Is the information you’re hearing from software salespeople appropriate for your business? Watch as the SALTovation team talk about the importance of understanding what you are buying as a consumer. They discuss pricing models and projections, taxability, and the differences between reality and hype in helping businesses navigate the complexities of tax collection software. The team also talks about taking into consideration the future goals of your business to make sure the software you’re implementing is aligned before buying.

Welcome to another video from your SALTovation team. I am Tram Le. We have Stacy Roberts, Alex Korzhen, and Meredith Smith with us today. We decided to chat about software providers and kind of walking through what you’re buying and really emphasizing the importance of understanding. And the functionality of the software you’re getting as well as the service and support that you may or may not get.

But we really want to hash some of those important issues out today. So, I’m just going to kick it off with the introduction of sales tax software. There are a lot of providers out there and they do promise you a solution that helps you manage your sales tax as well as managing the filings and the reporting.

But in our experience, we have seen variations in the different providers in what you are getting. The pricing,  , the level of service from managed services, which is a term I think we’d want to dig into a little bit today, as well as, I mentioned earlier functionality on the filing and reporting and if a service provider is providing that to you that as well. I’ve had a lot of clients dealing with a lot of different vendors trying to figure this out and we want to help our clients get the best recommendations and help them select the right provider.

Pricing models and projections

One of the first things I mentioned is pricing, right? Understanding what you are getting. And what I’ve seen here is there are a lot of different pricing models, some based on transactions, others on both revenue and transaction. We have also seen some customized pricing. It is not always clear how these software providers are going to charge you for the software itself as well as the additional service and support that comes along with it.

Depending on what kind of business you have, if you’re an e-commerce provider or a seller, where your transactions might be, the volume of those transactions and the dollar value of items you are selling may all factor into pricing. Even if your revenue may not be high, a business may have a ton of transactions. In some cases, providers will charge a ton for those high volume transactions. So, a factor in choosing a sales tax provider is what existing sales look like.

A separate consideration is where sales are expected to go. It is helpful to project sales into the future five to ten years so you can make a selection today that will scale with your business. Or what about your GL system? While you may be a QuickBooks user now, you may be expecting to integrate a more sophisticated GL system in the near term. Does whatever product you pick now from a sales tax collection software integrate with that future GL system? Also, what do you anticipate growth being?

What business lines are you planning to get into? Some software solutions work better with certain industries than others. Are you going to also tack on a swag store to your software as a service? Factor that possibility in now as you consider pricing and integration now. Just try to take that net step and provide now with a software for sales tax that will serve you in the future.


Also to be analyzed relative to the specific business is taxability decisions that support what you’re selling. If a company is selling SaaS and the software provider does have all the taxability, taxability codes and decisions to support those sales but the business is expecting to expand into digital goods or any other area that the sales tax software provider isn’t equipped to support, it is good to know that upfront and make an informed decision. In some cases here, businesses have to figure out taxability themselves, meaning custom coding. Or the software provider might or might not be willing to do the research and provide you those tax decisions. We have a really great relationship with one of our software as a service (SaaS) clients. Every time they’re thinking about doing something new, they let us know so that we can assist them in product taxability decisions. They were considering a reinstatement fee to encourage customers not to let their contract expire. What’s the taxability of a reinstatement fee? That’s a one-off in need of an appropriate taxability or code aligned to what they are selling.

It is important that your vendor make available to you what the tax decision is behind that kind of one-off product assignment so that you can validate what you’re going to be taxing for your customers and know where that product is taxable. We see a lot of differences with the software providers on the jurisdictions in which their software will collect. And especially in home rule states, not all of the software providers might be able to collect there. So, it is important for companies to understand their footprint and the jurisdictions in which they are selling into, specifically locals. In the SaaS space in the city of Chicago, there’s a specific tax. Make sure if you are selling there, your software can support those sales.

Reality vs. hype

Be mindful of the sales spin. What the system can do may be different than what sales or marketing is presenting during the sales and bidding process. This is specifically true in cloud services and the software space where there’s really a lot of nuance from the taxability perspective. In all these different products, the law is pretty vague and/or inconsistent across states.  So, one salesperson might say we’ve simplified the software sales process by reducing the codes, which may sound promising for streamlining the process, sort of a positive spin on less granularity. But less granularity can get a business in trouble. Having more codes may be technically accurate and sound, but you’ll tear your hair out trying to figure out which code your product or service fits into if you don’t have the sales tax background.

Moreover, the term managed services can be a misnomer. A lot of sales tax automation companies are pushing out a managed services tier for a company who does not have the resources or expertise to handle some of the functionalities, like the managing exemption certificates and tax filings. Software companies may tell you, we’ve got that for you, but do they? While the sales people might say they will help you handle it, once the sale is done, the salesperson is out of the loop and your left with whatever reality is. Which may be software with the wrong tax codes because mapping wasn’t granular enough, or incorrect tax decisions, or exemptions managed improperly for business type because the amount of tax charged is incorrect. All of these items on audit can lead to the taxpayer being on the hook for uncollected taxes or penalties and interest for overcollected taxes.

The takeaway

Keep in mind the slippery slope of sales for tax automation solutions. If you do not know what you are buying — the functionality, the level of managed services, the customer support — get help shopping for vendors from a tax advisory service like TaxOps. You may think that because you buy a software, you should be able to talk to someone about renewal charges or customization. That value with the software license you buy may or may not be there. Get professional help to make sure the professional services you are buying match what you think you are getting upfront as opposed to relying on what the salespeople are telling you in the sales process.

For all you parents out there, we have one more story. We were having a parent-teacher conference for our kids and one of our questions was, thanks for the feedback, but is this behavior normal ? How does this behavior compare across my kids’ peers, right?

This same analysis can be applied to selecting sales tax automation solutions. If you’re not working with somebody who has that across-the-board experience and you are not sure if the information that you’re hearing from the salespeople is appropriate or not for your business, get help to understand, like a parent-teacher conference, whether what you’re being told is normal or not.


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