by Stephanie Miles
Published on 19 August 2013
As states begin ramping up sales tax enforcement efforts, an increasing number of businesses are targeted for sales & use tax audits. Minor mistakes in the collection of sales tax can result in tens of thousands of dollars worth of fines and penalties. This is one reason why companies of all sizes are now searching for ways to ensure the accuracy of their sales tax collection. Avalara is a cloud-based transactional tax solution that small and mid-size businesses can use to decrease the work necessary for administering sales tax. The platform helps improve accounting accuracy and reducing the risk of trouble in an audit.
In this Avalara review, I will look at how the sales tax software can be used by small businesses in the U.S., to reduce audit risk, survive an audit, and address rapidly changing rules and regulations.
Most business owners will be subjected to a state tax audit at some point. Avalara tax solutions won't guarantee auditors won't come knocking, but they can mitigate potential risk and provide the data needed to substantiate tax accuracy. Avalara's cloud-based software platform manages sales tax rates for its customers, regardless of where those customers are located. Avalara manages all tax boundaries, and integrates with more than 250 accounting, e-commerce, CRM, and mobile payment platforms.
Avalara's integrations make it possible for businesses to use its tools without abandoning their current accounting software. Popular apps like NetSuite, Microsoft Dynamics, QuickBooks, and 3dcart communicate remotely with Avalara's tax engine, allowing businesses to calculate taxes on demand. Rather than having to run sales tax reports at the end of each month, sellers rely on outsourced filing and remittance provided by Avalara.
Avalara's functionality can be split into three main areas: calculations, exemption certificate management, and tax return filing & payment. At its most basic level, Avalara is a useful tool for calculating sales tax on-demand. The software integrates with existing accounting and e-commerce tools and basic functions work slightly differently depending on which software is used. Businesses no longer have to research tax rates and build and administer tax tables . The more jurisdictions a company operates in, the more tax rates it is subject to, and Avalara eliminates the research and maintenance altogether.
The second major component to Avalara is the application's certificate system. AvaTax Certs allows businesses to collect documents from exempt customers. Resellers who can purchase products without paying state sales tax can submit required information online, without relying on fax machines or traditional mail. The system generated certificate is then stored along with all appropriate invoices and receipts, making it easy for the business to access the necessary documents in the event of an audit.
The final component of Avalara involves filing and remitting sales tax. Avalara can be set up to file and remit its clients' taxes, either electronically or by check. Businesses pay Avalara via a wire transfer, and Avalara pays the states for the companies it represents. This simplifies the sales tax payment system dramatically for businesses.
Manually collecting sales tax is a process that's fraught with complications. Collect too much tax, and businesses risk damaging the relationships they have built with clients. Collect too little tax, and businesses risk owing thousands of dollars worth of fines and penalties resulting from a state sales tax audit.
Although the primary benefit of Avalara is accuracy - automatic sales tax calculations ensure companies are collecting the right amounts, regardless of where their customers are located - the software also shines because of its documentation tools. Collecting the right tax is one thing, but being able to prove it is quite another. Avalara archives every piece of relevant information for its clients, making it possible for businesses to quickly reference particular invoices or wholesale claim forms at a moment's notice.
Companies that use Avalara can match sales numbers reports from their accounting systems and then approve (or make adjustments to) forms based on whether the figures align. The online system simplifies sales tax for businesses of all sizes, but particularly for small and mid-size businesses that collect tax from customers in various states and municipalities.
For those with an integrated sales tax module, the interface with Avalara will obviously look like your financial system. Within this context, it's integrated into your platform and won't change how your invoicing system or payroll system looks or functions.
The AvaTax Admin Console will show dashboard screens, including account alerts, service notes, and a tax summary, along with other features. You'll also find links to more detailed tax returns, reports, tools and account settings.
From the dashboard screen, you'll see account alerts, service notes, and a tax summary, among other features. You'll also find links to more detailed tax returns, reports, tools, and account settings.
Click on the "Tax Returns" tab to see a liability worksheet for your company. Sort line items by date or worksheet type. You can also expand the worksheet to see the status of certain filings, filtered by location.
Take a detailed look at individual transactions to see specific figures, like total taxes and total discounts. Individual transaction detail pages are also where you'll find records of tax rates, sorted by jurisdiction type. Avalara keeps a detailed archive of all transaction details, which you can refer back to in the event of an audit.
Because Avalara operates inside of existing accounting applications, it's important for users to be able to access custom support information. Avalara offers a number of training videos and classes for clients to use while getting familiar with the service. The company also supports an extensive knowledge base, where customers can find immediate answers to their own questions. More detailed queries can be directed to Avalara via email or by telephone at no additional cost.
Avalara offers a scalable pricing model for small and mid-size businesses. Companies can expect to pay significantly less for Avalara than what they would pay for traditional sales tax software, without worrying about investing time or money in software updates or maintenance requirements. Avalara pricing includes a one-time activation fee, along with an annual or monthly fee for service based on transactions.
Sales tax software saves companies time and money, and decreases the workload on overburdened accounting staffers. By opting for a web-based solution, companies can decrease the time they spend collecting sales tax from customers. Avalara also provides businesses with a sense of security and protection in the event of an audit, since all invoices, paperwork, and line items (with tax code details) can be accessed with just a few clicks of the mouse.
Ratings: ease of use 5/5, features 5/5, value 5/5