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Jul 28, 2022 | 9 minute read
written by Hank Chang
With the expansion of eCommerce in recent years, the demand for tax software has simultaneously increased.
According to Fortune Business Insights, “the global tax management software market size was USD 5.24 billion in 2018 and is projected to reach USD 11.19 billion by 2026, exhibiting a CAGR of 10.4% during the forecast period.” This growth is primarily due to the rising volume of financial transactional data captured by many businesses.
Tax software helps eCommerce businesses streamline the process of calculating taxes by eliminating the need for teams to keep up with the countless sales tax laws and rates that are constantly changing. Furthermore, tax software assists businesses with filing returns, preparing for audits, managing payments, and prepping exemption certificates.
In this blog, we will take a look at some of the key benefits and challenges of using tax software, as well as a list of the top sales tax eCommerce vendors in the market.
Benefits to Using Tax SoftwareThere are many different ways that tax software can help online businesses.
Challenges to Using Tax Software Although it may seem like tax software has many benefits, there are still a few shortcomings that can inconvenience users. Human error won't be fully eliminated as some tax compliance software still requires data to be input manually. The system has no way of working properly if data is incorrect. Another downfall of tax software that stems from human error is tax determinations. Tax compliance software often can not make tax determinations for clients because of the uniqueness of each situation, so users must choose from a list of tax categories manually.
Finally, tax software can be expensive when adding up subscription, implementation, and onboarding fees. Customers should make sure that the tax software they are using is cost-effective for them as contracts can last multiple years.
There are many tax software options, so let’s take a look at nine of the top eCommerce tax compliance software vendors in the market, listed alphabetically. Top eCommerce Tax Software Vendors
Headquarters: Bainbridge Island, WA
Businesses that use Avalara can manage customers globally. The platform is used by over thirty-thousand customers in 95 countries. Through AvaTax, the in-house rate calculation tool can make all the needed calculations for sales tax reporting. When utilizing Avalara, you can get reliable and accurate data from experts, have no downtime at peak times, and leverage their 1000+ signed integration partners.
Headquarters: Westbrook, ME
DAVO separates the amount of sales tax collected daily, files it, and pays it to the state on time. Tax documents can also be stored on DAVO for future reference. Set-up of the software is frictionless through POS and DAVO alerts you when on-time filing discounts are available.
Headquarters: Riga, LatviaLOVAT provides an all-in one solution for accurate VAT calculation, reporting, and payments accessible in 57 different countries. They have a SaaS business model that automatically files tax reports and allows users to upload sales data from different sources. LOVAT starts at $43 a month, but does offer a free trial for new users.
Headquarters: Las Palmas, SpainQuaderno is compatible with popular eCommerce platforms such as WooCommerce, Shopify, and Amazon FBA and can be used globally. The software can integrate with content platforms, shopping carts, or payment processors and also supports multi-channel selling. Also, Quaderno is able to automate billing and provide each customer a personalized bill.
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Headquarters: Multiple offices in the USQuickBooks is among the most commonly used tax softwares in the world with 7 million customers. Positioned for small businesses, QuickBooks automates sales tax calculation, product categorization, and sales tax liability reports. If you are looking for a tax software for calculations, QuickBooks is best suited for your needs.
Headquarters: Norwalk, CTTaxCloud provides sales tax calculation within the U.S. and has two payment models: free or fee based. The free model is paid for by TaxCloud’s state partners. TaxCloud has integrations with many carts, platforms, marketplaces, and payment processors to ensure a seamless experience.
Headquarters: Boulder, COTaxify helps avoid late fees through automatic tax calculation and filing with accurate rates. In addition, the platform automatically complies with tax changing laws. Taxify is also equipped with online tax experts to answer questions and fulfill your needs whenever. Compared to other vendors, Taxify does have an option of a free trial, but is on the more expensive side, starting at $47 per month.
Headquarters: Woburn, MATaxJar is a cloud-based tax platform launched by Stripe that automates the entire sales tax lifecycle, does calculations, and even files reports. Its features include a product classification tool, which uses AI to calculate the individual sales taxes of different products in your store. With 99.99% uptime and dynamically updated laws and regulations, it is one of the best tax software vendors currently in the market.
Headquarters: King of Prussia, PAAs a company with 40+ years of experience, Vertex focuses on providing flexible solutions to clarify tax compliance. Vertex automates the process of tax calculations that come with expanding your ecommerce business to a new country. Also, Vertex can help boost VAT accuracy, stay up to date with regulations, and centralize visibility.
Conclusion
Tax software helps businesses decrease the amount of time they spend on managing sales taxes and improves the accuracy. They are able to do so by automating the process of sales tax calculations and keeping up with current rules and legislation. Punctuality of filing taxes is also aided by the use of tax software, which can lead to on-time filing discounts.
With the wide variety of tax compliance software in the market, business owners need to choose one that fits their needs and budget.