No one enjoys paying taxes. That's especially true when the tax structure is complex and convoluted. Payroll taxes often fall into this category, but perhaps the most convoluted taxes that some of your clients will have to track, compute and remit are sales and use taxes.
The reason for this complexity is that taxing authorities want as much sales tax revenue as they can get. This has resulted in the same company often being subject to a multitude of rates, jurisdictions, and an ever-changing landscape of which items and services are and are not subject to taxation.
To that, you can add in the concept of nexus, which is the legal term for the ability of a taxing jurisdiction to tax a transaction based on the level of sales/use activity, or company presence, within the taxing jurisdiction's borders, even if the business itself is located in a different jurisdiction, or even another state.
And as the popularity of retail sales continues to shift from brick-and-mortar storefronts to the Internet, the whole sales tax boondoggle can only get worse.
Also hanging over the heads of many of your clients that collect sales or use taxes is the threat of a sales tax audit, an excruciating experience in most cases.
Compliance and enforcement are the names of the game, and if your clients aren't playing it right, they could get hurt. On the flip side, if your clients are able to correctly assess the tax liability and rate of any particular transaction, and apply, collect, report and remit it correctly, even the dreaded sales tax audit doesn't have to be a nightmare.
For clients that have any volume of transactions that may be subject to sales or use taxes, especially if these transactions take place in multiple taxing jurisdictions, sales tax software isn't an option, it's a must. Exactly what approach provides the best solution depends on the circumstances. Keep in mind when examining sales tax applications that not every vendor supports every level of accounting system. Many of the available sales and use tax applications are targeted at enterprise-level ERM software such as SAP. Software from these vendors won't do much good for a client running QuickBooks, even if they could afford the five-figure cost.
To jumpstart your own investigations, we looked at eight of the applications available for your clients to help them stay out of the sales and use tax quagmire. Many of these vendors base their price on the number of transactions performed, and as such, require a direct sales call to provide a quote.
However, we have to provide a word of warning up front. In many cases, software for performing sales and use tax calculation and reporting can cost enough to give your client sticker shock. But if it helps the client avoid overpaying taxes, or saves them penalties if they are audited, it will be worth every cent.
AccountantsWorld Sales Tax Online
AccountantsWorld was one of the first vendors to provide accountant-oriented applications over the Internet, and has been steadily expanding its suite of offerings.
Sales Tax Online is designed to allow an accountant to prepare and print client sales and use tax returns from anywhere the accountant has access to the Internet, even from the browser on many smartphones. With permission, staff and even clients also can have access to current and prior returns.
Sales Tax Online is a very directed application. Basically, it just maintains current tax rates for all jurisdictions in the states covered, and requires the accountant to input the amount of sales in each taxing jurisdiction. Currently, only New York and California are covered, with AccountantsWorld promising to add additional states in the future.
Once the sales and use data has been added, the accountant prints out the requisite forms and provides them to the client for signature and remittance. The application can help you prepare California's BOE-401-42, and ST-100, ST-809, ST-101, ST-102, and Schedules H, FR, N and N-ATT for New York.
At $299 a year for New York and $199 per year for California, AccountantsWorld is probably a good choice for accountants who have a large number of clients that keep good sales records. But the limited taxing jurisdiction coverage may limit the application's appeal.
ADP Sales Tax Service for Midsized Businesses
(800) 225-5237 ext. 230
While it's still one of the 800-pound gorillas in the industry, ADP isn't just for payroll any more. Just as it allows a company to outsource payroll, ADP Sales Tax Service and its Sales & Use Tax System allow your clients to use ADP to handle the calculation, reporting and remittance of sales and use taxes.
There's one caveat: Unlike the payroll services that ADP offers smaller businesses, the Sales and Use Tax System is targeted at midsized and larger businesses. Midsized, according to ADP, is in the range of 50-500 employees. Of course, the number of employees isn't really a measure of the number of transactions that a client will actually generate, but you get the idea.
ADP targets the Sales Tax System for these midsized companies, and offers Taxware Enterprise, a tax engine for large multinational companies, the Sales and Use Tax System for large companies in the U.S. and Canada only, and TaxSolver, which is a returns-processing package that works with the others to produce the requisite returns.
For many of your clients, ADP's solutions may be overkill, and somewhat more expensive than those offered by other turnkey outsourcing vendors. On the other hand, ADP has built up an enviable reputation and track record over the years, which might be a consideration in your clients' decision-making.
Vendors take a number of approaches in providing services to deal with the sales and use tax dilemma. Some provide tables for rate lookups, some integrate with accounting and point-of-sale systems to provide accurate tax rates, and others provide complete integrated solutions, or a way for your client to completely outsource the process.
Avalara covers a number of these bases, and does so for accounting systems ranging from QuickBooks on up.
For those of your clients that need rate tables and updates, AvaRates is available in an online lookup version - AvaRatesNow - that your client uses by just entering a particular city or zip code. And its AvaRates Database and AvaRates Database Connect can be integrated with other applications.
Avalara also has several products in the compliance area. These include AvaFile, an outsourced solution where Avalara tracks sales and use tax liabilities for your clients and prepares the necessary returns and remits the required payments on your clients' behalf. TrustFile is aimed at larger businesses that want to file electronically. Rather than a completely outsourced solution, TrustFile provides an automated e-filing and remittance service. It is available in 11 states.
AvaTax OnDemand and AvaTax OnSite are sales tax and use tax solutions that integrate directly with your client's accounting system, including selected ERP systems from Microsoft, Sage, Info, Epicor, Macola and even QuickBooks.
Pricing varies with the particular service and the expected number of monthly transactions. But you can try AvaRatesNow for free on their Web site, and look up any rate in over 12,500 taxing jurisdictions (which is a much smaller database than the paid service, but handy for the occasional lookup).
BNA Sales Tax & Use Tax Rates
(800) 424-2838 opt. 3
At the most basic level, most accounting software can automatically calculate sales tax if you indicate whether the transaction is taxable, and what the correct rate is. If your client is liable for collecting, reporting and remitting to just one or a few taxing jurisdictions, then they, or you, may be able to keep track of any changes of the tax rate in those areas.
A much more effective method than relying on checking the Web sites of taxing jurisdictions is subscribing to a service that provides tables of the most current rates everywhere that your client is responsible for filing.
The BNA Sales Tax & Use Tax Rates service is an online service (also available on CD) that allows you or your client to look up the applicable rate in over 58,000 taxing jurisdictions in the United States. This lookup can be performed by state, county, city or zip code, which is probably the easiest way. The service also provides documentation on any special treatments that the jurisdiction requires. As well as providing the rate, your client can enter the amount of the sale or service and calculate the applicable tax.
Keep in mind, however, that the BNA Sales Tax & Use Tax Rates service does not track your sales and use taxes, nor does it generate the forms that your client needs to file. As an option, the service can be provided with the Rates Exporter, which can export the current rate tables at times specified by you or your client. This export can take place in a variety of formats, and many accounting systems can directly import them so that your client has the most up-to-date information when preparing an invoice or sales ticket.
If you are responsible for keeping the client's sales and use tax tables current, then the $995-per-year subscription price of the BNA Sales Tax & Use Tax service is a no-brainer. And if your client performs this management themselves, and has a fair number of taxing jurisdictions that they are responsible for collecting and reporting to, the BNA service can easily save its cost in time saved and reducing the number of errors that might be uncovered in a sales tax audit.
CCH CorpSystem Sales Tax Solutions
CCH is well known for its accountant-oriented suite of products, ProSystem fx Office. A bit less well-known, but just as robust and comprehensive, are the applications CCH fields specifically for use in the corporate environment. These end-user applications encompass research services as well as compliance applications like the CorpTax Sales Tax Solutions.
The complete product line covers the gamut from the CorpTax Sales Tax Rates and Taxability Database and ZIPSales Lookup, to integration with a number of ERP systems ranging from Microsoft Dynamics to QuickBooks. A Sales Tax Load utility can upload up-to-date tax rate tables into many accounting systems, and help you set up your clients' sales tax detail schedules for each customer in their system.
CorpSystem also offers two applications for sales tax calculation - CorpSystem Sales Tax Office and CorpSystem Sales Tax Online. The Sales Tax Office is actually an add-on application that integrates with specific accounting systems from Microsoft, Sage, Oracle and SAP, and adds enhanced sales tax lookup and calculation capabilities directly in the application itself. Once set up, sales taxes are correctly calculated and stored for transmitting to the CorpSystem Sales Tax Returns Online, which actually prepares the sales tax returns for any area where the client has nexus.
A somewhat less vendor-specific approach is available with CorpSystem Sales Tax Online. This is a Software-as-a-Service application that essentially offloads the responsibility of maintaining sales tax tables and performs the sales tax calculations for the particular taxing jurisdiction the sale is relevant to. There are several ways this can be accomplished. Your client can run Sales Tax Online in parallel with their invoicing or POS software, or integrate it with an existing accounting system using the available software development kit.
There's a specific version of CorpSystem Sales Tax Online for QuickBooks users, which replaces the tax calculation functions in QuickBooks Pro or Premier. It supports transactions created in the forms used for making up estimates, invoices, sales orders, sales receipts and credit memos. As with the other CorpSystem Sales Tax application, the actual return preparation is handled by the separate CorpSystem Sales Tax Returns Online.
CorpSystem Sales Tax Office and Sales Tax Online are particularly good choices if your client is already using other CorpSystem Suite applications. CorpSystem Sales Tax Online is also well worth investigating for your clients using QuickBooks.
Sabrix Managed Tax Service (MTS)
Many of the vendors mentioned in this roundup concentrate on midsized to enterprise companies. Rather than concentrate on one particular size of client, Sabrix has two offerings. The Sabrix Application Suite is an in-house solution that integrates with a wide variety of ERP systems through pre-built integration bridges or through the use of an SDK. This same type of integration applies to the Managed Tax Service, which is an outsourced sales tax solution similar in concept to that of several other vendors mentioned in this roundup.
There are several major differences between the two products. The first is the pricing model. The in-house Application Suite is priced based on the number of transactions, and is available either on a perpetual license, or as a yearly subscription. The Managed Tax Service is also priced based on the number of transactions, but is only available as a subscription service.
While the Application Suite will appeal to those clients who are large enough to have an accounting department large enough to keep current with the sales tax process, the Managed Tax Service is likely to garner substantial interest, especially in this economy where companies are looking to reduce expenses. While it's an unfortunate situation where it makes more economic sense to pay a service to perform the entire sales tax process from calculation, to filing and remittance, to hand-ling sales tax audits if they occur, it makes a lot of sense when your client is trying to get by with as small a staff as possible.
It's that full range of available sales tax support services that gives Sabrix an edge. Most of the vendors in this roundup can provide updated and current tax tables and/or software to perform calculations and return generation. Sabrix also backs this up with documentation and research useful in the event of a sales tax audit, to the extent of even being able to provide support staff to handle an audit (which may step on your toes as your client's accountant).
Still, you and your clients can decide what level of support and participation Sabrix will play in the sales tax process, and it's this flexibility that makes it a configurable and affordable choice.
SpeedTax provides a number of approaches to handling sales taxes. SpeedTax Core is the tax calculation engine. This can be tightly integrated with a variety of ERP, POS or e-commerce applications, including Microsoft Dynamics, Sage Accpac ERP and MAS 90/200 ERP, NetSuite, Intacct, and SAP. Other integrations can be accomplished by using the software development kit available from SpeedTax. A version of SpeedTax is also available for QuickBooks Pro, Premier and Enterprise, which makes SpeedTax an appropriate choice for clients ranging in size from small to large. As with almost all sales tax software applications, SpeedTax pricing is based on the number of transactions, starting at under $2,000 for the QuickBooks version.
SpeedTax Core handles the entire sales tax process, including address verification, nexus management, and reporting. More than 14,000 taxing jurisdictions are covered in its database. SpeedTax also handles product taxability, with an extensive database of which products and services are taxable or nontaxable in the jurisdictions it covers.
Return preparation and filing is handled by a separate product called Plus. As with Core, it can be tightly integrated into an ERP system, or used in stand-alone mode with a bulk upload of transactions.
One area that will be of great interest to many practitioners is SpeedTax Pro. This allows your staff to access client settings and information, and manage their sales tax process through return preparation and filing. Another practitioner-oriented product that SpeedTax offers is Audit Pro, which can examine transactions and identify potential overpayments that have been made. Audit Pro can also be used as an audit tool to verify an audit client's sales tax liability. These two products help to tie your practice more deeply into the client's sales tax workflow, making SpeedTax potentially useful as an additional revenue generator.
Thomson Reuters OneSource Sales and Use Tax
Over the last few years, Thomson Reuters has done a lot of re-organizing. Many of its corporate and enterprise-level applications are now under a single banner - OneSource. Targeted at larger companies and enterprises, OneSource Sales and Use Tax integrates with most popular ERP software to provide up-to-the-moment rates and applicability for sales tax, consumer's use, seller's use, leasing returns, and food and beverage purchases. It can provide 200 state returns in the 46 states that have these kinds of taxes, as well as the District of Columbia, and 388 local returns in 11 states that have local reporting requirements. OneSource Sales and Use Tax also handles Canadian returns for revenue in Canada and six provinces.
The standard edition of OneSource Sales & Use Tax is designed for larger companies and enterprises, and is priced accordingly, in the same five-figure range as most of the other vendors' similar products.
For smaller companies, there's the OneSource Sales & Use Tax Express RS Edition. This has the same calculation engine, but addresses the needs of companies that operate in only a few states and have fewer transactions. It can map transactions from a spreadsheet directly onto the correct tax line, which allows it to work with pretty much any accounting app that can export to Excel. The Express RS Edition has the same capabilities as the standard edition of OneSource Sales and Use Tax, including the ability to automatically generate a check or perform an electronic funds transfer to remit payments.
Ted Needleman is senior director of the Technical Services Division of Industry Analysts Inc., an independent market research firm and testing laboratory. He was previously the editor-in-chief of Accounting Technology, and writes frequently on software, hardware, and technology-related subjects.
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