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4 Ways to Harness the Cloud for Effective Sales Tax Management

by Rory Rawlings | SAPinsider, Volume 16, Issue 1

January 1, 2015

Sales tax calculations are far from simple, and even though there are many solutions to help companies with these challenges, they often require expensive hardware costs and lengthy implementation times. Discover how a cloud-based approach can get you up and running quickly with the flexibility to meet rapidly changing business requirements.

 

Sales tax calculation is rife with complexity and fraught with risk. An incorrect calculation can have serious consequences for your business — both for the bottom line and for regulatory compliance. A wide range of tax solutions are available to help companies address this challenge, but many require expensive on-premise hardware, lengthy implementation, monthly data maintenance, and rigid licensing agreements.

A cloud-based solution can ease these restrictions, enabling organizations to avoid infrastructure costs, implement quickly, minimize maintenance, and gain the flexibility needed to access up-to-date information and meet rapidly changing business requirements.

4 Common Scenarios for the Cloud

Here are four common scenarios in which a cloud-based approach can save companies time and money, freeing them to focus resources on growing the business and maintaining a competitive edge.

1. Expanding Ecommerce Systems

Almost any business using an ecommerce system needs to integrate that system with a solution that can handle the complexities of calculating sales tax. Integrating on-premise sales tax solutions with an ecommerce system typically requires a dedicated implementation project involving multiple systems and costly consulting services. You also generally need to obtain a new license to coordinate the ecommerce tax engine with the tax engines located in on-premise ERP systems. A scalable and flexible cloud-based sales tax solution integrates quickly and easily with various ecommerce solutions and hundreds of ERP systems, enabling an accelerated implementation and lower overhead, while facilitating real-time information updates.

2. Integrating with Multiple ERP Systems

Many organizations have multiple on-premise ERP systems running in their landscapes and often assume that the native tax solutions in these systems are handling sales tax automatically. However, keeping the solutions up to date with changing rates and rules across a range of tax types can be expensive, time-intensive, and risky. A cloud-based, automated sales tax solution reduces complexity by integrating various ERP systems through white-labeled, custom software development kits or out-of-the-box modules. It also provides greater accuracy without the fixed costs of ongoing maintenance and tax table updates.

3. Incorporating Mergers and Acquisitions

Acquiring a company involves either migrating its systems into the acquiring company’s SAP landscape, or leaving them on the existing system. If the sales tax module in the existing system is different, the dual systems will require intensive IT staff time to update, maintain, and coordinate the software. It will also require more time for the compliance team to accurately report tax information to tax authorities, which can affect the entire business. A cloud-based sales tax solution eliminates the resource drain involved in these scenarios. You can expand sales tax compliance to an acquired company’s system by simply creating a connection to the new system.

4. Managing Upgrades

As vendors phase out earlier versions of older on-premise tax systems, companies often need to invest in upgrading existing solutions. This means absorbing implementation and consulting costs all over again. And opting out of the upgrade isn’t an option — outdated sales tax functionality leaves your company vulnerable to audit penalties and fines. With a cloud-based sales tax solution, the provider hosts and maintains the solution, keeping it up to date and compliant.

Harnessing the Cloud

By using the cloud to bring scalability, flexibility, and accuracy to enterprise tax solutions, Avalara helps companies harness the cloud to handle sales tax, and take advantage of reduced overhead, lower implementation and maintenance costs, greater accuracy, and flexibility to connect to many systems. Learn more at www.avalara.com/learn/whitepapers/cloud-vs-premise-sales-tax-solutions.

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Rory Rawlings
Rory Rawlings

Founder and Chief Tax Automation Officer
Avalara



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