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Edwin Watts currently collects sales tax for online orders in the 16 states where it operates its chain of 88 golf shops. But as the Florida-based retailer opens stores in additional states, as it recently did in Utah, it has not found it difficult to extend its tax collection software to automatically calculate sales tax for transactions, McCarter says. "No matter what state we have a store in, to collect sales tax we just punch in that city and county tax code," he says.
Sales tax software from most vendors that provide it—including Avalara, FedTax, Exactor, AccurateTax and CCH—also include services for remitting tax revenue on behalf of retailers to states and for preparing tax return forms that show the amount of tax collected and remitted. The software companies say they're also prepared to represent any client retailers that get audited for tax collection by states, to prove that their software collected and remitted the correct amounts. "As long as a retailer gives us accurate sales transaction data and doesn't commit fraud by trying to hide sales volumes, the retailer is off the hook in audits," says Charles Collins, vice president of legal affairs for Taxware LLC.
The cost of sales tax software can range widely. Avalara says its software starts at "a few hundred dollars" per year for small retailers. CCH, a unit of Wolters Kluwer N.V., offers a web-hosted Sales Tax SaaS product for a startup fee ranging from about $2,000 to $5,000, depending on a retailer's size, plus an annual subscription fee ranging from about $3,000 to about $20,000, depending on a retailer's transaction volume, says product manager Cory Barwick. The software typically takes 30 to 60 days to get up and running, he adds.
CCH has about 200 clients running that software, including some doing as little as about $100,000 a year in sales, Barwick says, adding that the software is designed to handle retailers with sales of up to $50 million or more. CCH also offers licensed software suitable for larger companies, he adds.
Under the Marketplace Fairness Act, retailers may have to pay none of that cost—or only a part of it, depending on what's in any bill that finally passes.
E-retailers unaccustomed to widespread sales tax collection, meanwhile, have at least a few more months to plan how sales tax will fit into their way of doing business.