Should You Automate Sales Tax Filing?
Jennifer Dunn of TaxJar discusses sales tax filing automation in this guest post.
When is the right time to automate sales tax filing?
As a business owner, you quickly learn that there’s a difference between all the tasks required to keep your business afloat and the tasks that truly require your full attention.
Sales tax is one of those required tasks. But while collecting, reporting and filing sales tax is necessary, it’s also a time-consuming hassle. You collect it from your customers and give it to your state government. There’s nothing scalable or profitable about that!
As your business grows you should spend your limited supply of time on the tasks that grow your business. And you can buy back that time by automating some of your more difficult tasks.
Is it time for you to automate your sales tax compliance? Read this list and see if any of these scenarios sound like you.
Scenario 1: You Don’t Have Enough Time in the Day
Business is booming! Between sourcing new products, inspecting your new private-label shipment and keeping the hype about your business alive on Twitter you simply don’t have the 3-5 hours per period it takes to handle sales tax. This is especially true if you a) sell on multiple channels or b) have sales tax nexus in multiple states.
States want you to break down how much sales tax you collected by city, county and other special taxing districts. And, inconveniently, customers don’t tell you whether or not they live inside the city-limits when they make a purchase from you. If you find yourself with far too many profitable tasks, then it may be time to automate sales tax.
Scenario 2: You’re a Tax Procrastinator (and Chronic Late-fee Payer)
It’s all too easy to file sales tax late. Different states require sales tax payment due on different dates in the month. And on top of that, some states will want to hear from you every month, while others want to hear from you quarterly, and still others want you to file an annual sales tax return. Nobody can blame you if you constantly forget to file your South Carolina sales tax return by the 20th of the month when you’re more accustomed to filing your California sales tax return by the final day of the month. States, however, don’t care so much for excuses and will charge a penalty if you’re late. So if you find yourself constantly paying unnecessary $50 penalties on late sales tax filings, it may be time to automate your sales tax life.
Scenario 3: You’re Data-entry Impaired
“Hmmm. Did I collect $5.65 from buyers in Olathe, Kansas? Or is that amount $6.56?” When entering numbers from your accounting software into your state’s filing system it can be all too easy to transpose numbers. You probably won’t know what you did until you get an error message when trying to proceed. And that means going over every dollar and cent to try to determine where the error lies.
Worse, some states require that sales tax filers round sales tax collected up or down. Again, forgetting your rounding rules can mean more data entry mistakes. If you constantly find yourself shouting “Why is this still wrong?!” when filing your sales tax returns, it may be time to automate your sales tax life.
If any of these scenarios sound like you, do yourself a favor and look into sales tax automation software. As a busy business owner, I know you’ll find better ways to spend your time!
TaxJar is a service that makes sales tax reporting and filing simple for more than 8,000 online sellers. Try a 30-day-free trial of TaxJar today and eliminate sales tax compliance headaches from your life!
Originally published on June 30, 2017, updated February 26, 2019
This post is accurate as of the date of publication. Some features and information may have changed due to product updates or Amazon policy changes.