Top 5 Reasons You Should Consider a Managed Sales Tax Solution

Making mistakes with sales tax and not following the rules increases your chances of financial penalties and audits from state revenue departments. That’s because when you deal with sales tax by yourself, you must handle different tax rates and rules in cities, counties, and states.

This is where an automated sales tax management solution comes in. These managed solutions can help businesses calculate the correct amount of sales tax on purchases, collect it from customers at checkout, and remit it to the states during filing.

As state, county, and city changes occur, a managed solution can make real-time adjustments, so you collect and remit the right amount of sales tax based on your requirements every time.

Manual vs. Automated Process

Here’s what it looks like when you handle sales tax yourself vs. using an automated sales tax solution.

Using a managed solution allows you to streamline your sales tax requirements from start to finish. Here are five reasons why you should consider using one for your business.

1. Accurate Sales Tax Rate Calculation

Managed sales tax solutions provide real-time sales tax rate calculations for businesses. These solutions integrate directly with systems and platforms and leverage up-to-date tax rate databases for accurate calculations.

These solutions automatically calculate correct rates based on the following factors:

• The buyer’s location
• The type of product or service being sold
• Any applicable tax exemptions

With seamless integration into e-commerce platforms, companies can provide accurate transactions to customers at every point of sale. This helps build trust, as customers will know they are paying the correct amount and won’t be charged after the fact.

2. Real-Time Updates

Real-time sales tax updates are vital for businesses as they ensure they remain compliant and accurate in their tax calculations. Rates vary by jurisdiction (city, county, and state) and are subject to frequent changes, like new tax laws, rate adjustments, and the introduction of new taxes. Manually tracking sales tax rate changes yourself can lead to errors, further harming your business.

A managed solution eliminates the burden by providing automatic updates, ensuring companies always apply the most current rates and rules. This reduces the risk of overcharging or undercharging customers and helps avoid costly penalties for non-compliance.

3. Seamless Integration

Another reason to use a sales tax-managed solution is its seamless integration with e-commerce platforms. These platforms streamline the process of calculating and collecting sales tax directly within a company’s online store. E-commerce platforms like Shopify, WooCommerce, and Adobe Commerce are widely used by businesses, and integrating a tax solution with these platforms eliminates the need for manual calculations, ensuring accuracy and efficiency.

With a managed solution, integration is straightforward. This allows businesses to automatically apply the correct tax rates based on the customer’s location during the checkout process. This eliminates the risk of errors, especially in a fast-paced, high-volume online environment.

For example, Shopify provides easy-to-use plugins and APIs that allow sales tax solutions, like Zamp, to integrate smoothly. This efficient integration saves time and reduces the complexity of managing tax rules for different regions, providing businesses with a hassle-free way to stay compliant while improving the customer experience.

4. Easy Filing and Reporting

Filing sales tax can be challenging, especially when dealing with multiple jurisdictions that require different forms, deadlines, and payment schedules. A managed solution automates this process by gathering all relevant transaction data and generating accurate reports tailored to each jurisdiction. 

This reduces the risk of human error and ensures that businesses meet all filing requirements without missing deadlines or making mistakes that could lead to penalties. 

In addition, managed solutions provide read-to-file reports in the format required by local tax authorities, making the filing process quick and easy. This also means that if you are audited, your information will be clean for them to look at.

5. Audit Protection

Using an automated solution provides businesses with an added layer of security and support in the event of a sales tax audit from tax authorities. Authorities from a state’s Department of Revenue or taxing authority can audit a company for various reasons, including suspicion of underreporting sales, inconsistent or discrepant tax returns, or customer complaints or information.

A managed solution helps businesses maintain accurate records of all transactions, tax calculations, and filings, which can be easily accessed in case of an audit. Most managed solutions offer built-in audit protection, providing businesses with documentation and support to demonstrate compliance. This can include detailed transaction histories, proof of tax rates applied, and other essential data needed to defend the company if an audit happens.

This level of protection can reduce stress and the financial risk businesses face when an audit occurs.