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The Hidden Cost of "Free" Tax Tables

In seeking a sales-tax compliance solution, many companies — especially younger, smaller ones — may turn to free tax-rate tables, using them to manually figure out how much sales tax to charge customers. However, although these tables are “free,” they may be costing your company more than you think — in time, resources and potential risk.

First of all, manual sales tax compliance – including tax calculation, tax exemptions certificates and sales tax returns – takes up a lot of time and staff resources — and the resources needed are growing. Nearly two-thirds of companies have hired additional staff to manage sales tax within the last five years, according to a recent Wakefield survey.

Not only that, but tax tables are often out of date because sales taxes change all the time. In 2017 alone, there were 36,254 changes to sales tax laws in the U.S. Tax tables also don’t tell you which taxes apply to which categories or how those categories are defined. Since different tax rates can apply to different products, or — in the case of exemptions — not apply at all, this is a crucial part of getting tax rates right. Complicating matters, tax tables are not geographically precise. Why? Because ZIP codes don’t always align exactly with tax jurisdiction boundaries.

All this adds up to a heightened risk of error and increased exposure to tax liability and unexpected audits.

In contrast to manual processes using tax tables, a sales tax API like Avalara’s can offer consistency, increase accuracy and lower risk, while reducing the resources needed for sales tax compliance.

Avalara’s sales-tax API can also help you hit your rollout goals with speedy integration and implementation, thanks to features such as pre-built connectors with most ERP, CRM and billing systems, a library of the most common programming languages with multiple SDKs and strong developer support.

A sales-tax API solution can be especially useful for companies that are growing rapidly, expanding into new markets, selling new types of products, upgrading or switching between eCommerce platforms or ERP/back-office systems or experiencing compliance issues, such as audits.

Want to know more about the benefits of a sales-tax API vs. tax-rate tables? Download the whitepaper.

–Wayne Myer, Software Engineer, Avalara Developer Relations Team

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