For many retailers, the rapid growth of e-commerce sales threatens to outpace their ability to meet tax responsibilities in a practical and efficient way. Manually managing indirect taxes across multiple channels and platforms requires intricate work, and the business and regulatory environments are constantly changing.
Tax automation software can help you navigate the three most common types of change:
Regulatory changes. Tax authorities continue to see e-commerce as a potential source of new revenue, and they’re looking for new ways to cover all transactions regardless of the sales channels. Rulings like South Dakota v. Wayfair (2018) impose significant compliance burdens. Tax automation solutions remove much of the complexity and enable retailers to respond to changes with new rules and rates in a timely manner.
Changes in business activity and performance. Success in creating new online operations can result in unexpected tax responsibilities alongside a spike in the variety and volume of transactions, as many retailers discovered when they turned to alternate delivery platforms (such as Grubhub and Instacart) during COVID-19. Expanding the reach of your e-commerce activities may result in new nexus considerations on a state-wide, country-wide or global scale. A tax platform can help you navigate this kind of growth seamlessly.
Changes in technology and channel access. Retail technologies are constantly changing, system upgrades are inevitable, and tax compliance must keep pace. At the same time, online platforms and physical locations interact – for example, a customer may buy in-store and return by mail. Manually calculating the tax liability across these channels can be an extremely complicated, error-prone and a time-consuming task. Tax automation software enables you to accurately calculate and track tax liabilities as your systems and channels evolve.
With the support of a tax automation solution, you can be confident to meet today’s challenges, and prepare for whatever comes next.
Please remember that the Tax Matters provides information for educational purposes, not specific tax or legal advice. Always consult a qualified tax or legal advisor before taking any action based on this information. The views and opinions expressed in Tax Matters are those of the authors and do not necessarily reflect the official policy, position, or opinion of Vertex Inc.
Pete Olanday is Vertex Consulting Retail Practice Leader, responsible for the integration of Vertex's Indirect Tax solutions in the retail space, specifically with Point-of-Sale systems and e-commerce platforms. Prior to joining Vertex, Pete worked for IKEA and EY. Pete has a B.S. in information and decision sciences from Carnegie Mellon University.