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Saying “I Do” to Tax Software

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I often get asked what a company should look for when selecting the right transaction tax software. You don’t want to make a bad decision on this one. After all, this software will become an integral part of your A/R and A/P processes and you’ll need it to be “on” and “right” all the time. You will be joined at the hip for years to come and like any good marriage, it pays to do a little work upfront to make sure you found “the one”.

The main providers in the industry have evolved in size, ownership and branding in recent years. Here is the rundown of the main players in this space:

  • ADP owns Taxware and offers the Sales/Use Tax (SUT) and Taxware Enterprise (TWE) applications.
  • Avalara is privately owned and offers the AvaTax Connect as a web-hosted solution for small-to-medium businesses.
  • Thomson Reuters owns Sabrix, which has been re-branded and integrated as part of OneSource.
  • Vertex remains privately owned and offers the Q-Series and O-Series applications.
  • Wolters Kluwer owns CCH, which offers the Sales Tax Office (STO) solution, and they recently acquired SpeedTax.

On the surface, they all mostly do the same thing. But dig a little deeper and you will see some clear differences in how they do it. Of course, there are obvious variables, like pricing and contract terms, that could make or break an engagement and I won’t go into the 50-point checklist to fully assess every aspect of a software suitor. Somewhere in between, there are a few bite-size nuggets that will help you glean whether this is a match for you.

1) Does their tax research line up with my business? Each of the tax software providers deliver pre-researched tax decisions on item or service categories that you can map your SKUs to. While this is a common feature, ask for a list of the product/service categories so you can see if your sales and purchases are covered. This might mean the difference between having your tax research done for you or having to make your own tax decisions.

2) See an example of how to set up a rule. You can tell a lot about the software from the screen design. Is it intuitive to use? Are there a lot of unnecessary buttons and links that don’t go anywhere or do anything? Is it easy to create, view or modify a rule? How easy is it to delete a rule if you mess up? Can you backdate a rule? Good screen design is a sign of a vendor who has listened to their users over the years and included enough to be flexible, but not too much to be confusing.

3) Do you keep an audit trail of configuration? Not all vendors offer this – but it is really helpful to know who and when a change was made to a tax rule or exemption record. Call it the Sherlock Holmes in me, but when trying to pinpoint a time when something “broke”, I like to see an audit trail of what changes were made in the tax software, when the change was made, and who made change. Uh-oh. You can run, but you can’t hide!

4) What if I want to load en-masse? On pretty much every implementation, at least some of the configuration – whether it’s the taxability rules, customer exemptions or product mappings - would be best uploaded via load files. You don’t want to be paying a consultant to manually input all your customer exemptions, do you? Ask the vendor for every type of record that can be auto-loaded and more importantly, what can’t be auto-loaded. By the same token, how easy is it to copy your configuration from one software instance to another? You will need to do this as you transport from testing environments to production, and again when you need to refresh from production.

5) Show me how I can troubleshoot. You don’t want a black box calculating your taxes. You want to understand the inputs and outputs and be able to trace why a certain tax result was returned. During your demo, ask for a walk-through on how to view logs and test the calculation within the software. How easily does logging capture the data from the ERP system? This is crucial during troubleshooting and some vendors do this better than others.

6) How complete is my address data and do I want the tax software to cleanse it? When it comes to addresses in your ERP system, your tax software runs a validation to assign jurisdiction codes and tax rates to those addresses. Some vendors validate to the street detail, while others only validate city, state, and zip or zip +4. The level of address validation should match your objectives and the cleanliness of your data (do you have “dirty data” hiding in your closet???). If your customer and vendor addresses are incomplete, and you purchase software with street-level validations, then you might have some cleanup to do – but the end result might be worth it…

7) And finally, what are other companies in your industry using? Some software vendors have a better foothold within certain industries. And with that comes better research and features designed to accommodate that industry. Your tax requirements are probably similar to your competitors, so find out what they are using and how it’s working for them. You don’t have to follow the herd on this one, but it’s good to find out why other companies chose their software partners and more importantly, do they feel they chose correctly?

My final crumbs of advice to you? Enjoy the courtship and learn everything you can from your software providers in the process. Ask the same questions of each so you can properly compare their responses and give them an even playing field. Then hand the rose to the lucky contestant and off you go into the sunset…

Other recent “Sales Tax Automation & Software” posts by Suzy Soo:

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