Sales and use taxes can be exceptionally
frustrating to document and prepare. With
multiple taxing jurisdictions, rates and applicability, just keeping up with what has
been collected, at what rate, and who it gets
reported and paid to can easily become a full-time job.
Nexus, a legal term for a taxing authority’s
ability to collect taxes from a company, mud-dies the waters even more. Having significant
amounts of sales in different taxing jurisdictions is actually pretty common in businesses
that do catalog or Internet-based sales, as well
as multi-state companies with taxable sales.
And if your client is subject to sales taxes, use
taxes and value-added taxes, keeping track of
what taxes get reported and where they get
reported becomes a significant challenge.
On top of all this is the ever-present specter
of a sales tax audit. As any accountant that’s
been through one knows, that’s not much
fun for either you or your client, especially
if accurate records of liabilities, filings and
remittances haven’t been kept.
But if your client has been keeping accurate records, and can demonstrate compliance with liabilities and remittances, a sales
tax audit can often be reduced from a nightmare to an inconvenience.
Sales tax software is not a single-function
application, but falls into one of two major
categories. The more obvious one of these are
applications that determine whether a sale
is subject to sales tax, compute the rate and
the amount, accumulate the tax collected,
and prepare the required forms for whatever
taxing authorities need to receive them. In
many cases, this task is provided by an outside vendor, which either integrates to work
directly with your client’s accounting system,
or analyzes the revenue stream for accuracy
after the fact.
A second category of sales tax software is
Choices abound in sales and use tax software
BY TED NEEDLEMAN
Taxes are, unfortunately, a fact of life. There’s taxes for this and
taxes on that. Your clients who derive revenue from sales prob-
ably have it worse than most.
similar to the tax table service many payroll
users have. These sales tax services monitor
changing rates and item tax liabilities, and
provide the updated sales tax information on
a regular basis. This allows your client to make
sure that they have the latest data on what tax
authorities they need to report to, what the
taxability of different kinds of sales and merchandise are, and what the current tax rates
are for different taxing jurisdictions.
As with many applications, there is no
“one-size-fits-all” when it comes to sales tax
software. Exactly what the best solution is for
a particular client depends on that client’s
specific needs. Another caveat is price. Many
of the sales and use tax applications are targeted to large enterprise clients running
high-end accounting systems like SAP.
An additional thing to consider is whether
your client’s accounting system provides sales
and use tax capability. Many do, especially if
your client is using a point-of-sale front end.
In this case, you and the client need to determine whether the embedded capability
is sufficient to do a good job. You and your
client don’t want to find out that it didn’t in
the middle of an audit.
Pricing on sales and use tax software often
depends on the application itself. Many of
the vendors listed here offer a server, rather
than in-house software. In this case, pricing
may depend on several things, such as the
level of services provided and the number
of sales and use tax transactions per period.
If it appears that any of these vendors could
serve your client’s needs, you’ll have to contact their sales department for a quote.
To give you and your clients a leg up on
researching which sales and use tax software
or service might best meet their needs, we
looked at eight vendors who offer solutions
at different levels.
use ADP to prepare their payrolls — it’s one
of the oldest and best-known of the payroll
service bureaus. But payroll isn’t the only
service that ADP offers. Payroll is frequently
left to a service bureau like ADP because of its
complexity and ever-changing laws and rates.
Sales and use taxes are very similar in this
regard, and as with payroll, ADP can handle
your client’s sales tax process, from calculation to reporting and remittance to the various taxing authorities and jurisdictions that
your client is liable to.
With payroll, ADP is structured to handle
clients large and small. It’s not uncommon for
a business with only four or five employees to
use ADP for payroll, simply to eliminate the
hassle of keeping up with tax rate changes,
reporting requirements, and sending out
W-2s and 1099s at the end of the year.
Unfortunately, while ADP offers smaller
businesses payroll services, it targets larger
businesses for its Sales and Use Tax System.
At the high end, ADP has its Taxware Enterprise, but that’s really for large enterprise and
even multinational companies. The Sales and
Use Tax System for Midsized Businesses is
focused on what ADP considers midsized, a
company with between 50-500 employees.
That’s the range at which ADP estimates that
the company will generate enough sales to
make outsourcing the sales and use tax process economically and work-load feasible.
Of course, if you have a smaller company
with large numbers of transactions in more
than a few taxing jurisdictions, especially if
nexus applies, ADP’s Sales and Use Tax System may be entirely appropriate, as it’s the
complexity of the tax calculation, collection
and reporting process that is the real benchmark of where it becomes more practical to
go outside the client for this task.
If ADP’s Sales and Use Tax System for Midsized Businesses does fit the bill, your client
will find it easy to use, accurate, and up to
date as far as jurisdictional liability and current rates. But that’s pretty much what you
would expect from ADP, and why so many
companies use them for their outsourced
With Internet sales assuming more and
more importance these days, ADP’s midsized
solution may not be appropriate if your client has a significant amount of taxable and
reportable sales/use tax liability outside of
the U.S. and Canada, as these are the only
countries covered by the service. If this is the
See revIew on
BILL.COM PARTNERS WITH
PAYPAL TO AID SMB BILL PAY
SAN JOSE, CALIF. — Cloud-based paperless
bill management and payment technology provider Bill.com announced its
participation in the PayPal Business Payments pilot and the availability of Bill.com
in the PayPal Apps beta program.
The pilot program will enable small
and midsized businesses to fund vendor
payments using their PayPal accounts,
including the ability to send payments
quickly from one PayPal account to another. Bill.com is participating in the program, using PayPal’s Business Payments
product to provide a secure method for
sending and receiving certain kinds of
payments for a flat fee of 50 cents.
SAGE SIGNS MOBILE COMMERCE
PARTNERSHIP WITH ROAM DATA
MCLEAN, VA. — Sage Payment Solutions,
the payments division of Sage North
America, has partnered with mobile commerce provider Roam Data to introduce
integrated mobile payment offerings for
small and midsized businesses. Through
the partnership, Sage customers will be
able to accept credit and debit cards on
hundreds of different types of mobile
phones and computing devices, including the iPhone, iPad, Android and BlackBerry, across all major wireless carriers.
Roam Data’s mobile payment application, Roampay, is being integrated with
Sage Exchange, Sage’s secure, certified
payments technology. Sage Exchange
integrates with a wide range of Sage
business management software products
and third-party business products.
For more, visit www.sagepayments.
Ted Needleman is senior director of the
Technical Services Division of Industry
Analysts Inc., an independent market
research firm and testing laboratory. He
was previously the editor-in-chief of
Accounting Technology, and writes frequently on
software, hardware, and technology-related
ADP Sales and Use Tax
System for Midsized
(800) 225-5237 ext. 230
Many accounting practices have clients who
VERTEX CONNECTS TAX
WITH ERP AND BI SYSTEMS
BERWYN, PA. — Vertex Inc. has introduced
Vertex Enterprise, a software product
spanning the corporate tax management
process, from data acquisition to audit
defense, that integrates tax processes
and technologies with third-party enterprise resource planning and business
intelligence systems, such as Oracle and
SAP. Vertex’s approach to enterprise tax
management technology is based on its
Indirect Tax O Series, which supports U.S.
sales and use taxes, as well as value-added taxes and other global transaction
taxes for over 200 countries. For more,