Sales tax technology vendors have been expanding their efforts to help small and midsize businesses cope with the dizzying array of tax rates and rules across states, localities and countries.
“One of the things that we focus on is the SMB space,” said Marshal Kushniruk, executive vice president of business development at Avalara. “Even though we do some enterprise business, our major focus is the SMB space. We believe that the smaller businesses need to compete with the bigger guys and are really the ones that are driving the economy.”
Another sales tax technology vendor, Vertex, has set up a Vertex SMB unit to target small and midsize businesses with a streamlined version of its corporate offerings, according to Bradd Wildstein, director of channel sales. Thomson Reuters markets its ONESOURCE series of indirect tax products across the world to businesses of all sizes.
Demand for international capabilities has been growing among smaller businesses, particularly for ecommerce.
“We believe we have to develop a product or suite of products that allows us to take globalization for the little guy to the market,” said Kushniruk. “When these customers are selling across borders or across countries, they really have to worry about shipping it, with landed cost, duties, excise, and tax. They need to collect the right VAT or sales tax and most importantly pay the tax.”
Avalara and Vertex use connectors that are able to link their systems to outside accounting software, such as QuickBooks and Dynamics GP, or ecommerce technology such as Magento. ONESOURCE also integrates with outside systems like SAP.
“We have 500 different connectors that have been written, and they allow small businesses to essentially have an omnichannel type of presence,” said Kushniruk. “They may be doing invoices in QuickBooks and selling in a Magento shopping cart and a Shopify shopping cart. We’re consolidating all of the tax and helping them figure out the right tax that should be charged on the item, and paid in that particular jurisdiction, whether it’s the state of New York or Germany.”
Expanding internationally can be a challenge for any small business. “When clients go global they have to figure out first of all should they be registered in a country or not ship into that country,” said Kushniruk. “If they should be, what’s the correct VAT rate? On top of that, what is the product you are selling in that particular country or set of countries or states in the U.S. and how is that particular product taxed?”
Avalara is also offering specialized content for growing industries, like the sharing economy represented by companies like Airbnb and Uber. In recent years, it has also been forming alliances with state CPA societies, such as the Illinois CPA Society, the Kansas Society of CPAs, and the Maryland Association of CPAs. Vertex SMB has allied with the American Institute of CPAs’ CPA.com unit.
The calculations can be complex. “A baby carriage could be taxed at 24 percent in the U.K., and at a reduced rate in Germany, which is about half of their standard rate, and a zero rate in France, which is not a zero amount, but it’s essentially a tax holiday on it,” said Kushniruk. “In Louisiana, it could be 100 percent of the state rate, and then it could be in a tax holiday in New York State from August 1 to 14 because of back-to-school sales or something. All of that stuff goes into the determination, as well as landed cost. If I’m shipping a product from the U.K. into Ireland, is there an excise or a duty on top of that? For small businesses, the penalties are huge if they get it wrong.”