Compliance for sales tax, value-added tax (VAT), and goods and services tax (GST) gets more complex as a business grows and expands to new locations. Since each country and state (and sometimes even city) creates their own specific tax laws, global tax compliance can be hard to manage.

With these challenges top of mind, many companies turn to a tax automation solution. These aim to take the guesswork out of compliance by automatically calculating and collecting tax from customers for the seller. It’s important to find the right tax solution, especially with so many choices in the market.

This guide will highlight what to look for as you search for the best tax solution for your business—including features and functionality you may want to prioritize. These are the questions our customers have told us they wish they had asked their previous providers. To get started quickly, you can download our RFP template with questions mapped to each of the following areas of evaluation.

Please bear in mind that the information provided in this guide does not constitute tax or legal advice. This guide has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax or legal advice. You should consult your own tax, legal, and other advisors when deciding which tax software is right for your business.

Understanding your tax obligations

Before you begin researching tax software, it’s important to understand tax compliance and what is required of your business. If you are new to indirect taxes, we have more tax resources available here.

Important areas to consider when evaluating tax software

Setup and implementation

Compliance can’t wait for a lengthy setup process since you risk penalties and interest for missed tax payments. If you have an obligation to collect taxes from your customers now, it’s important to ensure your tax software can be implemented quickly. If a solution requires a third-party plugin to work, it might take more time to get up and running. In addition, if the software requires engineering work to integrate, the onboarding process might look different than a solution built into your current tech stack.

While it might take time to research and decide on the right solution for your business, you should be aware of the setup time required once you have made your choice. In an ideal world, the tax solution should take days or weeks instead of months to implement.

Questions to ask any vendor

• What will the first 30 days with the software look like?
  
• How long is your typical implementation?
  
• What information will I need to complete the setup?
  
• Does your documentation include code snippets, detailed steps, and easy-to-follow examples?
  
• What resources do you have to help my team learn the software on their own?
  
• How will we test to ensure tax is being calculated correctly before going live?
  

Geographical support

Tax laws are specific to country, state, and other tax jurisdictions. To find out if a tax software is the right fit for you, ask yourself, “Where am I doing business today, and do I plan to expand to other regions in the future?” If a tax software doesn’t have coverage where you need it, it won’t serve its purpose. For a global company, it’s important to find a solution that can meet your specific geographical needs. Even more, if you intend to expand your business in the future, you should consider if the tax solution can provide coverage in those locations as well.

Oftentimes, tax solutions offer coverage in the US or the EU market. If you have tax obligations in both locations, make sure the solution has coverage in those areas or plans to build out that support in the near future.

Questions to ask any vendor

• What markets do you currently support?
  
• Are you planning to expand support for more markets in the future?
  
• Do you provide support to help us register to collect tax in new markets?
  
• Can you help us navigate local regulations when we expand?
  
• Can you dynamically select the correct tax rates based on our customer’s location?
  
• What are the steps to set up a new country, and how quickly can that be done?
  

Accurate, real-time tax rates

For a tax rate to be accurate, it must use the customer’s exact address to determine how much tax to charge. Some providers will only rely on ZIP or postal codes to determine the tax rate for a location, but this does not always generate the most accurate rate. Your tax solution should provide accurate, real-time, “rooftop level” rates upon checkout. This means the software is using latitude and longitude to pinpoint the exact location on a map, resulting in the most accurate rate for that specific set of tax jurisdictions.

On top of that, there are thousands of product tax codes used to determine how an offering should be taxed. Some tax software providers might only specialize in physical goods, and if your company sells digital goods or a combination of goods and services, they might not be the right fit.

Questions to ask any vendor

• How does your tax engine calculate tax rates?
  
• What does your software support in terms of product tax codes? Does my offering fall under your list of coverage?
  
• If we expand our product line, how easily can we add new product tax codes?
  
• How does your team ensure the tax rates and product tax codes used for calculations are kept up-to-date?
  

Filing and remittance

Once the tax has been accurately calculated and collected, it will need to be remitted to the appropriate tax authorities. While this can be time-consuming for a business, the right tax solution should make it easier. Since each country and state have different filing requirements, the solution should offer reports that are tailored to each market, making it easy for you to download the information you need and upload it to the website when it comes time to file.

Even more, a tax solution may offer a filing service or partner with other companies to file for you, using the information the solution provides. Taking advantage of these tools can minimize manual errors, while also saving you time.

Questions to ask any vendor

• Are your tax reports tailored to the filing requirements of each jurisdiction?
  
• Does your software provide due date reminders to ensure our team files on time in each location?
  
• What resources are available to educate our team on filing requirements for each region?
  
• How easy is it to download the relevant information to file each month or year?
  
• Do you provide resources that allow me to hand off my filing to a partner?
  

Pricing

As a forward-thinking business, you ideally want your tax solution to scale with you in a clear and consistent way. Consider the value and impact of the solution on your organization. When you’re thinking about pricing, consider the ROI in terms of time saved, time to adoption, and risk reduction.

We’ve found that solutions with usage-based pricing are the most scalable for sellers. Usage-based pricing allows you flexibility if your sales are lower a certain month, rather than always paying the same monthly fee no matter how many sales you make during a time period. A solution should understand that businesses are always changing, and a scalable solution moves with the business.

In addition, before you sign any contract, be sure to check for any hidden fees for support, implementation, or upgrades.

Questions to ask any vendor

• How is your pricing model structured?
  
• What can we expect to pay monthly?
  
• Is there an annual agreement or minimal contract commitment length?
  
• Can I switch between pricing models in a timely and efficient way?
  
• Are there any other fees outside of the monthly cost for the software that I should be aware of now?
  

How Stripe can help

Stripe Tax reduces the complexity of tax compliance so you can focus on growing your business. Stripe Tax helps you monitor your obligations and alerts you when you exceed a sales tax registration threshold based on your Stripe transactions. In addition, Stripe Tax automatically calculates and collects tax on both physical and digital products and services in all US states and 40+ countries.

Stripe Tax can help you:

• Understand where to register and collect taxes: See where you need to collect taxes based on your Stripe transactions, and after you register, switch on tax collection in a new state or country in seconds. You can start collecting taxes by adding one line of code to your existing Stripe integration or add tax collection to Stripe no-code products, such as Invoicing, with the click of a button.
  
• Register to pay tax: Let Stripe manage your tax registrations in the US and benefit from a simplified process that prefills application details—saving you time and ensuring compliance with local regulations.
  
• Automatically collect sales tax: Stripe Tax calculates and collects the correct amount of tax, regardless of what or where you sell. It supports hundreds of products and services and is up to date on tax rule and rate changes.
  
• Simplify filing and remittance: With our trusted global partners, users benefit from a seamless experience that connects to your Stripe transaction data—letting our partners manage your filings so you can focus on growing your business.
  

Learn more about Stripe Tax.