How Does $6,000 Annual Software Cost Turn into $60,000?

A Texas academic recently claimed that remote sellers complying with sales tax regulations in Texas would pay “about a penny” per transaction. That’s crazy talk. If your company needs to comply with sales tax regulations in multiple states across the Union, your minimum cost for sales tax software from the largest companies will run about $6,000.

The problem is, that’s a minimum. For many, it’s also a spherical chicken. That’s a reference to a joke about how physicists would approach problem solving for a chicken farm. Their solution would begin with a spherical chicken in a vacuum — in other words, a solution that will always work, but which has no connection with reality.

That’s how the most popular sales tax solutions work. They assume that purchasers put items in a basket, have their sales tax calculated, check out, and have their total added to your sales total. It’s as simple as that.

Except when it isn’t. Take an ecommerce retailer, the simplest situation.

The shopping cart experience

Your customer puts three items into her shopping cart and the sales tax is calculated. You are charged for that calculation.

Your customer changes her mind about the color of the item. There’s another calculation, and you’re charged for it.

She leaves the basket and comes back on her coffee break. She sees that a purchase of $100.00 will get free shipping, quickly adds several more items, and there is another calculation. You’re charged for it.

Back to work. Your customer thinks about her purchases off and on during the afternoon and decides that she’ll pare down her total to $100.00 and then check out. After work, she tries several different combinations, calculating each time to see how low she can get her total without losing free shipping.

You are charged for each of those calculations.

At bedtime, your customer makes her final decision and checks out. You are charged again.

This isn’t an extreme example. Many online shoppers play with their shopping carts. Almost 70% of ecommerce carts are abandoned. Plenty of people pay with their carts and then abandon them. With software that charges you for every sales tax calculation, you can easily find that your monthly bill is 10 times what you were expecting.

Other industries

Retail isn’t the only industry that has to deal with sales tax. Construction, manufacturing, and many more will also have sales and use tax responsibility. Multiple invoices, multiple calculations — you need to know ahead of times what the steps along your customers’ path to purchase will be, and what they will cost you.

Or you can use Sales Tax DataLINK. We don’t charge you by the calculation or by the invoice. We have one simple price, so you have no surprises. 

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