TAXATION CAN BE CHALLENGE for many online retailers and e-commerce websites. Questions have to be answered about company nexus, county taxes, city taxes, reporting, and other considerations. Luckily, there are countless solutions out there designed to solve all these problems (and more).
Let’s have a look at just one of those solutions: Avalara. While we don’t contend this is the best solution available, we think the offerings are robust, easy to use, and reliable, making it a solid choice for most SMBs.
Avalara is a cloud-based Web service that maintains tax rates in real-time for use in e-commerce systems. The software-as-a-service is offered a la carte, with customers paying for the basic (tax rate calculation) or adding on IRS filings and return management.
For the purposes of this spotlight, let’s just consider the basic tax rate calculation and reporting services for typical e-commerce applications.
Avalara AvaTax connects with a website’s CMS via plugin. With Magento, for example, AvaTax integrates with an extension, giving it cart/checkout access to display and charge correct tax rates as well as to validate addresses and provide full reports.
Nexus — AvaTax enables users to establish Nexus for particular locations. In this way, the online store will only charge tax to required transactions and no others.
Exemption Status — Some customers hold a tax exemption status. Avalara enables e-commerce websites to manage customers’ exempt status via the Avalara AvaTax API.
Product Taxability — Account managers can set products to be considered taxable or non-taxable. For example, clothing in New York City is not a taxable good. AvaTax admins, then, would establish certain products as clothing to avoid unnecessary taxation.
Tax Rate Calculation — Using what it calls “advanced geocoding technology,” Avalara’s AvaTax pinpoints a customer’s shipping address and references it to a broad tax database over 11,000 tax jurisdictions, being sure to charge all applicable taxes whether they be state, county, city, or even specialty tax.
Address Validation — Avalara employs “the most accurate and up-to-date, U.S. Postal Service-approved, address data available,” according to its website. In other words, it will know as well as any delivery software whether a user is providing a legitimate address.
Reporting — Summary and detailed reports can be created on the fly via an online portal. Time ranges and other variables can be set and adjusted.
Integration — Avalara connects with most popular e-commerce CMS, CRM, and bookkeeping tools, including:
Want a quick overview of the product? The YouTube video above presents a company-made consumer-use demonstration. For additional information, visit the Avalara website page, “AvaTax: Sales Tax Software that Works for You.”