Do you find tax compliance daunting?
We all do. Taxes are complex. Sensitive. Painful. And time-consuming.
In the wake of the pandemic, there has been a massive shift in ecommerce and online businesses.
But also grew global compliance challenges.
A survey found that standard compliance practices may take over 50% of your tax department’s time.
Not good for surviving in a competitive online business!
Therefore, you need tax compliance software. A smarter way to manage your tax deliverables.
But what exactly is this software for?
What are the benefits?
And what are some of the best software that can help you with compliance challenges?
Let’s dig into it!
What is tax compliance software?
Tax compliance means you adhere to the tax obligations levied by the law. However, traditional compliance methods are manual, time-consuming and confusing.
You may remain unaware of the new jurisdictions, potential risks of penalties or missing deadlines. Calculation inaccuracy is yet another problem.
Therefore, tax compliance software is here to do most of the heavy lifting for you.
They’re powered by automation and machine learning capabilities. Secured in a centralized cloud as a single source of truth.
And bound by the legal agreement of regulatory and privacy law firms. Like GDPR, HIPAA, CCPA, etc.
So that you can trust them and focus more on your business. But the most interesting part, is that you don’t have to be an accountant.
What are the benefits of tax compliance software?
- Keeps track of the tax liabilities to the government. Maintains all transactions. Automates forms and filings.
- Keep up with the changes in jurisdictions and maintain up-to-date tax slabs for error-free calculations.
- Helps you streamline tax compliance by using automation, controls, and a clear audit trail into your compliance process.
- Data collected is maintained in a central repository in a secure cloud that lets you use and reuse it for multiple purposes. Works as a single source of truth.
- Ensures budget transparency and protects you from any legal prosecutions or any false claims from another party.
- It can integrate with the client’s existing accounting tools to help them calculate, collect and remit sales taxes.
- Their APIs remain 99.99% uptime and clock in at a lower ping rate. Which means, real-time calculations, checkouts, uploads or downloads can be done without latency issues.
When businesses look for a tax compliance solution, most of them think of TaxJar by default. TaxJar is one of the most popular, if not the best, platforms for SMBs.
Are you an ecommerce brand or SaaS provider? Medical service or a Food company?
No matter what, TaxJar makes a staple choice for all kinds of businesses.
How would you know if you’re liable to sell and collect taxes in particular states or not?
The sales tax nexus. However, it’s a quirky and complicated process. Many compliance methods take a long time in establishing a connection with state jurisdictions.
TaxJar makes the nexus simple. Which makes this software stand out from the crowd.
Talking about the monthly plans, TaxJar has a simple pricing structure.
Since the acquisition by Stripe, they have been offering a plan based on the amount of monthly orders. However, the plans were based on the number of transactions earlier.
TaxJar Key Features
- AutoFile tool removes your need to consistently monitor and automate your sales tax process: uses exact addresses, classifies products, precise tax calculations, and files tax returns by the due date.
- Under Stripe, they provide optimized compliance solutions like state-wise recommendations, keeping up with changing legislation, fraud protection, etc.
- Sales and transaction checker that lets you keep track of the economic nexus threshold across different states.
- Wide range of integration options which include popular accounting and ecommerce platforms like Quickbooks, Salesforce, Shopify, WooCommerce, Amazon, etc.
TaxJar Pros and cons
- AutoFile’s robust automation capabilities
- Keep track of economic nexus threshold
- Popular integrations option
- Affordable pricing plan
- 30 days free trial
- 30 days free trial
- Additional autofiles can cost you more
- Not all regions covered in starter plan
Starter plan: $19/month
Professional plan: $99/month
Cross-border trades are often burdened by numerous tax complexities. Unwanted expenditures and waste of time.
Lovat is often sought as a potential compliance solution to manage complex international tax obligations. Especially for ecommerce sellers.
With the growing ecommerce industry, they found a sweet spot in making e-tax filings easier for vendors.
Upon close observation, I found that Lovat is mostly specific to the EU market. Headquartered in the UK, their main focus seems to be withstanding the challenges of Brexit. To meet the new tax obligations, OMP rules, etc.
Selling on Amazon or Shopify?
Lovat seamlessly integrates with many popular channels. And also with your point-of-sale system.
Interestingly, Lovat is authorized to handle VAT issues for global sales on Amazon.
It’s a new but pretty reassuring software. And can help you meet compliance goals, regardless of the complexities.
They’re successfully operating in 57 countries. And they’re expected to expand global outreach in the coming years.
Lovat Key Features
- Compliance system of Lovat uses geolocation to help with area-based tax preparation across local, state, and federal jurisdictions.
- Seamlessly integrates with popular marketplaces and stores such as Amazon, Shopify, Magento, Etsy, AliExpress, and many others.
- A cloud platform that constantly updates with the changing VAT rules, rolls in new features and stays with the latest trends.
- Tax Academy, where you can explore a number of video tutorials. From VAT registration to sales tax preparation, or filing for return.
Lovat Pros and cons
- A range of marketplace integrations
- Technical support and learning resources
- Automated filing capabilities
- Stays updated on a monthly basis
- A bit on a pricier side
- Additional fees for integrations
They also provide add-on services based on extra number of countries, transactions, and hourly-priced dedicated support.
Scalable businesses need more than just tax compliance software. That can handle business workflows along with tax management.
They need practice management software, like Canopy. They’re designed to handle front and back-office processes.
A package of project management, team management, billing, and CRM capabilities.
You can organize tasks, track delivery using workflows, and manage client communications under a single roof.
Already working on apps like Quickbooks, FreshBooks, Slack, or Microsoft Office? Or wish to integrate with your Canopy account?
You can achieve that with Zapier.
Canopy has been here for a long time. Each year, they aim to keep up with the challenges of tax policies and make them less tricky for you.
Therefore, their practice management approach ensures you achieve reputation, productivity and hence, profitability.
Canopy Key Features
- Canopy helps you create federal and state forms based on surveys. They ask you questions which are then used to autopopulate the forms for a personalized compliance experience.
- You can automate collection calculations based on your revenue or region. In case of tax debt, they also recommend you with a list of options.
- Powered by advanced security standards – Service Organization Control. It means your company ensures all financial actions and sensitive data are shared or contained in a secure manner.
- Comes with dedicated support with options like live chat, email, and phone support. Also, a rich knowledge base and community forum to keep you updated with features or new compliance policies.
- Mobile app on both iOS and Android platforms. Helps you manage your account, connect with clients, upload, and share files while you’re on the move.
Canopy Pros and cons
- All-in-one accounting and tax solution
- Robust mobile apps on both the platforms
- Option to include unlimited users
- Powered by advanced security standard
- Flexible pricing structure as per your needs
- Complete practice management only available in higher tier
- Some add-ons from Zapier don’t integrate well enough
Canopy offers a suite of practice management tools with the freedom to select the tools that you need. Pricing varies as per number of contacts and users.
There is also a free trial for 15 days.
Selling any software, subscriptions, physical products or digital content?
Quaderno can fit into your business regardless of its type or size. It’s because they offer flexible pricing. You can pick your plan based on your number of transactions per month.
They come up with a number of ecommerce and payment gateway options. Even Amazon FBA.
You can seamlessly integrate with your existing store and shopping cart and begin automating your tax calculations in no time.
For VAT calculations, they use a geolocation feature. No matter where your customers are from. Quaderno’s automated solution charges area-specific rates.
They offer tax compliance services throughout the world. Though, it’s unsure how many countries they are currently serving.
Quaderno Key Features
- Unique checkout experience. Provides a set of branding tools to customize your invoice at the point of sale to increase conversion.
- Accurate calculation of sales tax, VAT, or GST rate based on your buyer’s location. Also helps you identify tax-free locations.
- Helps you track your tax obligations when you enter a new market. Or launching internationally for the first time. With automatic alerts, they minimize your burden of tracking whether you’re liable to collect taxes.
- For self-made web stores, they offer a set of APIs for developers. For example, Quaderno.js that lets you calculate sales tax from your frontend.
- Also their sandbox where you can test and experiment with their features without breaking your site.
Quaderno Pros and cons
- Best for ecommerce, content creators, subscription or SaaS services
- Branded invoicing during check out
- Flexible payment gateway options
- Flexible pricing for startups and large businesses
- Active customer support
- Quite a low number of transactions per month in cheaper plans
- Need wider date range in reports
They offer a transaction-based pricing plan. Transactions are counted when you create any document like invoices, receipts, credit notes, etc.
Avalara is one of the prominent tax compliance platforms. But what differentiates Avalara from other compliance software is its massive global outreach. They claim to offer services across 190+ countries.
The wider outreach also fosters your international selling goals. On top of that, they have like 1200, probably the highest number of signed partner integrations for any tax compliance software.
They include ecommerce marketplaces, accounting, ERP, CRM, and finance management solutions.
Avalara’s main product is AvaTax. A comprehensive sales tax tool. It’s cloud-based and powered by AI automation.
It helps you with fast and accurate tax calculations. And makes you more liable to sell your products hassle-free around the world.
Means, cross-border selling would be least of your worries.
Avalara Key Features
- AvaTax is a flagship tool with automation capabilities. Helps you with filing, remittance, tax returns, cross-border selling. Also alerts you about new jurisdictions and potential restrictions on products. Ultimately, minimizes your reverse shipping costs.
- Avalara’s partnership with Digital River enables smooth cross-border ecommerce. It connects with vetted logistics providers and protects them from any potential penalties or frauds.
- CertCapture helps you manage and store important compliance documents like exemption certificates on its secure cloud.
- Provides in-house fiscal representatives for European countries. They’re entrusted with cross-border tax and legal formalities. Helps you reduce processing time and remove language barriers.
Avalara Pros and Cons
- Accurate sales tax calculations
- Supports wide range of third-party applications
- Wider global outreach and support
- Avalara University eases your understanding of tax compliance
- Lacks customizable reports as per specific business needs
- No particular pricing plan
Volume-based pricing models. However, no specific pricing structure.
They do have a 60-day money-back guarantee, though.
6. Vertex Inc.
Vertex Inc. is a leader and trusted name in tax technology.
Probably the oldest tax compliance software that is keeping up with the changing dynamics of the world for 4 decades.
Which means, Vertex is fueled by a countless number of tax compliance and jurisdictions around the world. Which also means, you’re liable to collect taxes in most parts of the world without any friction.
No matter how small or big your business is, Vertex’s multi-industry tax compliance will leave you with no excuses.
They cover sales tax, VAT, consumer use tax, communication services tax, lease tax, and payroll tax – everything within the cloud.
Yes, Vertex looks daunting. Therefore, you can take advantage of its custom-tailored tutorials, which include tips and how-tos videos.
Unlike other compliance providers, Vertex offers a wider range of services. However, they don’t have a specific price plan.
Vertex Inc. Key Features
- Vertex O uses edge computing to help retails and businesses requiring a high availability checkout solution.
- Vertex Cloud comes with robust reporting options, automated tax calculations, and different tax preparations. But above all, easy navigation.
- Integrates easily with popular online stores, marketplaces, billing, ERP, accounting, and financial third-party applications.
- Syncs well with the retail point-of-sale system and auto-calculates taxes per purchase.
Vertex Inc. Pros and cons
- Offers excellent integration options
- Excellent solution for Exemption Certificates
- Prepares signature ready returns
- Tax updates are very timely and thorough
- No particular pricing plan
- Tax details can be imported in XML format only
Customized pricing as per the type of your business. Available only upon request.
7. Accurate Tax
Online sales tax often sounds daunting to many independent online merchants. Especially in the US, where frequent changes in tax laws make you uncertain about selling in different states.
Accurate tax, therefore, integrates with most of the shopping carts. And calculates region-wise tax for your store’s orders.
They are one of the few SaaS companies that have been offering tax compliance solutions for over 2 decades.
So, when it comes to precise tax calculations and sales tax reporting, Accurate Tax knows the game.
Over the years, they’ve tried to make the platform easier and cheaper for merchants of all sizes. Though, there is no such monthly plan. But it’s claimed to have a budget pricing.
Accurate Tax Key Features
- TaxTools is a flagship software of AccurateTax that simplifies the tax compliance process. Easily integrates with most of the shopping cart.
- Real-time sales tax calculation ensures location-based and accurate rates during checkout.
- Tax classification based on different products, ensuring up-to-date tax rates are levied.
- Provides extensions for a number of shopping carts like WooCommerce, OpenCart, Magento, Zencart and many more.
Accurate Tax Pros and cons
- A number of ecommerce integrations
- Free sales tax calculator
- Option for free trial
- Excellent customer support
- No proper pricing structure
- Seems mostly confined to the US
Accurate Tax offers Basic Service and Fully Managed Service. But no price plans were discussed.
However, Basic Service offers only tax calculations and reporting features. They determine the price based on your quotes.
It’s easy for you to find tax compliance software centred towards software businesses. But Sovos is versatile. A multi-industry compliance solution.
From retail, manufacturing to SaaS companies, Sovos has got their back.
They offer visibility. And understanding, minimizing financial risks.
They can help you minimize the gaps between direct and indirect taxes.
Their main goal is to simplify every single step. Whether you navigate through its software. Track your revenue. Calculate your tax exemptions. Generate invoices. Or manage your tax records.
No matter if you’re a product startup or selling your SaaS subscriptions. Sovos aims to make tax resolutions easier than ever.
This is the reason about half of the Fortune 500 companies across 70 countries bank on Sovos.
Sovos Key Features
- Manufacturers or product companies can track suppliers who’re exempt from sales tax.
- The cloud solution, Advanced Periodic Reporting (APR) helps you validate the reports across any region’s tax jurisdictions.
- Seamless transfer of transactional data and automated calculation of global sales taxes. Also helps with shipping compliance and direct-to-consumer distribution.
- Helps with license management and license deadline checks. This is necessary for products that might be potentially restricted (or have a restriction record) or kept on hold in some areas. For example, distribution of beverages, drinks, medicines, etc.
Sovos Pros and cons
- A number of integration options
- Real-time compliance checks for shipping
- Robust transaction tracking system
- Extensive learning resource and tech support
- No fixed pricing plans
- Handling multi-state exemptions is a very manual process
Requires quotes to get the pricing.
9. ADP SmartCompliance
ADP is one of the oldest and most trusted tax compliance solutions. They define themselves as a cloud-based human capital management (HCM) company.
A holistic business partner as they offer HR, payroll, and financial management solutions.
Their outsourcing service is like no one else. With their services available across 140+ countries, ADP has been successful in enabling hassle-free cross-border compliance.
Just take a look at some of their competitors. Many of them fail to cover some Asian or African regions. But not in the case of ADP.
Interestingly, ADP not only offers compliance solutions for your business. But also for your employees.
If you already own a payroll system, you can seamlessly integrate with ADP. It just simplifies the tax filings of your employees.
And on top of that, your employees can also get valuable insights on saving as well as retirement plans.
ADP SmartComplaince Key Features
- ADP tax locator helps identify your employees’ (for existing, new and transferred) tax details based on local and state level. Also saves you from penalties and interests.
- Targeted solution for HCM compliance challenges like payroll taxes, business tax credits, wage payments, wage garnishment, unemployment claims, health compliance, contractor management, etc.
- Seamless integration and data sharing with other popular software. For example, accounting solutions like Quickbooks, ERPs like FinancialForce, etc.
- Lets you know your retirement readiness score and solutions for employee retirement savings. Useful for employees’ tax filings, returns and also personalized insights on tax saving.
ADP SmartComplaince Pros and cons
- Complete compliance package for employees
- Covers an array of industry
- Easy to search and manage reports
- Have dedicated account manager
- A few complaints about uploading and downloading file speed
- Pricing plans not discussed
ADP likes to keep things very personalized. So, they ask for quotes for customized pricing.
Zee was launched in 2021. A global tax compliance solution that doesn’t walk the same path as many others.
They might not have the luxury of a complete compliance package with the likes of TaxJar or Avalara.
On Zee, however, you can get solutions like trade compliance, import compliance, and logistics for your ecommerce business.
But to be specific, I found Zee mostly geared towards Amazon sellers.
That’s because growing your Amazon FBA business looks straightforward on paper. But in reality, it’s a lot trickier.
Many sellers faced issues down the road while selling on Amazon. For example, in some cases where label contents don’t match the actual contents of the product.
Late shipment is yet another issue.
These may lead to you receiving a warning or account suspension.
Even fraudulent activities. Like backend keyword abuse. It happens when a competitor intentionally tucks in a keyword that might get your listing flagged or suspended.
Also, Amazon doesn’t give a sheet about policies or regulations. Instead, they expect you to have a better understanding of selling in a compliant manner.
Just leaves you with a bunch of basic tools to list and sell your products.
This is where Zee steps in to save you from the wrong compliance practices. And ensures your product is liable for sale or imports.
Zee might be new. But have a wider Delivery Duty Paid (DDP) shipping across the USA, Canada, UK, Australia, and EU regions, UAE, and Japan.
Zee not only diversifies your selling goals. But also helps you with secured selling and stuck shipments.
Which means, you can sell on Amazon Europe from the US or any registered region and vice versa.
Zee.co Key Features
- Manages door-to-door Amazon FBA imports in a cost-effective manner. Covers fee for compliance, import duties, region-specific taxes, and freight.
- Can ship your products from any registered country directly to an Amazon Fulfillment center.
- Offers “Importer of Records” service that can manage customs clearance on your behalf.
- Close partnership with Vatglobal to help you remain VAT compliant. Helps you take advantage of its cloud-based technology called Vsuite, and automated filing tool called Vfile.
Zee.co Pros and cons
- Best for Amazon sellers
- Compliance plus shipment solutions
- Solves restock delay issue with its freight service
- Solution for stuck shipments
- Active customer services
- Lacks in-house VAT solution but partnered with Vatglobal
- No clear pricing structure
- Not enough recognition in the SaaS marketplace
Want to sell your app services internationally?
Overseas compliance models and jurisdictions often make things difficult for SaaS companies. Especially for start-ups.
Paddle is exclusively designed for SaaS businesses. That can support end-to-end requirements to sell your services globally.
They have incredible outreach. Currently, Paddle can help you file and remit taxes across 50+ countries.
They model a 3 layered approach:
- Commerce layer
- Finance layer
- Data layer
Commerce layer focuses on delivering personalized checkout experience, lead generation, and conversion optimization practices.
Finance layer focuses on revenue generation, compliance coverage, while ensuring fraud protection.
Data layer ensures you have reliable transactional data in the cloud. It’s your single source of truth.
Paddle Key Features
- Integrates with ProfitWell Metrics that delivers insights into performance reports, revenue growth, transactions, customer churn and retention, etc.
- Automated invoicing simplifies B2B sales. It syncs with your business workflows that cut the manual processes and makes payment reconciliation easy.
- Registered with Service Organization Control (SOC) 2 that ensures your business information can be trusted and fosters risk-proof partnerships.
Paddle Pros and cons
- Great option for SaaS businesses
- Comes with payment processor
- Excellent reporting and automation capabilities
- Pay as you go pricing
- Can’t manage multiple projects with the same account
- Customer support needs improvement
12. Fast Spring
If your business is everything digital, Fast Spring can be just right for you.
It’s one of the oldest and most trusted tax resolution companies. But specifically aimed at scaling your services.
It’s great if your software business is expanding to new regions. Different geographies bring different jurisdictions and restrictions.
But Fast Spring paves the way for you and your customers with its multiple language and currency support.
And it also claims to provide higher credit approval rates across the world.
A comprehensive ecommerce solution for your digital products. As it takes care of your tax collection, payment compliance, remittance, churn management, and monitoring fraud – no matter where in the world you expand your business.
Fast Spring Key Features
- Accepts a number of payment processors and local currencies. The payments are automatically routed to the payment gateway of the area as your customer makes any purchases.
- Provides a complete localized experience with 25 languages, 20 currencies, and local payment methods. Also accepts payments from most banks and cards around the world.
- Powered by a 15-factor fraud monitoring algorithm that keeps issues like chargebacks bare minimum.
- Automated invoicing system that saves you time, reduces processing costs, speeds up approvals, and minimizes errors.
Fast Spring Pros and cons
- Supports multiple languages and currencies
- Region-specific jurisdictions
- Active support services
- Robust security and fraud detection
- Higher transaction fees
- No pricing plan mentioned
- A bit daunting interface and integrations
FastSpring offers customized but flat-rate pricing. No extra fees or migrations costs.
Tax compliance is like being in a relationship. You barely know if something is going right.
That’s why tools like Avalara, TaxJar exist that can guide you throughout the process.
They offload your dependency on accountants for a fraction of the cost. They take care of the revenue structure, as AWS does for tech infrastructure.
That being said, these are some of the best compliance tools that may help you manage your tax deliverables.
Note that, deciding upon the software depends on the type of your business and the compliance solutions you’re looking for.
For example, a compliance model for SaaS-only businesses may not be a good fit for ecommerce merchants.