5 Best Sales Tax Apps For Shopify
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In the modern-day world, businesses are transforming. Keeping up with the changing legislative and regulatory requirements is no longer a preference, rather it’s a prerequisite to the changing global landscape.
The 2022 EY Tax and Finance Operations Survey revealed that 84% of the businesses surveyed are transforming their tax and financial operating models to incorporate automation solutions, co-sourcing, and shared service centers. They are redirecting their budgets towards augmenting their core tax functions with data analytics and technical capabilities.
In response to the transformation witnessed in businesses today, the legal systems are altering the legislative and regulatory requirements. Acknowledging these requirements, the government authorities are responding with an integrated tax compliance approach, cross-legislation reconciliation, and prioritizing integrating tax functions and technological solutions.
Despite all these changes, many businesses still feel that emerging digital tax filing requirements will increase the cost of tax functions. However, with the right technology and data, businesses can ensure tax compliance while reducing costs, driving value, and managing risks effectively.
To ensure tax efficiency and compliance, businesses must harness the power of tax automation solutions. Automated tax compliance solutions help you stay in line with the latest regulatory compliance even with the rapidly changing legislative requirements. It streamlines the tasks of data entry, processing, validation, extraction, and tax calculation, thus eliminating delays in manual processing and reducing the potential for human error.
In this article, we are going to reveal the best sales tax apps for Shopify that help your business consolidate and integrate data from different sales channels and accurately calculate applicable taxes for respective economic activities.
5 Best Sales Tax Apps For Shopify
Avalara’s AvaTax is a popular solution for automating sales tax compliance, and it integrates seamlessly with various e-commerce platforms, including Shopify. It makes use of geolocation and address verification to calculate sales tax down to a specific address, thus accounting for multiple tax jurisdictions in a single ZIP code, complex tax tiers, and more. In addition to this, AvaTax can calculate tax on international transactions.
To automate sales tax calculations using AvaTax, you need to connect AvaTax to Shopify Plus. For this, you must contact Shopify Plus to initiate setting up your AvaTax account. Then, you must activate AvaTax within Shopify Plus and set up your company profile. Once you activate AvaTax, you must then configure and set up AvaTax to your unique tax profile and business requirements.
To help you get started, AvaTax provides you with a comprehensive course that is designed specifically for Shopify Plus merchants. This course helps you to quickly and efficiently set up AvaTax. Once you take up this course, you can easily assign and apply tax schedules, set up taxability information, set up tax exemption rules, and configure more advanced rules.
Note that AvaTax provides calculations for the 13,000+ U.S. sales and use tax jurisdictions. Further, it offers 1,200+ signed partner integrations so that you can connect to your other e-commerce and POS platforms, accounting systems, and ERPs, in addition to Shopify Plus.
Additionally, AvaTax AvaTax assists businesses in staying compliant by automating various compliance tasks. This includes generating reports, filing returns, and providing documentation needed for audits.
Pros Of AvaTax
1. Address Validation
Incorrect or incomplete addresses can lead to errors in determining the applicable tax rates, especially when dealing with different tax jurisdictions. To help you enhance the accuracy and precision of your tax calculations, AvaTax includes address validation.
Thus, when a customer enters their address during the checkout process, AvaTax can validate the address in real-time. This is usually done using geocoding. Geocoding involves converting the address into geographic coordinates, which can then be used to determine the exact location for tax calculation purposes.
In addition to using geocoding, AvaTax often standardizes addresses to a recognized format, making it easier for you to match the address against tax jurisdiction databases. Standardization helps you in determining the correct tax rates and complying with specific tax rules for each jurisdiction.
2. Automated Compliance
AvaTax goes beyond just calculating sales tax; it helps you automate various compliance tasks. For instance, AvaTax generates reports that you can use to review your sales tax transactions. These reports are often crucial for internal record-keeping and can also be valuable in the event of an audit.
Another key automated compliance feature of AvaTax is its ability to file sales tax returns automatically. AvaTax can prepare the necessary documentation and filings based on the transaction data recorded, saving you time and effort in the return filing process. The transaction data includes details like the location of the sale, the items sold, and the corresponding tax calculations. Thus, based on the recorded transaction data, AvaTax automatically prepares sales tax returns.
In addition to reporting and filing returns, AvaTax can help you maintain the documentation needed for audits. This can include detailed records of transactions, tax calculations, and other relevant information that may be required during an audit.
Not only this, AvaTax also provides you with a tax calendar or reminders so that you stay updated about upcoming filing deadlines. This feature helps you stay proactive in meeting your compliance responsibilities.
Furthermore, you need not worry about the changing tax rules as the platform is designed to stay up-to-date with changes in tax laws and regulations. This proactive approach ensures that you are using the most current information for tax calculations and compliance.
3. Comprehensive Tax Data
AvaTax maintains a comprehensive database of tax rates at various levels, including state, county, city, and special taxing districts. This extensive data coverage helps you accurately calculate taxes for transactions in different geographical areas.
Furthermore, AvaTax is designed to stay current with these changes, ensuring that you apply the most up-to-date rates to transactions. The tax database is updated in real-time to reflect any changes in tax laws, rates, or rules. This ensures that you have access to the latest information for accurate tax calculations.
Also, AvaTax utilizes a sophisticated tax rules engine to apply the appropriate tax rates and rules to each transaction. This engine takes into account various factors, including the location of the buyer, the type of product or service, and any applicable exemptions.
Finally, to streamline the process of determining the correct tax rates, AvaTax assigns appropriate tax codes to different products and services. This is especially important if your business has diverse product offerings.
Cons Of AvaTax
AvaTax is a paid service, and the cost may be a consideration for small businesses or startups with limited budgets. Pricing models can vary, and businesses should carefully review the costs associated with their transaction volume.
2. Customer Support
Many customers believe that the customer support from AvaTax is not up to the mark. The account managers at AvaTax do not respond at times. As a result, customers have to resolve their issues through a contact form or email.
TaxJar is a cloud-based sales tax automation platform designed to help your business manage and comply with sales tax regulations. It integrates with various e-commerce platforms, including Shopify.
TaxJar helps you automate sales tax calculations, reporting, and filing, making it easier to stay compliant with complex and ever-changing tax regulations.
All you need to do is use TaxJar’s pre-built integrations for Shopify to connect your Shopify store with TaxJar. The pre-built integrations are easy to configure and offer a great user experience directly from the TaxJar dashboard. In case your business demands go beyond the prebuilt solution, you can use TaxJar API to build your own.
Once you integrate your Shopify account with TaxJar, TaxJar will help you collect sales tax by city and county, across all the states where you have sales tax activity (nexus). TaxJar’s sales tax API clocks in at sub-20ms with 99.99% uptime, which means that your customers can view accurate sales tax data during checkout. Moreover, TaxJar continuously monitors the recent sales tax laws at the state, county, city, and special taxing district levels. So, the moment there are changes in tax rates, TaxJar applies them. This means you do not have to bother about keeping track of the tax rate changes, product exemptions, and sales tax holidays, to remain compliant.
Then, TaxJar’s Nexus Insights Dashboard makes it easy for you to determine the states that require you to collect sales tax based on your economic activity without having to rely on manual workflows. The moment you come closer to nexus in a particular state, you can review the nexus status with your tax advisor and determine the next steps for your business. Furthermore, to help you indicate when you approach the thresholds in a particular state, you can set up notifications from your TaxJar’s Economic Nexus Dashboard.
Furthermore, TaxJar automates your sales tax filing and remittance. Once you integrate TaxJar with your Shopify Plus account, it takes sales data from your Shopify account. Then, it uses the sales data to prepare and submit accurate returns with its AutoFile feature. AutoFile automatically submits returns and remittances on your behalf to the states where you’re enrolled. This way you do not have to worry about missing deadlines or committing errors when filing returns.
Additionally, to help you stay organized and informed, TaxJar automatically compiles orders from your Shopify account into one dashboard. This way you have access to all your sales transactions, as well as state-by-state reports with city, county, and special district breakdowns.
Pros Of TaxJar
1. Seamless Integration
TaxJar is known for providing seamless integration with Shopify. It offers a pre-built integration with Shopify which makes it easier for you to connect your Shopify store with the TaxJar platform. This pre-built integration is designed to simplify the setup process.
Many customers believe that it is one of the easiest plug-ins that they have integrated with their Shopify stores. That’s because TaxJar provides instructions on exactly what you need to do to make sure you are receiving the correct data. Even someone with no IT or technical skills can follow the instructions and get it working.
2. Easy To Use
TaxJar typically offers a user-friendly interface that simplifies the configuration and management of sales tax settings. This can make it accessible for your business if it has varying levels of technical expertise.
The platform is structured with a clear and intuitive navigation system. You can easily move between different sections or features within the platform, facilitating a smooth user experience.
Furthermore, TaxJar offers configuration wizards or setup guides to help you get started. These wizards walk you through the initial setup process, making it easier for you to configure settings accurately.
3. Tax Support For Omnichannel Business
TaxJar is designed to provide sales tax support for various business models, including omnichannel businesses. Omnichannel businesses operate across multiple sales channels, which may include physical stores, online platforms, mobile apps, and more.
TaxJar is equipped to assist your business with managing sales tax compliance across these diverse channels. That’s because it can integrate seamlessly with various sales channels, including e-commerce platforms, point-of-sale (POS) systems, and other channels where transactions occur. This integration allows you to centralize your sales tax calculations and reporting.
Also Read: Does TaxJar Work With Shopify?
Cons Of TaxJar
1. Customer Support
Many customers believe that TaxJar’s customer service needs improvement. Many times, the account managers are not available to extend support to customers. Customers have to rely on email for support which turns out to be quite stressful, especially during tax filing season.
2. Learning Curve
Implementing a new system, especially one as comprehensive as TaxJar, may involve a learning curve for users and administrators. Training and familiarization with the platform may be necessary to optimize its use.
Customers have to take the support of the CPAs to understand where to find everything and how to set things up.
Quaderno is a tax compliance automation platform that assists your business with handling sales tax and other tax-related matters. The tax management platform typically integrates with various e-commerce platforms, including Shopify, to provide automated tax calculations, invoicing, and compliance solutions.
Quaderno is optimized for Shopify. Just like other great tax automation software, Quaderno automates the calculation of sales tax based on the latest tax rates and rules, ensuring accurate calculations during the checkout process. It monitors tax policies and tracks your sales around the world.
As a result, it notifies you if you need to register there if you surpass the sales tax threshold for sales tax in a specific state or jurisdiction. Furthermore, Quaderno supports over 14,000 tax jurisdictions worldwide. Accordingly, every sale that your Shopify store makes automatically has the correct local tax rate, based on your customer’s location and the product category.
In addition, Quaderno provides easy-to-read sales reports that help you keep track of the amount of sales tax you have collected from transactions your store has done around the world. Since you have all of your sales data in these reports, it becomes straightforward for you to fill out your tax returns or share reports with your tax advisor.
In case you need help with tax return filing, you can even partner with one of Quaderno’s certified tax advisors who are experts in online businesses like yours.
Apart from this, Quaderno automatically generates tax-compliant invoices so that you do not have to go through the hassle of creating invoices manually. These invoices are not only tax-compliant, but they even match your brand identity. This means you can customize your invoices as per your brand identity.
Furthermore, to help you view payment history, edit billing details, and pay pending invoices on the spot, Quaderno provides you with a self-service billing dashboard.
To avail of these benefits, all you need to do is integrate your Shopify account with Quaderno using either one of their native integrations, import a CSV file, or use their API.
Pros Of Quaderno
1. Invoicing And Receipt Generation
Quaderno may automatically generate compliant invoices and receipts, including detailed tax information. This feature helps you create professional and legally compliant transaction documents. Thus, it automates the invoicing process, allowing your business to generate invoices automatically based on transactions. This is particularly useful for your eCommerce business having a high volume of sales.
Also, the platform typically offers customization options for invoices. Therefore, you can often add your branding, and company logo, and customize the layout and design of invoices to align with your brand identity.
2. Multi-Currency Support
Quaderno may support multi-currency transactions, thereby allowing your business to generate invoices in different currencies based on the location and currency preferences of your customers. This feature ensures that your invoices reflect the correct currency for each transaction. Thus, it is particularly beneficial for your business if it operates internationally or sells products and services in currencies other than your default currency.
Not only this, Quaderno may automatically detect your customers’ currency based on their location or other parameters. This can streamline the purchasing process for your customers by presenting prices in their local currency.
3. Helpful Customer Support
Quaderno is generally known for providing good customer support. Its customer support team is often praised for being responsive and prompt in addressing customer inquiries, concerns, and issues.
Customers have reported that Quaderno’s support team is knowledgeable and provides helpful assistance. They are often willing to guide users through setup processes, troubleshoot problems, and offer solutions to various issues.
In addition to this, Quaderno typically provides comprehensive documentation, guides, and resources that help users understand the platform’s features and functionalities. This self-help material can be valuable for users seeking quick answers to common questions.
Cons Of Quaderno
1. Limited API Documentation
This is quite subjective, but some customers believe that Quaderno does not provide extensive API documentation to assist developers in integrating their platform with external systems. Extensive API documentation is crucial for developers to understand how to interact with Quaderno’s API, make requests, and handle responses effectively.
2. High Cost
The cost of using Quaderno may be a consideration, especially for small businesses or startups with limited budgets. Businesses should carefully review Quaderno’s pricing structure to ensure it aligns with their financial constraints.
Vertex provides powerful, automated tax determination for Shopify in a cloud-based tax engine. Its tax solutions for Shopify Plus and Shopify Commerce Components integrate seamlessly to calculate sales and seller’s use tax, VAT, and GST for both B2B and B2C transactions.
Vertex O Series Solution continually updates tax rules and rates in a cloud-based tax engine. This ensures that you apply tax accurately and consistently regardless of how, when, or where the transaction occurs. Thus, there is no need for you to manually update complex rates and rules.
Additionally, Vertex integration with Shopify supports customer tax exemptions, thereby helping you to ensure tax compliance regardless of customer status. With the help of automated tools and outsourcing services that Vertex provides, you can collect, track, and store exemption certificates. It will help you reduce audit risk and streamline internal operations.
Also, Vertex integrates seamlessly with all your transaction channels such as your ERP, procurement, e-commerce, and other billing systems. It leverages the rich data in your transaction systems, automates tax calculation, improves tax accuracy, and reduces risk across your business.
Another area that Vertex automates is generating tax returns. Vertex automatically generates signature-ready tax returns. This not only improves efficiency but also provides an archive for audit needs.
Furthermore, Vertex offers standard reports and data extracts that you can use to support compliance, audit, and reconciliations.
Also, to make it easy for you to use the platform, Vertex offers implementation services, convenient knowledgeable support, and a range of training options. This helps you to increase your proficiency and boost ROI.
Pros Of Vertex
1. Multi-Jurisdictional Compliance
Vertex is known for its expertise in handling multi-jurisdictional tax compliance. Its solutions assist your business in navigating and managing tax obligations across different states, regions, or countries.
Vertex considers the specific tax rules and rates associated with your customer’s location and automates the tax determination process during transactions. It leverages advanced algorithms and a vast tax content database to ensure accurate and up-to-date tax calculations. Such automation helps reduce the risk of errors and ensures compliance with local tax regulations. This is crucial when dealing with diverse tax rates, rules, and exemptions that vary across different jurisdictions.
In addition to this, Vertex offers solutions for businesses engaged in international transactions. Such solutions ensure compliance with diverse international tax laws. This includes considerations for Value Added Tax (VAT) and Goods and Services Tax (GST) in addition to local sales tax requirements.
2. Tax Exemption Certificate Management
Vertex offers Exemption Certificate Manager (ECM) that allows you to manage sales and use tax exemption and resale certificates in a powerful web-based application. Vertex ECM is a solution that stores your sales and use tax exemption certificates electronically. It eliminates the time-consuming and labor-intensive process of filing and managing paper certificates by providing you with a self-service customer portal.
The ECM customer portal is a client-hosted, self-service solution that automates workflow for certificate requests, certificate collection, and reporting. Such automation ensures timely compliance and responses to audit requests.
Furthermore, Vertex ECM stores all of your exemption certificate data in real-time, in a central place thereby ensuring easier compliance. For instance, Vertex ECM automatically tracks and calculates expiration dates, recommends updates, and validates certificate number format. Furthermore, the system automatically generates an email to the customer requesting updated certificate information when a certificate is incomplete or due for renewal.
3. Address Cleansing
Vertex offers an address-cleansing add-on for its Vertex O Series tax management solution. This add-on cleanses each address and adds ZIP+4. This will automatically complete, correct, and cleanse the street address using USPS CASS data and assign the correct ZIP+4 code. Such complete addresses further help in improving tax jurisdiction assignment and thus tax calculation, specifically in cities with multiple tax jurisdictions and multiple streets with similar names.
Cons Of Vertex
1. Downtime And Outages
Some customers faced slow customer support. These customers believe that the account managers at Vertex are not proactive. However, one should understand that every customer has his or her own experience when it comes to customer support. Thus, one should always experience customer support firsthand. You can even avail of the trial period to understand how customer support functions at Vertex.
2. Outdated User Interface
Some customers believe that relative to the other tax automation solutions available in the market, Vertex has a quite dated UI. It’s a simple software that is meant for business applications. The other tax automation solutions available present a much more modern look. However, the outdated UI does not impact performance while using the software.
Sovos is a company that provides tax software solutions, including those related to tax compliance and reporting. Taxify by Sovos is one of Sovos’ offerings, specifically focusing on sales tax automation.
This tax automation solution comes with an easy-to-use filing connector for Shopify with the help of which you can connect your Shopify or Shopify Plus store to Sovos Filing in minutes. Once you connect your Shopify account with Taxify, Taxify pulls all the transaction data from your Shopify account and automates your sales tax compliance processes. Using the transaction data, it then performs real-time sales tax calculations based on the latest tax rates and rules applicable to each transaction. This ensures accurate tax calculations for each sale.
Besides providing accurate sales tax rates and automating sales tax calculations, Taxify also offers automated tax filing. It uses the accumulated transaction data from your Shopify account and applies relevant tax rules to generate the required information for filing. It may generate the necessary documents and forms required for filing sales tax returns. This includes summary reports, schedules, and any other documentation needed for compliance.
Furthermore, Taxify even facilitates the electronic submission of sales tax returns by integrating with tax authorities or government systems. This integration streamlines the filing process and helps you as a business to comply with regulatory requirements. To help you stay compliant, the tax automation solution may provide automated reminders and notifications to you about upcoming filing deadlines. This helps ensure that you submit your sales tax returns within time.
Then, Sovos Taxify, as part of its tax compliance and automation suite, also offers a solution called CertManager for managing exemption certificates. Exemption certificates are documents that you as a business use to confirm a customer’s exempt status for certain transactions, such as sales tax exemption. CertManager is a centralized platform that automates the process of collecting, validating, filtering, maintaining, and downloading exemption certificates. It even tracks the expiration dates of exemption certificates and automates the process of sending renewal requests to customers as their exemption certificates approach expiration. Such automated reminders help you as a business to maintain up-to-date certificates.
In addition to CertManager, Taxify also provides Use Tax Manager that streamlines use tax for your accounts payable department. The solution gives you a complete view of the tax on all vendor invoices including use tax obligation, use tax paid, use tax accrued, overcharges by vendor, tax rate variance by vendor and use tax exemptions. It allows you to configure data validation rules to ensure that you calculate use tax accurately. Furthermore, the solution modifies and configures new rules based on repeat purchases, and works with vendors to avoid future errors.
Pros Of Taxify
1. Seamless Tax Calculations
Customers believe that Taxify undertakes total sales tax calculations quite seamlessly for e-commerce stores. Accordingly, users are able to manage their tax calculations without any hassle, saving them time and effort in ensuring compliance with tax regulations.
2. Good Customer Support
Several customers appreciate Taxify’s customer service. Users have found the support team to be responsive and knowledgeable when it comes to addressing their tax-related queries or concerns.
Cons Of Taxify
1. Technical Issues
Some customers experienced technical issues while using Taxify. For instance, they faced challenges when pulling specific addresses and encountered freezing during the sales process. Then, some customers found the installation process challenging while others faced challenges when integrating Taxify with existing enterprise resource planning (ERP) systems or other business applications, particularly for businesses with complex or custom-built IT architectures.
The cost of implementing and maintaining Taxify may be a consideration, especially for smaller businesses with limited budgets. Businesses should carefully assess the pricing structure and ensure it aligns with their financial constraints.
Before choosing a specific app, always consider your business needs, the complexity of your tax obligations, and any specific features you may require. Additionally, check for recent reviews and updates in the Shopify App Store to ensure that the app is still actively supported and meeting the needs of users.
Additionally, always refer to the latest information on the Shopify App Store or consult with a tax professional to ensure compliance with current regulations and to choose the best app for your specific business requirements.