In a push to capture the estimated $20 billion in sales tax from online transactions, some states now offer protection from audits and other incentives for businesses that volunteer to collect sales tax. The problem is that there are 8,000 sales tax jurisdictions in the U.S., making sales tax calculation especially onerous for small and medium-sized businesses (SMBs).
Avalara, a Bainbridge Island, Wash., firm, comes to the rescue with its AvaTax program, a sales tax solution tailored to SMBs. Avalara is a certified service provider for the Streamlined Sales Tax Project (SSTP), which includes 19 states that have changed their laws to simplify their tax codes and another 23 states interested in doing the same.
Several companies interviewed say that the modest charges associated with the AvaTax program are saving them time and labor. ShopperTrak, a Chicago firm that analyzes foot traffic in retail settings, has satellite offices in the U.S. and abroad. Because of AvaTax, accounting personnel can be utilized for other accounting tasks, said Zachary Jarrell, controller.
"Since our business is growing and we are very busy keeping pace, sales tax is not something that we want to be spending too much time on," Jarrell said. The privately held company does about $20 million in annual revenue.
Before using Avalara, "calculations were driven from ShopperTrak's accounting software, MAS90. "Sales tax rates had to be manually updated, sales tax codes were manually selected when invoicing and the reported were manually prepared," Jarrell said. Now, ShopperTrak puts in AvaTax as the default code and the sales tax is calculated based on the addresses. The service's address verification also ensures accurate mailing, cutting down on mistakes in shipping and ensuring that invoices get to the right place for future payment, Jarrell said.
Whisper Creek Log Homes in Sandy, Utah, manufactures pre-assembled log homes at its plants in Arkansas and Canada, ships materials throughout the U.S. and has dealers in more than a dozen states. Its goal is to have a dealer in every state, says the company's controller, Patrick Volz. Started in 2002, the company is growing rapidly, with $34 million in sales last year.
"There is a huge amount of work to figure out what these taxes are," Volz said. "To collect that sales tax, you have to know what the tax is, and not just for states, but for the county and small townships and whatever else is out there." Whisper Creek could have had to hire a full-time person just to handle the sales tax.
The company wanted a tax calculation package its dealers could access online. "We checked out Commerce Clearing House, but that would have cost us $8,000 a year," Volz said. Whisper Creek pays Avalara $100 a month. "We are working on a next stage with Avalara, so they'll file for us," Volz said.
Let us know what you think about the story; e-mail: Linda Tucci, Senior News Writer