With the complicated rules, and the inordinate amount of time it would take today’s business owner to research and implement tax rates for cities, counties, states, and even countries, it’s imperative that today’s business owners invest in a software product that can easily manage these calculations. While the number of tax jurisdictions in the U.S. vary, most tax institutes agree that the number hovers around 10,000, making sales and use tax tracking impossible to handle manually for anyone selling outside of their own city or state.
And because revenue from sales and use tax is essential to these governmental entities, they take collection of these taxes very seriously. While very small businesses may be able to keep track of sales collection and payment, those selling in multiple cities or states can quickly find themselves overwhelmed with the amount of information they need to manage, as well as possibly facing some serious repercussions if reports are not filed and taxes paid promptly.
Another complication is tracking temporary tax rates put into play by cities looking to fund a project, or the new popularity of tax holidays that many cities and states have implemented in recent years. Add to that the fact that these tax rates can change much more frequently than standard income tax rates, and even the small business owner can find themselves in trouble.
2016 Reviews of Sales and Use Tax Systems
One solution to the problem is to have an accountant or CPA handle sales and use tax calculations and payments; a solution that is being seen more frequently, as more businesses expand their selling network to include nationwide, or even worldwide sales. But for those that wish to track sales and use tax in-house, it’s imperative that they utilize a product that is designed to do just that – track sales and use tax, provide up-to-date tax rates, and even file those taxes with the appropriate parties.
So what should you be looking for in a sales and use tax product? Here are just a few suggestions:
- Are the tax rates provided in real time? Make sure to implement a product that offers constant tax updates, can handle local taxes as well as state and county tax rates, and can determine taxable liability.
- Can you get in and start using the system quickly, or is setup and implementation complicated and time consuming? Keeping it user-friendly is vital. This is particularly important for the business owner who will be using the system.
- Does the product file tax returns? Again, this is particularly important for the small business owner. It’s great that the system is tracking the tax liability, but what you do with that information is just as important. For businesses not using an accounting firm to manage their taxes, this may be the most important feature of all.
Whether a business owner chooses to let their accountant handle sales and use tax management or chooses the do-it-yourself solution, they must be given the proper tools to handle the process adequately. And because business needs can vary, the sales and use tax products we reviewed vary as well. The products we looked at in this review cover three very distinct areas:
- Rates & Forms Tools – These products provide quick access to current tax rates for thousands of tax jurisdictions, while also providing users with access to a library of tax forms that can be accessed and completed for filing.
- Integrated Sales Tax Engines – These products are designed to provide larger businesses that have more complicated sales and use tax need. Most are designed to integrate with existing accounting software, working in tandem with that product to provide accurate, up-to-date tax calculations on any sales transactions processed.
- Sales Tax Preparation – These products are designed to prepare and file sales and use tax returns, and often contain the ability to e-file returns with the appropriate agency while also paying taxes electronically
Because all of these areas are equally important, it was impossible to assign a rating to them. Instead, readers are given a summary of their features, along with a brief list of product strengths and potential weaknesses.
So whether you’re looking to implement a sales and use tax product in your own firm to assist your clients, or are simply looking for a product that your client can use with their current accounting software, the overviews provided will helpfully steer you in the right direction.
In a global economy, where businesses can find themselves shipping products thousands of miles away, it’s imperative that sales and use tax be tracked and managed for accuracy and timely filing.
See inside June 2016
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