What is Avalara, How Do We Use It, and Who Does it Best Serve?
In a nutshell, Avalara is a software to get your business tax compliance done right. It’s tax automation for businesses with real-time tax calculation and automatic returns filing.
Avalara is a master tax sales and use tax advisor. Can you imagine with all the governmental agencies looking for tax revenue dollars, that each jurisdiction has their separate rules?
For instance, if you sell something in the city of Atlanta, do you know if you have a local sales tax or not? By classifying a sale in Avalara and inputting the proper address of where you sold your item, it automatically states the correct tax rate. It’s one less thing you have to keep up with for customers.
Use their table that plugs in with every single invoice, and it tells what tax to charge. It then takes your information into their console, and they’ll file all your sales tax returns for you. With some of our clients having to file taxes in 37 states, it would be a beast of a job to know and keep up with the information for that volume of states, if it wasn’t automated. Avalara not only automates the sales tax collection up-front based on those rates, based on that address, it also bases it on the shipped to or billed to address, and then they file all those returns in each of those jurisdictions.
The taxes get done at a phenomenal rate versus what you might have if you did it in-house yourself.Avalara is a winner for us because it keeps our clients compliant and it integrates nicely with Sage Intacct.
The primary type of company who use Avalara are distributors that sell products. We have several SAAS companies (software as a service) that may have a piece of equipment they sell upfront.
Let’s say they have a kiosk and all the software they license on that kiosk. Also, they might have hardware such as the kiosk itself (the physical frame for distribution of the product). Their software subscription fee would be structured differently and may not have sales tax depending on the jurisdiction, but usually, all the hardware shipped would. Avalara helps segment the taxes on these different product elements during the sale.
The hottest thing right now is to sell on Amazon versus back in the day when selling happened on eBay. But eBay did not have warehouses, so their situation on whether they were charging sales and use tax was not as crucial. However, with Amazon coming in and creating residents in those states, there is no doubt that if you become an Amazon reseller right now, you need a tool to collect the proper sales tax everywhere.
Amazon has warehouses where they hold products. The jurisdictions, where they base those product warehouses, want the revenue from any incoming product in their state. This makes sales and use tax a huge issue today.
Sales and use tax are becoming a significant concern because the nature of doing business is shifting considerably. With new implications whereas most Georgia companies file sales tax in Georgia. However, those companies are changing the way they do business and are now crossing state borders. They are going to have to file for sales and use tax, and they are going to need a good reliable solution.
Regardless of whether you sell through Amazon, if you have a presence in another state, you’re going to have sales and use tax jurisdictions in that state. With Amazon having warehouses everywhere, it puts your product in the Amazon warehouses in other states. This requires your business address multi-location taxes.
For example, there is a book reseller that used to have a brick and mortar retail store where they sell old used books. The moment that they start listing their product on Amazon, they may warehouse the book in Idaho, New York, and California because it’s one of the most popular products. All of a sudden this company has a presence in these states. They can’t only collect Georgia sales tax anymore. Now they are required to pay sales and use tax for the relevant jurisdictions.
Amazon probably has a warehouse in your state or will soon. By warehousing across the Nation, Amazon is creating complexity for sales tax tracking and collection. How will you handle this with your business?
The data funnels through Sage Intacct into Avalara.
Let’s say someone sells on Amazon and sold a product. Integration with Avalara provides for the sales and use tax to be accurately charged based on where Amazon warehouses the product sold, where it ships from, and to where it ships.
Trusted CFO Solutions has a sales and use tax expert whom we outsource those situations. We coordinate a time for our clients to ask questions and let them make those decisions.
The issue is such a complicated topic and changing every day. We inform all of our clients to go through our S.A.L.T. Department (sales and use and local tax department), to determine if they have an issue or not.
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