Sales Tax Compliance Software for Modern eCommerce
If you have an online store, one of your biggest challenges is undoubtedly remaining sales tax compliant. Whether you primarily sell locally or have a national or international reach, trying to navigate thousands to tens of thousands of sales tax laws across multiple tax jurisdictions is impossible without support.
Enter sales tax software. It’s become essential for ensuring you’re charging the right sales tax to each customer based on their location, types of items purchased, and more. Many types of sales tax software also help with other critical things like keeping track of your progress towards nexus thresholds in different jurisdictions, notifying you when you achieve nexus, handling sales tax registration for you, and even filing and remitting your taxes.
In this post, we’ll break down the best sales tax compliance software options to help you figure out which is best for you.
How does ecommerce sales tax work?
In the U.S., ecommerce companies have been required to collect and remit sales tax since the 2018 South Dakota v. Wayfair decision that found that businesses didn’t have to have a ‘physical presence’ in a state to be required to collect and remit sales taxes in that state.
Since then, companies who have a significant ‘economic presence’ in that state, also known as ‘economic nexus,’ are required to collect and remit sales tax. Each state has different thresholds at which they consider companies to have achieved economic nexus in their state. This is often achieved by doing a certain volume of sales in a state or processing a certain number of orders to that state.
For example, in Connecticut ecommerce companies achieve economic nexus once they make $100,000 in sales and 200 separate transactions in a state in a year.
Once a company achieves sales tax nexus in a state, they must register for a sales tax license and begin collecting, filing, and remitting sales tax. Depending on the size of the company, they could be required to remit sales taxes in a handful of states – or all of them. That’s where ecommerce sales tax software comes in handy.
What is sales tax software?
Sales tax software is any type of software that helps automate aspects of the sales tax management process including tracking nexus, calculating sales tax, collecting sales tax, filing sales tax, remitting sales tax, and helping with sales tax audits.
Not every type of sales tax software helps with all aspects of the sales tax compliance process. For example, some types of sales tax management software will only help with sales tax calculation and collection whereas other types will automate everything for you.
Ecommerce sales tax software integrates with your ecommerce platform(s) to calculate sales tax for you. Generally, it also integrates with your other programs including your ERP, accounting software, and more. This allows you to manage your sales tax compliance in the most efficient way possible.
Choosing a sales tax software
There are a number of different types of sales tax automation software. Which one will be right for your ecommerce business will depend on your needs.
Here are some things to consider before you choose which one’s right for you.
Comprehensive vs. simple: The more features an ecommerce sales tax software has, the more that program tends to cost. However, time is money and so you might appreciate having the entire sales tax compliance process automated for you.
One platform vs. multi-platform: There are a number of single-platform sales tax compliance software plug-ins available for popular ecommerce marketplaces. However, if you sell on multiple platforms they won’t be able to track your sales tax nexus or file your taxes for you without significant work on your behalf to consolidate your sales taxes across platforms. If you sell on multiple platforms, you’re better off getting a sales tax software solution that works across platforms.
One country vs. global: If you sell in just one country, it makes sense to get a sales tax automation software just for that country. However, if you sell cross-border, there are a number of global options. While global software might be more convenient, most charge extra for each jurisdiction so it might be more expensive, in the end, to go with a global software than to choose country-specific options for each of your country’s sites.
Specialized vs. generalized: Some types of sales tax management software are focused on helping niche types of businesses with their sales tax management. For example, there are some sales tax software specifically designed to help SaaS companies.
Real time API vs. basic data integrations: When it comes to how sales tax calculation software calculates your sales tax, there are often two options: a real-time API or a basic data integration. A real-time API makes some additional features possible like geographic address verification and real-time data updates. However, basic data integrations are cheaper.
Premium customer service vs. limited: Like many software options, one of the biggest differentiators between ecommerce sales tax software is the level and quality of the solution’s customer support. Some sales tax software options have very limited customer support whereas others have multiple customer support options and highly responsive support.
What’s right for your company will depend entirely on what your needs are.
1. TaxCloud
Platform highlights
TaxCloud’s sales tax compliance platform can compute sales tax rates across more than 13,000 jurisdictions in the United States. It ensures accurate collection of taxes from each customer, guarantees accurate tax return filings, and offers audit management services for added convenience.
Important details
- Great for: Small and medium e-commerce businesses operating in the US market.
- Price: Starter: $199/annually ($16.58/month), Premium: $799/annually ($66.58/month), Custom
- Pros: TaxCloud offers comprehensive sales tax software and services that allow you to automate all aspects of your sales tax compliance from tracking nexus to managing audits – all for one of the lowest prices in the industry. It also offers all its customers chat and phone support and has more features like audit support that other sales tax automation software don’t offer.
Customer review
“TaxCloud is perfect for those who have very little technical skills or low skills in accounting. This software will assist in reports and calculations for you. Overall the service and customer support is amazing. They assisted with everything I needed and pointed me in the right direction.” – Daniel P.
Why TaxCloud?
Established in 2008, TaxCloud boasts over 15 years of experience supporting ecommerce sellers with their sales tax compliance.
- Accurate calculation of sales tax rates across 13,000+ jurisdictions in the US.
- Cost-effective pricing, which saves you money each month.
- Generous number of transactions included in its pricing tiers.
- Tailored for small to medium-sized businesses targeting the US market.
- Accessible customer support from live representatives via phone and chat.
Get more information about TaxCloud.
2. Quaderno
Platform highlights
Quaderno is a comprehensive sales tax compliance software solution designed for online businesses operating on a global scale. It manages sales tax, VAT, and GST requirements across various jurisdictions worldwide.
Important details
- Great for: Software as a Service (SaaS) companies.
- Price: Startup: $49/month (up to 250 transactions, 3 jurisdictions), Business: $99/month (up to 1,000 transactions, 5 jurisdictions), Growth: $149/month (up to 2,500 transactions, 10 jurisdictions), Enterprise: Custom (up to 2,500+ transactions, 10+ jurisdictions).
- Pros: Quaderno monitors your tax obligations and nexus thresholds, ensuring you know where and when you need to collect taxes across all the global tax jurisdictions you operate in. It also facilitates real-time tax rate calculations and seamless tax filing. Quaderno also collaborates with partners to manage tax preparation and filing on your behalf.
- Cons: Customers complain about Quaderno’s pricing being high compared to other sales tax management software options and also complain about poor customer service. Their pricing tiers also force you to get higher levels of service and countries if you hit certain order thresholds so it’s not great for those operating in one country.
Customer review
“Simple tax calculation – Somewhat easy to integrate API if you’re a developer as there is pretty good documentation. As a developer I didn’t totally understand the whole tax VAT collection process going into it. More guides on that would have been helpful as I was getting started. I’m a small business owner and software engineer so more guides on how to not only integrate it but also how to use Quaderno to calculate how much to report and where to report.” – Paul M.
3. SOVOS Taxify
Platform highlights
SOVOS is a consulting service that offers both managed services and software solutions tailored to the needs of companies with a wide range of compliance issues. Their Taxify service seamlessly integrates sales tax software with personalized support from tax experts from their managed services team.
Important details
- Great for: Small to medium businesses that want more support.
- Price: Not listed online.
- Pros: Taxify streamlines the sales tax return process for businesses by combining sales tax compliance software with dedicated assistance from a specialized tax team. This approach provides a more cost-effective solution for accessing managed sales tax support than simply outsourcing it to tax experts.
- Cons: Some of SOVOS’s small business customers see the price as too high, while others have found the software to have technical challenges like difficulties with specific addresses and timing out during the checkout process.
Customer review
“The software does what it is supposed to, it correctly calculates sales tax even on complex transactions. We use the program to calculate tax, store resale and exemption certificates and file our returns in 26 states. The software is not one software and it really shows. If you are storing resale & exemption certificates they goes into one program. Once it is in the system it is transferred to another system.” – Kristin U.
4. Avalara
Platform highlights
Avalara provides various tax compliance solutions that you can choose a la carte based on your needs. Among them, Avalara AvaTax is a cloud-based sales tax automation software designed to assist companies stay updated on sales tax rates and calculate tax in their ecommerce stores.
Important details
- Great for: International medium to large businesses.
- Price: Pricing is volume and feature based. The cost of their tiers and products are not listed online. $349 for sales tax registration.
- Pros: Avalara’s sales tax managment software products help businesses manage tax rates and collection across numerous countries, including the U.S., Canada, and Europe. Avalara also offers help obtaining sales tax registration and business licenses.
- Cons: Avalara’s basic plans do not encompass city, county, and local tax filings. They also don’t offer consolidated reconciliation reports for sales taxes. Global businesses find their limited geographical reach compared to other more comprehensive options don’t meet their needs.
Customer review
“The upsides of Avalara are quite compelling. Firstly, its seamless integrations with different platforms make navigating the complexities of tax compliance remarkably easy for businesses. The user-friendly interface enhances overall efficiency and ensures a smoother experience. The only downside to Avalara so far is the price tag. While the platform nails seamless integrations, the cost might raise an eyebrow for budget-conscious businesses.” – Jordan R.
5. TaxJar
Platform highlights
Owned by Stripe, TaxJar is a sales tax compliance software focused on helping ecommerce businesses with their sales tax calculation and filing. They help with everything from classifying products to filing taxes.
Important details
- Great for: E-commerce businesses.
- Price: Basic: $19/month, Professional: $99/month, Custom.
- Pros: Because it’s developed by Stripe, it integrates well with other Stripe products. It also has a comprehensive list of features.
- Cons: TaxJar is more expensive on a per transaction basis than many comparable sales tax software options and doesn’t have as many support options as competitors like TaxCloud (Learn more: TaxJar Alternatives: 8 Sales Tax Software Options to Consider). Its pricing tiers both only include 200 transactions meaning what you’ll actually pay is much more than that.
Customer review
“The team has been extremely helpful in managing all issues with the various states. I like best that I don’t have to worry about these things anymore.”
6. Numeral
Platform highlights
Numeral is a sales tax software for small business focused on helping e-commerce businesses with the collection, registration, monitoring, and remittance of taxes. They have a slightly different pricing model than many of their competitors by charging per state filing rather than a set monthly fee.
Important details
- Great for: Small ecommerce companies with lots of orders but few states to file in.
- Price: $75/state filing, $150/state registration.
- Pros: Numeral offers a comprehensive sales tax software product that automates many aspects of the sales tax process for you. They estimate that their typical customer dedicates only five minutes per month to sales tax compliance.
- Cons: Although Numeral’s filing-based pricing structure may appear cost-effective, the actual savings depend on the number of states you need to file in and your order volume. Numeral estimates that a brand processing $5 million in transactions may need to file in over 30 states. That could potentially result in a monthly cost of $2,250 with their pricing structure. They also don’t provide audit support.
Customer review
“We had many issues with TaxJar like late filings which incurred penalties, incorrect tax filing resulting in $5700 more paid in taxes, complexities around state onboarding, and non-existent customer support. Numeral provided complete onboarding, prompt customer service, rapid feature additions based on customer input, and so much more.”
7. Vertex
Platform highlights
Vertex offers a cloud-based sales tax compliance software that provides customers with a variety of tax solutions. They offer everything from real-time global sales tax calculations to threshold and nexus monitoring. Additionally, they offer support with sales tax filing and remittance.
Important details
- Great for: Large global enterprises.
- Price: Varies based on features, support, training and customizations.
- Pros: Vertex assists global businesses to cut through tax complexity so they can operate in compliance with over 300 million tax rates and regulations worldwide. The company stands out as one of the most comprehensive solutions available that’s also fully equipped for global enterprise use.
- Cons: Their sales tax software is overkill for many companies who aren’t as large or don’t operate in as many countries as a typical Vertex customer. The software has more capacity and power than most companies need.
Customer review
“Great experience overall for a large enterprise in automating the tax engine seamlessly, the O series has been more comprehensive than the past series. Great piece of tax software for SAP users. Very seamlessly use across the board.” – VP
8. LOVAT
Platform highlights
LOVAT is a sales tax solution that helps manage cross-border tax obligations, particularly focused on VAT. They focus on making tax compliance simple and offering hands-on and responsive support.
Important details
- Great for: Companies doing business in the EU or UK.
- Price: Start-up: 35€/month (100 transactions, 1,000€ total), Standard: 65€/month (1,000 transactions, 100,000€), Premium: 450€/month (10,000 transactions, 200,000€ total).
- Pros: LOVAT helps businesses manage their tax compliance in over 111 countries. They help with sales tax registration and calculation. They also ensure that all tax data is stored in a manner that’s GDPR compliant.
- Cons: LOVAT doesn’t offer any service to file tax returns on your behalf. While they make it easy to create sales tax returns within their program, anyone looking for more support will have to look elsewhere.
Customer review
“VAT returns are a big deal. If you mess them up, you could face penalties, audits, or even lawsuits. That’s why I trust Lovat to handle them for me. Lovat is a miracle software that automates the entire process of VAT compliance.” – Vadym R.
What sales tax software is best for you?
For e-commerce businesses operating primarily in the US market, TaxCloud provides industry-leading support at an industry-leading value when it comes to automating your sales tax management.
TaxCloud streamlines tasks ranging from monitoring economic nexus to calculating taxes and handling the filing and remittance of returns. With TaxCloud, you won’t just benefit from cost savings, but you’ll also get responsive customer service if you ever have a problem. And you’ll talk to real people who want to help, not bots.
Book a meeting with our team to learn more.
