Few things are more challenging than staying abreast of sales and use taxes. Levies are imposed by more than 7,500 state and local authorities, each with its own set of rules; increasingly aggressive state auditors; and staff sizes that are decreasing. In the last year, new vendors have entered the space, while existing vendors are partnering and/or beefing up their offerings. But one thing is for sure-all sales and use tax vendors are counting on their software to enable companies to pay the right tax, for the right place, at the right time, allowing accountants and their clients to comply with the law, avoid assessments and overpayments, and improve cash management.
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Before the Internet era, most sales applications were high-priced affairs. But Web-based products, such as Sales Tax Online, have brought new capabilities to smaller firms.
"Sales Tax Online allows me to complete and report sales tax returns whenever I want. The best part is there is no updating required and it calculates the taxes fast," says Isabelle McAndrews, owner of IMAC, a Brooklyn, N.Y.-based bookkeeping and tax services company. McAndrews uses Sales Tax Online to file her clients' sales tax returns. The application from AccountantsWorld can be used with the Accountant's Office online. Also, tax returns can be saved in clients' Cyber Cabinets, the AccountantsWorld online filing system.
This year, the Hauppauge, N.Y.-based company has added e-filing capabilities for all existing states and enhanced sales reports. It has also organized an activity center that offers a view of client-specific data and an import feature that will allow the user to import Excel spreadsheets directly into the sales tax program.
McAndrews, who charges clients approximately $100 per sales tax return, utilizes the filing instruction page on behalf of the clients, and printing forms to a PDF file.
The Web is an ideal medium for tracking taxes, says Laurence Zuckerman, AccountantsWorld's director of educational services.
"We feel that as states, counties, and localities look for ways to improve, modify, and collect more sales taxes, the use of online programs will increase," says Zuckerman. "Accountants will and should use the Internet to their advantage. Sales tax programs can eliminate the need for complex manual recordkeeping."
Washington, D.C.-based BNA Software has introduced a Web version of its BNA sales & use tax rates and forms service. BNA also offers the product as a monthly service distributed on CD-ROM.
"We've seen pockets of interest for a Web-based product. It will make updates available continuously throughout the month as they are released. This way, customers will avoid waiting until the next month for a CD delivery, and any associated mail delays," says Roy Luebke, director of tax software for BNA.
The CD-ROM and Web versions are each priced at $895 for single-user pricing for an annual subscription.
Bainbridge Island, Wash.-based Avalara bounded onto the scene in June 2004, following a partnering strategy. It does not sell its products under its own name. Instead, it replaces the sales tax module in the systems with which it integrates.
So far, it interfaces with Intuit's QuickBooks, Sage Software's MAS 90/200, Accpac International's Advantage Series, Epicor's iScala, and Microsoft Great Plains and Navision. It also plans to add interfaces to Open Systems and Microsoft's Small Business Financials, and is considering SAP Business One.
"SMB businesses had no solution. We wanted to reach the small company who has no internal tax department. They have to meet the same requirements a large company does," says vice president Marshal Kushniruk, "but they usually don't have the budget to automate the process. Any company that completes transactions has a need for our service."
AvaTax ST automates the sales tax process by performing address validations down to the Zip+4 level. Kushniruk says that correct levies cannot be applied without having the correct street address. After addresses are validated, the software assigns the right jurisdictions, tax calculations, and detailed reporting.
It also automatically generates pre-populated returns for any of the more than $8,000 North American taxing jurisdictions. The AvaTax system communicates with Avalara's computers, which keep track of the changing array of rates.
The starting price for AvaTax (except QuickBooks) is $99 a month; the SDK starts at $30 a month. For QuickBooks, pricing starts at $9.95 per month (with no transactions) plus $.50 per transaction, and the entry-level package price is $29.95 per month.
Also looking to enter the sales and use tax market is Sage Software. In May, executive vice president Jim Foster said that the company has requested proposals from OEMs to provide such a tax product for the MAS 90/200/500 and Accpac lines. CCH, which has a product development alliance with Sage, is one of the companies whose application is under consideration. The company declined to elaborate on those comments for this story.
Reaching New Markets
Taxware, which had been focused on Fortune 100 companies, has wanted to break into the SMB space for a long time. It found a partnership with Avalara the perfect opportunity to do so.
"We were experiencing requests for functionality in the SMB space, and as we were pursuing vendors, we kept bumping into Avalara. They focus solely on the SMB space, and have a solid delivery vehicle," says Jayme Fishman, senior vice president of sales, marketing, and business development for the Salem, Mass.-based company.
The agreement lets Avalara sell three of Taxware's services, including Taxability Matrix, which covers thousands of industry-specific product, service, and entity-and-use-based rules, and TaxSolver, a remittance form and report platform. It will also handle Taxware's international rate and value-added tax content, which calculates international value-added taxes for more than 150 countries.
Avalara will also co-deploy and become a reseller of Taxware products. Taxware products will be available through the Avalara Infinity program, a network of value-added resellers.
"In the higher-end SMB space, we've seen a segment of customers who want a stand-alone product as opposed to a service. Through the deal, our VARs will now have the ability to offer both options," adds Avalara president Jared Vogt.
Avalara is also counting on its 225 partners to spread the word about AvaTax ST. It is enlisting resellers in the Infinity Partner Program.
Sales & Use Tax Vendors|
BNA Tax Management
CCH Sales Tax Group
Participants who can join the program for free, receive a not-for-resale copy of AvaTax ST, and one copy for in-house use to help track sales and use tax within their own businesses. They also receive client interfaces for supported accounting/ERP software applications. These are linked to Avalara's demo servers, allowing partners to demonstrate the system.
Another high-end vendor, San Ramon, Calif-based Sabrix, formed a partnership with Carrollton, Texas-based RIA to integrate RIA's InSource sales and use tax return compliance software with Sabrix's Application Suite. This integration allows companies to initiate a financial transaction in legacy or ERP systems, with Sabrix performing all sales and use tax determination, calculation, and reporting, and completing the tax filing with a direct connection to RIA's InSource software.
RIA took another step in March when it acquired Tax Partners, a sales and use tax compliance service firm which filed more than 540,000 state and local tax returns and remitted $7.5 billion in taxes for its clients last year.
"Acquiring Tax Partners allows tax professionals and their clients to choose from a range of sales and use tax solutions, from automated tax determination and return processing to complete outsourcing of the sales and use compliance function," says Brian Peccarelli, general manager of RIA Compliance.
Not only are there different tax rates for different states, but certain industries also have specific needs. In turn, vendors are introducing industry-specific modules to address unique compliance requirements.
For example, RIA's InSource product has a Food & Beverage Tax Return Processing module priced at $5,000, which can calculate and prepare returns in a variety of jurisdictions for food and beverage operations. The module includes four-digit coding, and sales and use transactions are tagged prior to import with a code that indicates their specialized tax characteristics.
All returns can be populated through RIA's electronic spreadsheet import feature or via manual data entry. The system offers 134 local returns for 13 states.
Meanwhile, Riverwoods, Ill.-based CCH also offers several industry-specific modules. Industries covered include telecommunications, food and grocery, medical devices, electric, and natural gas.