No one outside of government seems to like sales tax, but there are ways for online sellers to make it easier to manage.
As companies expand their sales reach through B2B e-commerce, doing more business across state lines and internationally, they face the challenge of collecting and remitting sales tax on customer orders placed in states where they have a physical presence.
Other than the five states without a state sales tax—Alaska, Delaware, Montana, New Hampshire and Oregon—states and the District of Columbia require online sellers to collect and remit sales tax if the seller has a physical presence within their jurisdiction, such as a bricks-and-mortar outlet, office or distribution center. This is commonly considered an issue for online retailers, particularly those with chains of retail stores, but it also applies to many manufacturers and distributors with facilities outside of their own state.
Sales tax requirements can be of particular concern for distributors with chains of branches, outlets designed to provide flexibility and convenience to both sellers and their customers. In addition to letting customers pick up products ordered online, the branches also provide sellers optional sources of inventory to fulfill orders placed via web or phone from customers that reside in a state requiring sales tax collection.
Sales tax collection—including calculating it on each order and remitting it to states—is an area where B2B companies can learn from operators of retail stores and chains. Take Event Network Inc., a company that operates more than 100 retail gift stores and e-commerce sites for independent organizations with nationwide customer bases like the Museum of the American Revolution in Philadelphia. Event Network, says Sharon Hina, sales tax manager, has learned that deploying an effective sales tax management system can make the difference between processing tax quickly and dealing with a drawn-out process for filing monthly sales tax returns.
Event Network describes the gift shops as “partnerships” with its clients; Event Network provides the products according to each organization’s specifications, and shares the revenue from sales.
But like any other network of retail sites and stores, it has its challenges. Before Event Network deployed a new sales tax management system last year, for instance, it would take Hina a long time each month to reconcile all of the sales transactions with sales tax records for all of the e-commerce sites and stores Event Network operates. “I’m the one person who does taxes for all of our more than 100 stores,” she says. “With the old system, it would take me the first three weeks of every month to reconcile sales and tax data. Now I’m done by the 10th of every month.”
That has freed her up to do more work on various projects in Event Network’s accounting department that help the company operate more efficiently and profitably, she adds, declining to be more specific.
Event Network deployed cloud-based sales tax management software from Vertex Inc. and integrated it with the Magento Enterprise e-commerce software platform for Event Nework’s e-commerce sites.
While slashing the time it takes to reconcile sales transactions and related tax figures each month, the Vertex software has also resulted in more accurate records, Hina says. Under the prior system, inaccurate records led to tax returns that Event Network would have to amend, adding to expenses and time spent processing returns.
Managing sales tax at Event Network is complicated by the diversity of products sold in its clients’ stores and e-commerce sites, and the fact that many of them sell to customers across the United States and Canada and at U.S. military bases overseas. The merchandise sold by the Museum of the American Revolution—Revolutionary War maps, illustrations and Liberty Bell souvenirs, for example—are nothing like the desert artwork and small potted plants sold by the Phoenix-based Desert Botanical Garden. “There are no cookie-cutter products,” Hina says. “Everything is unique to each location.”
The Vertex software, she says, applies the appropriate sales tax based on the price of each product and each customer’s location—including value-added-tax levied on overseas transactions.
For online sales, the sales tax calculations are processed and recorded through a connection between the Magento e-commerce software and the cloud-based Vertex software.
Going forward, Event Network plans to also connect its store point-of-sale system in a similar way to the Vertex software. For now, Hina manually enters tax rate information from Vertex into Event Network’s POS system, which enables her to check the correct tax rate for each store location when reconciling monthly figures. With the POS system eventually connected to the cloud-based Vertex software, it will eliminate the need to manually enter tax rates, saving her even more time, Hina says.Favorite