Navigating the complexities of sales tax compliance can be a daunting task for any eCommerce business. That’s why top industry experts, including a founder and a CEO, are sharing their insights on effective methods to stay compliant. This article kicks off with implementing sales-tax automation software and wraps up with the adoption of a ZIP-first compliance approach, showcasing four invaluable tips. Discover how these strategies have helped avoid potential pitfalls.
- Implement Sales-Tax Automation Software
- Use Shopify’s Built-In Tax Calculator
- Team Up With Tax Professionals
- Adopt a ZIP-First Compliance Approach
Implement Sales-Tax Automation Software
Many of our clients are e-commerce businesses, and one of the most important methods we’ve used to ensure sales-tax compliance is implementing sales-tax automation software like Avalara or TaxJar. These tools simplify the process by automatically calculating the correct sales-tax rates based on the buyer’s location and filing returns in multiple jurisdictions, if needed. Using these tools has allowed us to stay up to date with changing tax laws (which change a lot) and avoid penalties for inaccurate reporting or missed deadlines.
And one final note: While the software is powerful, I always recommend obtaining the advice of a tax/accounting professional to oversee its implementation and maintenance.
Jack Perkins
Founder and CEO, CFO Hub
Use Shopify’s Built-In Tax Calculator
As an experienced florist with over a decade in the business, ensuring sales-tax compliance is crucial. I use Shopify’s built-in tax calculator, which makes it easy to track taxes across different states. This tool saves me from the hassle of manually calculating taxes for each order, which would be a real headache.
Having this automatic system in place helps prevent errors and ensures I meet all tax obligations. It’s also a lifesaver during busy seasons when I don’t have time to worry about tracking rates. Knowing that my tax compliance is covered means I can focus more on delivering beautiful flowers and serving my customers.
This method brings peace of mind and minimizes risk. I recommend all small businesses selling online use a similar tax tool. It keeps you organized, saves you time, and helps you avoid any compliance issues, especially as your business grows.
Sophie Marasco
Founder, Thanks A Bunch Florist
Team Up With Tax Professionals
We know how overwhelming tax compliance can be for our clients, especially those in eCommerce. One of the best steps we’ve taken is to team up with tax professionals. This partnership helps our clients stay on top of their sales-tax requirements while they focus on growing their businesses.
Let me share an example. We recently worked with a local retailer who wanted to boost their online visibility. As we optimized their Google Business Profile, we also suggested they connect with a tax advisor who specializes in e-commerce. This was a game-changer for them. It helped the retailer grasp the nuances of sales tax, particularly when selling to customers in various states.
We encouraged them to use tax-compliance software that links to their e-commerce platform. This tool automatically calculates the correct sales tax for every transaction, based on where their customers are located. It took a huge weight off their shoulders.
Ramzy Humsi
Founder & CEO, Vortex Ranker
Adopt a ZIP-First Compliance Approach
After a nerve-wracking audit in 2019, I developed what I call the “ZIP-first” approach to sales tax compliance. Instead of focusing on state boundaries, we restructured our entire e-commerce platform around ZIP codes as primary tax jurisdictions. This seemingly backward method actually simplified our compliance nightmare.
We built a custom dashboard that flags any ZIP code showing unusual tax-collection patterns, like when collected tax suddenly drops despite steady sales volume. This early-warning system has caught numerous system glitches before they became audit triggers. For instance, it caught a payment processor error, misclassifying tax-exempt sales in three counties.
The real game-changer? We now run weekly micro-audits on random ZIP codes rather than monthly state-level reviews. This granular approach has slashed our quarterly tax-filing prep time from three days to four hours while keeping our compliance rate at 99.8%.
John Beaver
Founder, Desky
Submit Your Answer
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