What Businesses Need to Know about Sales Tax Automation

by | Aug 21, 2021 | State and Local, Tax News

Consider these initial questions as you begin the selection process for purchasing sales tax automation software.

By Tram Le 

As businesses register with various states and are required to comply with sales and use tax nexus rules across the country, inevitably they will look to third party software vendors to address sales tax obligations, compliance, and other requirements.

There is an initial set of questions to consider in selecting sales tax automation software.

  • Does the taxpayer truly have a need for third-party automation software, or given the nature of the business, can the taxpayer’s ERP system handle all tax decisions, rates and rules? 
  • Does the third-party software integrate with the taxpayer’s existing ERP system or accounting software? If there is no integration, there is no point in communicating with a third-party vendor. 
  • What is the cost? Does the taxpayer have the resources to maintain and monitor whether the software is properly calculating tax and staying current with law changes across the country? 
  • Does the software address local home rule jurisdictions that have separate nexus, licensing requirements, tax decisions, and rules? In many cases, businesses exceeding the nexus threshold in states such as Colorado, Louisiana, and Alabama will have to deal with local home rule requirements, which all must be timely addressed by the software vendors. 

Work through these and other issues with your TaxOps advisor to thoroughly review and assess your nexus footprint and tax decisions before selecting and signing that contract with a third-party vendor. 

We’ll keep you posted on developments here. As questions come up, contact your TaxOps advisor for guidance.

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