system
is approved by each of these states for electronic filing and can be used
either as an in-house application by businesses or by professional public
accountants representing their clients.
- SuperForm Sales Tax Rates/Forms
- STF Services Corp. offers SuperForm Sales Tax Rates/Forms,
which is essentially the same product as BNA’s offering (reviewed
above). The compliance program provides current and previous sales tax
rates for virtually all jurisdictions in the United States, including
special tax districts, with an interface that eases the task of searching
for appropriate rates.
- Thomson RIA — InSource
Sales & Use Tax
- InSource Sales & Use Tax provides an automated
sales tax collection and compliance application that supports all sales
tax jurisdictions in the United States and Canada, with forms support
for more than 470 sales, use, seller use, rental and leasing returns.
The program can either be used as a stand-alone system or integrated.
- Trustfile — Trustfile
Sales & Use Tax
- Trustfile offers sales and use tax compliance for
several states and their municipalities and special tax districts, including
programs for CT, FL, GA, IL, LA, MD, NJ, PA, SC, TN and WI. Each of the
state programs shares generally the same features with the exception of
the form view, which depicts the state form on which the user is working.
- Review of Sales & Use Tax
Systems 2006 — Executive Summary
- Businesses with either simple or complex compliance
requirements can benefit from a sales and use tax program that offers the
reporting and remittance tools that they need. Fortunately for businesses,
this area of software offers a very diverse array of programs, from very
specialized single-state options, to very broad applications with tax tables
for everywhere in North America, allowing most companies to get support
for the jurisdictions they need for a financial investment that is appropriate
to their size and needs.