Tax Compliance Software Overview
What is Tax Compliance Software?
Tax compliance software provides organizations with accurate local and federal tax calculations, and automates tax form filing and reporting. Leading tax compliance vendors offer separate applications to manage particular kinds of transactions and their associated taxes.
This type of software can help organizations maintain compliance and stay apprised of regulation changes across various tax types, including:
- Income taxes
- Employment taxes
- Corporate taxes
- Sales taxes
- Excise taxes
- Value-added taxes (VAT)
Beyond these capabilities, tax compliance software provides management of other tax-related tasks. These include exemption certificate search and management, e-way bill processing and tracking, returns processing with multi-jurisdictional compliance, and tax data analytics and audit reporting.
Within the tax compliance software landscape, vendors may focus on specific segments of the consumer market. This is typically based on company revenue size:
- Smaller businesses making 10 million or less
- Midsize businesses making between 10 million and several hundred million
- Enterprises making anywhere north of 500 million
However, not all vendors focus on a specific market segment, and many have offerings that are well suited for all business sizes. TrustRadius currently does not have a ‘company revenue’ filter for sorting reviews, but the ‘company size’ filter can serve as a useful proxy.
Sales Tax Software
Sales and use tax compliance apps calculate and process appropriate taxes to be levied across jurisdictions. Value-Added Tax (VAT) apps track regulations and automate calculation across complex scenarios. Leading tax compliance software also supports customs tax management for international sales. And many vendors offer managed tax filing and audit reporting for both corporations and small businesses.
Tax Compliance Software Integrations
Integrations with other third-party software are essential for tax compliance software. Sales tax compliance software may integrate with ecommerce platforms or shopping cart software, for instance. Other common integrations are with corporate ERP, budgeting and accounting software, procurement, and supply chain. Leading vendors tout integrations with many popular applications.
Tax Compliance Software Features
Types of taxes managed by tax compliance software include:
sales & use tax
value-added taxes (VAT) or goods and services taxes (GST)
employee income tax
customs tax & tariffs
Common features of tax compliance software are as follows:
geolocation for correct tax assessment
return filing and tracking
e-way bill management
tax calculation & payment processing
tax exemption processing & management
automated complex scenario management (e.g. tax holiday)
exemption certificate storage and search
tax data analytics
Tax Compliance Software Comparison
Before investing in a tax compliance or sales tax software, consider the following key factors:
Scope: does your business operate across borders or within the boundaries of one country? If you’re running an international business, then you’ll need a tax compliance software solution that can calculate the appropriate taxes across country borders. Not all tax compliance software solutions include calculation of cross-border and other international taxes.
User-friendliness: how user-friendly is the software? Taxes can be difficult enough to calculate on their own, so your software should be as easy to use as possible. When you start evaluating different products, check to see if the vendor offers a free trial. Free trials are often one of the best ways to get ‘hands-on’ experience with the product before making a purchase. You can also check TrustRadius’ ‘usability’ product rating on a product’s scorecard to see how current customers rate a product’s overall ease of use.
Cost: ultimately, tax compliance software is meant to help your business save more money and avoid costly and lengthy audits. Make sure the tax compliance software you’re considering will end up saving you more money in the long-run than it will cost you. Some tax compliance software is focused more on serving the needs of enterprise companies, while others focus more on smaller businesses. Enterprise-oriented tax compliance software will likely be too expensive and too complicated for many micro and small businesses.
Tax compliance software is often cloud-based and available on a per month subscription basis. Lower-tier plans support a relatively limited number of monthly transactions. Leading tax compliance software vendors offer a range of applications supporting the needs of specific industries (e.g. manufacturing), global corporations operating in multiple countries, or modules for only the specific kinds of transactions needed.
Additionally, some leading vendors provide all-in-one offerings for small and midsize businesses. These support management of local taxes, requisite sales and vendor transactions, document filing, and reporting in a single platform.