As an enterprise design and development consultancy that transforms eCommerce businesses from the ground up, Codal leverages best-in-breed technologies to ensure maximum flexibility, security, and scalability for our clients. When it comes to taxes, from adding the cost of sales tax at checkout, to filing returns, to organizing documentation for auditors, many businesses approach us with costly, outdated tools and processes.
We help streamline this by integrating Avalara —an end-to-end tax compliance platform that calculates real-time tax rates, automates time-consuming workflows, and provides insightful content and data to help online businesses maintain industry compliance and improve their bottom line. With Avalara, tax compliance becomes a competitive advantage, rather than a hindrance to growth.
With our partnership beginning in 2017, Avalara and Codal have collaborated on a number of innovative eCommerce experiences with complex technical requirements, one of which earned us the award for Best User Experience at the 2022 BigCommerce Agency Partner Awards —we'll discuss that project later.
Keep reading for insights around tax compliance in eCommerce and how our partnership with Avalara helps merchants resolve complex challenges and drive operational efficiency.
Tax compliance in eCommerce is a moving target
In response to a rapidly growing eCommerce market, the federal government has cracked down on remote sellers with aggressive tax policies. This includes economic nexus laws, which state that physical location doesn’t change your sales tax liability. So if you’re an eCommerce retailer based out of California that sells and ships a product to a customer in New York, you’re still responsible for collecting, filing, tracking, and paying the New York sales tax for that item.
There are over 13,000 tax jurisdictions in the US alone, each with their own laws and rates. These laws change constantly and they’re highly specific. For example, in Illinois, sweet snacks with no flour are considered candy, which means the seller must pay a 5% higher sales tax on them. And in New York, whole bagels can be purchased tax free, while cut bagels are subject to a sales tax, since they technically fall under the category of a sandwich.
When selling across state lines, merchants must comply with such standards, or risk expensive penalties, revoked licenses, and so on. Thus, businesses spend significant time, money, and resources to ensure they’re holding the right certifications, paying accurate sales tax on every online transaction, taking advantage of applicable tax exemptions, and keeping documentation organized for the sake of routine audits.
Long story short: Taxes are hard, especially for eCommerce merchants selling a wide range of products to customers around the world.
It’s no surprise that complying with strict, ever-changing state-by-state tax regulations can act as a hindrance to your business’ growth. Luckily, with Avalara, these workloads can be offloaded and automated via an intuitive SaaS product specifically designed for eCommerce businesses by a team of over 100 global tax professionals.
Avalara takes away the pain of taxes
By integrating Avalara for your eCommerce store, you can cut down on the amount of people, technologies, processes, and costs associated with maintaining tax compliance. The platform offers:
Real-time sales tax calculation at checkout, based on product, industry, jurisdiction, exemptions, and custom business logic.
Automated returns filing, from sales tax preparation, to remittance, to notice management.
Centralized documentation management for tax records, licenses, permits, and registrations.
AI-enabled retrieval, validation, and renewal of licenses and certificates to avoid both federal and state penalties.
Access to real-time and historical tax content, data, and insights to help optimize your tax compliance process.
Access to real tax experts who can help you navigate complex tax issues.
Avalara owns a comprehensive repository of structured tax content and data, consisting of over 9k tax codes, 20k industries, 30k jurisdictions, 300k product categories, and 900k rules. With all of this information, the platform can ensure your business maintains compliance, without requiring any significant time and effort from your team. And whenever the government changes a regulation, Avalara updates its database to reflect that change.
Returning to an earlier example, let’s say your eCommerce store sells candy in multiple states, including Illinois, where the sales tax for candy is 5%. If the state decides to raise it to 7%, this increase will be applied to all future candy purchases for your Illinois customers. This example shows how Avalara takes away the burden of keeping up with constantly evolving state-by-state regulations.
On top of providing a secure, scalable, and user-friendly platform, Avalara also integrates seamlessly with over a thousand other solutions, many of which you’re probably using right now to power your eCommerce business. This includes eCommerce platforms like Shopify and BigCommerce, ERP systems like NetSuite and Acumatica, and billing applications like Stripe and Sage.
Case study: Launching a tax compliant website for gifting alcohol products to large groups
Codal recently helped launch a new online store for Cocktail Courier, where users can browse a wide range of at-home cocktail mixing kits—alcohol included—and purchase them for friends, family, clients, co-workers, and so on. The brand faced many compliance challenges in making this new kind of eCommerce experience a reality.
Different states have different tax laws when it comes to the selling of alcohol products directly to consumers—and some jurisdictions simply don’t allow it at all. To help establish Cocktail Courier as the perfect solution for corporate gifting scenarios, our job was to design a fast, user-friendly experience that enables customers to send multiple cocktail kits to multiple recipients across the country—with a single transaction, followed by speedy delivery.
This required a complex business logic supported by best-in-breed technology. By integrating Avalara, we were able to develop a system that calculates a customer’s total cost at checkout, with all taxes applied based on the jurisdictions of each recipient. Avalara handles all of these calculations on the back end and with no human intervention required—greatly reducing administrative costs and complexities for the client. Also, whenever the auditors come around, Cocktail Courier has all of its necessary tax records in a centralized location—no missing documents, expired licenses, or incorrect registrations—which makes the auditing process quick and painless.
Get started with best-in-breed eCommerce solutions
Don’t let legacy technologies hold your business back from achieving its full potential. Codal’s team of eCommerce experts will help you reduce costs, streamline complex workflows, and enhance the customer experience by recommending and implementing cutting-edge tools like Avalara.
