June 9, 2016 by The Bridge Solutions Group Team
1. eCommerce tax rules are constantly changing
As tax rules change, or as you expand your product line or distribution methods, you’re expected to keep up. What if you hire a remote employee in another state? Or use a third-party for fulfillment that opens a distribution center in a new state? It may impact the sales tax you should collect. And what happens if you fail to collect tax on eCommerce orders? You could face fines and penalties at your next audit.
2. Different State and Local tax rules
Non-compliance with various state and local tax rules can result in fines, penalties and interest payments. There are over 12,000 different tax jurisdictions in the United States alone, let alone globally. Which is difficult to manage, especially when transactions cross jurisdiction lines.
3. Returns across state or local lines
What happens when a customer makes a purchase on vacation in California, and wants to return it when they get home to Illinois? Or they go shopping on their lunch break in New York City, but want to return their purchase on the weekend near their home in New Jersey? Even within a state there can be challenges.
What if they’ve bought something in an Urban Enterprise Zone like Jersey City, NJ, where qualified retailers only charge 3.5% sales tax, and want to return it somewhere that is subject to the regular NJ sales tax of 7%? Tricky.
Now imagine an online purchase being returned in-store. Back when eCommerce orders were sales tax exempt it was simple. But this is no longer the case.
4. Different tax engines for different channels
If your Point-Of-Sale (POS) system in your retail stores uses one tax solution and your eCommerce store uses another, or if the two aren’t well integrated, it’s easy for tax records to get out of sync. This not only makes returns an even bigger headache, it also leads to compliance errors.
5. Poor compliance makes you an audit target
Let’s face it, state and local governments are always looking for revenue. So, if you’re not in compliance the first time you get audited, you’re likely to be audited again. Which costs you money…
There are fines and interest for non-compliance, as well as fees for the attorneys and accountants used to defend the audits. Not to mention the additional effort required by your employees. Audits are expensive. They even cost money if you discover you’ve paid too much sales tax.
6. Recovery of over payment
Overpaid sales tax? That’s a problem too. Even if you’re not subject to fines and penalties, overpayment still costs money. States and localities don’t like giving money back. Recovery can be a long, labor-intensive process.
So how can you avoid these headaches? We’re glad you asked.
In response to these challenges, we’ve developed a connector between IBM Sterling Order Management System (IBM OMS) and Avalara’s cloud based tax engine. Avalara manages the tax rules and rates, and IBM OMS distributes this information across all your channels, keeping them in sync, so you can say goodbye to non-compliance.
For more information on Avalara’s tax solution, read the AvaTax fact sheet.