In a recent webinar, Cameron Murphy, Senior Strategic Alliance Manager at Avalara, and Connor O’Donnel, Sales Executive at Avalara, delved into the complexities of tax compliance and the transformative impact of automation on business operations. Regardless of the ERP system you use for your eCommerce business, this webinar provides valuable insights into the pitfalls of manual tax compliance and underscores the benefits of leveraging Avalara Sales Tax software to enhance your financial strategies. Throughout the session, Cameron and Connor highlighted key solutions that can seamlessly integrate with your existing systems, making it easier to manage tax compliance and focus on growing your business.
Recap of the Webinar
Use this recap to skip to the sections that matter to you:
The Challenges of Tax Compliance (3:47 – 7:14)
Connor O’Donnell begins this section by addressing the increasing complexities of tax compliance in a post-Nexus eCommerce environment. He discusses how the intricate nature of state laws and the diverse tax jurisdictions across the U.S. create significant challenges for businesses.
- Navigating the complexities of sales tax compliance due to ever-changing state laws, rates, and rules (3:55)
- States increasingly modify laws and audit processes to boost revenue, with 48% of state income derived from sales taxes (5:33)
- The growing demands of tax compliance consume significant resources, diverting attention from revenue-generating activities (6:25)
Economic Nexus in a Nutshell (7:16 – 15:13)
In this section, Connor delves into the intricacies of Economic Nexus, a pivotal element in tax compliance that dictates when a business must register and collect sales tax in specific states. He explains how recent developments, particularly the South Dakota vs. Wayfair ruling, have significantly altered the obligations for remote sellers. Connor also highlights the challenges of identifying Nexus, stressing the importance of staying informed about the various triggers and thresholds that can affect a business’s compliance.
- Nexus defines a business’s requirement to register in a specific state based on qualifying nexus criteria (7:25)
- The South Dakota vs. Wayfair ruling transformed sales tax obligations for remote sellers, enabling states to tax out-of-state businesses (7:45)
- How to determine if your business has Nexus (8:15)
- Economic Nexus is based on revenue or transaction thresholds that vary by state and frequently change (8:44)
- Economic Nexus thresholds are continuously evolving, and businesses may cross them unknowingly without regular monitoring (10:20)
- Tax-exempt sales can also contribute to economic nexus thresholds, affecting compliance (11:06)
- The activities that create Nexus are expanding rapidly (13:15)
- Understanding when your business needs to collect and remit sales tax, and staying informed on law changes and nexus-triggering activities, is essential to avoid audits (14:10)
Automation is Key to Keeping Up with Nexus (15:15 – 17:10)
Connor underscores the importance of using automation to manage the complexities of nexus compliance. He introduces Avalara’s Sales Tax Risk Assessment, a tool that helps businesses identify where they need to register based on detailed data analysis. Avalara’s team of former auditors review data points to provide clear guidance on necessary registrations and any past liabilities.
All-Things Sales Tax Audits (17:11 – 20:40)
In this segment, Connor shifts the focus to audits, exploring the potential risks and challenges businesses face when navigating compliance. He discusses the unpredictable nature of audits and the importance of being prepared to mitigate hidden fees and disruptions. Connor also touches on the evolving landscape of audits in the digital age, setting the stage for a deeper discussion on how businesses can proactively manage these challenges.
- Audits can result in hidden fees and divert valuable time from your business, making it crucial to minimize audit risks (17:35)
- Common audit triggers include nexus oversights, customer audits, and selling through Amazon FBA (18:21)
- The rise of virtual audits by states has led to faster audit processes and the need for digitized documents (19:01)
Time and Cost Savings with Avalara (20:45 – 24:05)
In this segment, Connor discusses the economic benefits of partnering with Avalara, highlighting the significant ROI businesses can achieve. A study conducted by Forester revealed that a company with $25 million in revenue could see a 102% ROI with Avalara, recouping costs within six months and saving approximately $500,000 over three years. Beyond the quantifiable savings from labor, audit preparation, and penalty avoidance, Avalara also offers non-quantifiable benefits. These include easier expansion into new jurisdictions, increased confidence in tax compliance, and the ability to focus on core business activities rather than tax concerns. Ultimately, Avalara’s value lies in giving businesses the time and peace of mind to grow and thrive while handling their compliance needs.
Solutions from Avalara (24:27 – 37:33)
Connor overviews Avalara’s robust suite of solutions designed to streamline and automate both tax compliance and business transaction processes. Avalara’s tools seamlessly integrate with various systems like ERPs and e-commerce platforms, ensuring accurate tax determination and management. From handling exemption certificates and automating return filings to delivering precise tax research, Avalara addresses key aspects of tax compliance and business operations, allowing you to focus on growing your business with confidence.
- Avalara’s Tax Determination Suite integrates seamlessly with various systems, including ERPs like Acumatica and Sage, and eCommerce platforms like Shopify, to automate tax determination and exemption certificate management, ensuring accurate tax calculations on every invoice (24:45)
- Avalara’s tax systems integrate seamlessly to automate the entire process—from determining tax obligations to filing and remitting returns—eliminating the need for manual oversight and ensuring compliance with state requirements (26:21)
- Avalara’s AvaTax solution meticulously handles tax determination for every line item on an invoice, regardless of complexity, by automatically applying updated tax rates and rules across all 13,000 tax jurisdictions, ensuring accurate and compliant invoicing (28:30)
- Avalara’s Exemption Certificate Management (ECM) system streamlines the onboarding of tax-exempt customers by automating certificate collection, validation, and lifecycle management, ensuring compliance with state-specific expiration cadences (30:11)
- Avalara’s Returns platform fully automates the filing and remittance process by replicating your filing frequencies across states, ensuring timely and accurate submission of sales tax returns with minimal manual oversight (33:51)
- Avalara’s 1099 automates the entire lifecycle of managing W9s, 1099s, business licenses, and permits, ensuring timely renewals and compliance through an end-to-end document management system (34:55)
- Avalara’s Tax Research tool provides clear, accurate, and audit-backed answers to complex compliance questions, offering verified guidance on taxability and Nexus determinations, with the option to consult experts for further clarification (35:35)
Q&A Session (39:58 – 44:45)
- When you hit an economic nexus threshold, will your business be automatically registered in that state? (40:11)
- Do I need to change anything in my ERP to integrate Avalara? (40:44)
- Does Avalara provide free calculation and filing to customers in the SST program? (41:20)
- Where do you see most businesses being audited and fined? (42:23)
- Should I just have a database for certificates I can reference, or should I link them to each transaction? (43:42)
Learn More About Integrating Avalara with Your ERP
Navigating the complexities of tax compliance and business transactions doesn’t have to be overwhelming. With Avalara’s comprehensive suite of solutions, your business can achieve greater accuracy, efficiency, and peace of mind. Whether it’s automating tax determinations, managing exemption certificates, or simplifying audit preparation, Avalara has the tools to streamline your operations and allow you to focus on what matters most—growing your business.
Ready to take the next step? Contact us today to learn more about how Avalara’s solutions can integrate seamlessly with your existing systems and help you stay ahead in the ever-evolving landscape of tax compliance.