Choosing the Right Sales Tax Automation Software for Your Shopify Store: An In-Depth Analysis

Shopify merchants have been looking for easy ways to manage sales tax compliance because it's such a burden. It consumes their money, energy, and precious time.

Many Shopify merchants were surprised when they learned about their liabilities because they thought Shopify would automatically collect and remit their sales tax. In fact, many of them shared their sales tax horror stories online, and many admitted that they needed help because they could not understand the complexities of the changing tax laws and rates.

Due to this, many have already used sales tax automation solutions to help them solve this issue. If you haven't thought of automating your sales tax, perhaps it's time to reconsider.

According to them, they saved time and money by automating their sales tax compliance because it helped them avoid penalties, interests, and charges. It also gives them more freedom because they now have more time to spend on growing their business and they can do so confidently without worrying about tax because sales tax automation tools keep them compliant.

Understanding the Challenges of Sales Tax Compliance

As a business owner, your goal is to make more sales and when you establish a nexus, you should comply with sales tax requirements. 

Here are some of the potential repercussions of sales tax non-compliance.

Penalties and fines

You operate your business to make money and the last thing you would want is to spend your profits on penalties and fines, which is likely the case when you do not take sales tax compliance seriously.

Non-compliance could lead to fines and penalties from state and local tax authorities. And if you keep on ignoring it, the penalties will accumulate over time, especially since authorities impose daily interest on overdue taxes.

This could significantly impact your business because non-compliance could lead to back taxes owed when the merchant must pay the full amount of uncollected taxes from their funds.

Interests on unpaid taxes

Another potential issue that could hinder your finances is the accumulated interests. The IRS will charge interest on late or unpaid taxes. 

When a Shopify merchant refuses to pay the tax they owe, the amount will accumulate. This can strain cash flow, especially for small or medium-sized businesses.

Audits

An audit is one of the worst things you would face with non-compliance. And you will surely not like it when you are subjected to one as it could take months.

During an audit, your business operation will likely be disrupted. A governmental tax authority will check your documentation and record-keeping thoroughly, so you should ensure everything is well-documented. Otherwise, it could be used against you.

Audits can be expensive and go beyond sales tax because when investigators suspect other broader areas, including income tax, it can take longer and cost more. The costs and resources associated with an audit can be significant, especially when your business operates in multiple states.

Risk of losing business licenses and permits.

Prolonged non-compliance can lead to suspension or revocation of your business license or permit. But this will only happen after tax authorities make multiple attempts to collect your overdue taxes and penalties.

When your license or permit is revoked, you can't continue to operate your business. And this is probably the last thing you would want.

Damaged reputation

When your tax issues and compliance failures are publicized, it can potentially taint your business' reputation and affect customer trust. 

Reputational damage can also affect your business relationship with your partners, suppliers and affiliates.

Possible legal actions

If you are negligent of your sales tax obligations despite repeated warnings and accumulated penalties, tax authorities may pursue legal action against you.

Legal actions are the last resort and they can be disruptive and costly. Also, the authorities can freeze your assets and impose liens on the business' property, which could affect your financial stability.

Key Features To Look For Sales Tax Automation Software

When looking for an automated sales tax tool, you have to consider numerous factors before investing in one to ensure it will be a good investment for your business. If you are at a point where you are considering which among the popular sales tax automation providers you should choose -- Avalara, TaxJar, Vertex, or Kintsugi -- then here's a checklist that you should satisfy.

Accurate tax calculation

Sales tax calculation tools use artificial intelligence that automatically updates tax rates for accurate calculations. You should be mindful when it comes to this because even popular sales tax automation providers receive complaints about miscalculations from their unhappy customers.

Automated filing

Sales tax automation providers offer several services, but not all of them deliver, especially regarding automatic filing. You have to make sure that your provider really files your taxes; otherwise, you will have to pay the penalties and interest.

Also, you automate sales tax compliance with the expectation that your sales tax will be filed automatically, and you will not have to think about filing. Unfortunately, not all companies deliver. You will be surprised at how many customers complained about this.

User-friendly interface

While all sales tax automation providers want to deliver, many forget to consider the importance of a user-friendly interface. The tool should be easy to use so that even those new to the app or not tech-savvy can navigate it on their own in just minutes.

A user-friendly interface affects the overall user experience. So, it is very important to consider this.

Seamless integration

Most sales tax automation tools are designed to work with your existing ERP, HR, and e-commerce to make automation a breeze. So, make sure that your choice supports your current platforms because some do not.

Also, others claim to work with certain platforms, but they do not integrate seamlessly, which results in miscalculations and other tax issues. Fortunately, some tools allow seamless integration for a real hassle-free automation experience.

Scalability

Scalability is another factor that should be considered if you are planning to automate sales tax compliance. Your provider should be able to grow with your business when you expand to new markets or increase your sales volume.

Every business owners dream of expanding their business and scalability helps you adapt to the additional demands, so you can continue to enjoy the available opportunities. Scalability allows your company to distribute workload efficiently and avoid downtime.

Customer support

Another benefit of automating sales tax compliance is the 24/7 support you will get from the providers. However, you should research and check the reviews because not all attend to their customers' needs immediately.

Customer support will make or break a company, especially when dealing with services as complex as sales tax compliance. However, when you choose the right company with the right people, you will always be supported.

Top Sales Tax Automation Providers for Shopify Merchants

More and more Shopify merchants have automated their sales tax compliance for peace of mind and confidence because they can't manually handle its complexities. Keeping up with the ever-changing tax policies and rates while working on their business was too much for them. They find it more practical to leave the sales tax to the experts so they can concentrate on their business growth.

Even Shopify features the Shopify Tax Platform, which allows merchants like you to integrate your preferred tax service directly into your Shopify account. Initially, many Shopify merchants felt that the platform took away their power to choose the tax service provider of their choice. However, with the launch of the Shopify Tax Platform, your trusted tax services provider will be able to manage your store's end-to-end compliance.

Among the most popular sales tax automation tools that you can integrate with your Shopify are the following:

Avalara

Avalara is one of the most popular sales tax automation providers in the market. It was founded in 2004 and several business owners have used it for sales tax automation compliance.

It offers an extensive range of tax automation features to cater to small, medium, and large enterprises. Among the best things about Avalara is its flexibility in handling complex tax scenarios, including international taxes (value-added tax (VAT) or goods and services tax (GST)) and exemption certificate management.

However, the integration is not as seamless, with some technical challenges reported, such as integration difficulties and system glitches. There are also complaints about its onboarding process, with some customers finding the initial setup challenging and time-consuming.

All of its premium features come with a hefty price tag, which might be too expensive for small businesses. Also, a number were very disappointed because they paid so much more than they expected. This turned their Avalara experience into a nightmare because they no longer see the value of their money due to the unexpected plan upgrade that they didn't approve in the first place.

Tom A., an Avalara customer, said the company delivered a "horrible product" and "horrible service." He detailed several issues, including its questionable pricing.

"Avalara will automatically upgrade you to [a] higher usage tier without your permission. They will charge exorbitant 'Upgrade Fees'. Because their QBO integration is so bad, you end up having to use 3x the usage you expected, which then costs you 3x what you expected. We literally paid more because their product was worse than expected," Tom wrote.

Another disadvantage of Avalara is its poor customer support. Several customers paid extra to receive premium customer support. Unfortunately, to their dismay, they still needed to wait for a day to receive responses to their concerns.

"Premium support is 24 hours per email response," Adam S. wrote.

Adam added that support would close tickets even without providing a solution to the problem they raised. Instead, Avalara reportedly told them it was a "user error."

"After repeatedly following up, they will admit the error was internal and not user [a] error but not offer any explanation," he added.

Here is an overview of Avalara's performance.

Pros

• Comprehensive tax automation
• Extensive integrations
• Real-time tax calculation
• Scalability
• Compliance management

Cons

• Poor customer support
• Complex and time-consuming setup
• Expensive
• Technical issues
• Limited customization

Vertex

Vertex is another go-to sales tax automation provider among retailers. It offers a range of features to help business owners manage tax compliance, including sales and use tax, value-added tax (VAT), and other transaction taxes, making it suitable for businesses operating in multiple countries with diverse tax obligations.

It also supports robust integrations with various enterprise resource planning (ERP) systems such as SAP and Oracle, which is beneficial to large organizations with complex systems.

However, its feature and volume-based pricing model make it costly for large enterprises with complex needs. Small and medium enterprises also find the pricing high for their operation.

Aside from the pricing issues, Vertex customers have several complaints about the software. While it promises to automate sales tax compliance, the experience wasn't smooth because the setup wasn't easy and they had to do a lot of things to make it work. And to make matters worse, customer support was reportedly non-responsive.

"Be afraid. Be very afraid," one Vertex customer said, adding that Vertex should have mentioned that "'Vertex Premium' still requires a lot of attention from the users."

Customer support was reportedly only available via email and the response was "slow," leaving customers frustrated, especially when they were in a hurry to get an answer to their concerns. Unfortunately, they can't call someone for an instant answer.

Another Vertex user echoed the same sentiment, seemingly questioning the automation system because they still need to do a lot of work. According to them, "Lots of extra work involved in Sales Tax Credits and Certificates."

Another Vertex user found the software "clunky," suggesting it was not user-friendly. The customer also felt that Vertex was quite costly compared to other sales tax automation providers.

"It's got an outdated user interface and it's fairly expensive. The implementation was fairly laborious," the Vertex customer said.

Here is an overview of Vertex's performance.

Pros

• Comprehensive tax automation
• Extensive integrations
• Real-time tax calculation
• Scalability
• Compliance management

Cons

• Complex initial setup
• Challenging user interface
• Expensive
• Slow customer support
• Technical issues

TaxJar

TaxJar is generally well-received as it has been operating for over a decade and delivers. Small and medium-sized businesses (SMBs) love TaxJar for its automation capabilities. TaxJar helps them with tax calculation, nexus tracking, reporting, and filing.

The tool reportedly helped them easily manage sales tax compliance and even saved them time and money. Many were very pleased with TaxJar and said it was worth their money.

However, TaxJar altered its plans, and some customers were not pleased with it. Some even felt that they no longer got their money's worth.

"Used to be good, [now] it's just an overpriced poorly supported app," one TaxJar customer wrote, adding that "This company only cares about profits, not quality products/services."

According to the customer, TaxJar used to provide support and assistance with configuration, but it suddenly stopped. They were told it was "self-service," but the support articles were reportedly not helpful because they lacked "real explanation of the configuration of how the system works."

Carlton H. also opted for TaxJar when they decided to automate their sales tax compliance. However, they felt that it was a waste of money.

According to Carlton, TaxJar was great at marketing because they were convinced it could integrate their order system into it. They tried custom API, but it didn't work, and it reportedly calculated higher tax rates than Shopify.

"TaxJar has been the most disappointing experience our business has had in at least the past 3 years," Carlton wrote. "Not only did TaxJar almost always calculated higher rates than Shopify, but it is unable to handle certain types of very legitimate tax exemptions (like partial R&D exemptions), they thereby leaving you with the choice of filing manually (in which case TaxJar is COMPLETELY USELESS), or overpaying."

Also, setting up multiple marketplaces can be complex. Those who sell on Amazon, eBay, Shopify, and other e-commerce platforms said they had trouble connecting multiple accounts. And while TaxJar can file your taxes automatically via its AutoFile feature, it will incur additional fees per filing. This costs more for businesses operating in multiple states.

Pros

• Intuitive platform
• Automated filing
• Seamless multi-channel integration

Cons

• Pricing issues
• Complex setups for multiple marketplaces
• Additional pay for AutoFile
• Customization constraint
• Limited customer support

Kintsugi

Kintsugi is another sales tax automation provider that is becoming popular among Shopify merchants. The company only began operating in 2021.

Kintsugi uses artificial intelligence (AI) to automate your sales tax compliance in three steps -- (1) connect and monitor, (2) register and collect, and (3) remit and file. It is trusted by leading businesses worldwide, including Cardinal Robotics, Flywheel, PaddleSmash, Avid Armor, The Hat Pros, Fondo, and more.

Shopify merchants using Kintsugi for sales tax automation have nothing but praise for the platform due to its performance. It effectively streamlined tax compliance while keeping them compliant with up-to-date filing.

Kintsugi reportedly helped them save time and money, allowing them to focus on their business growth confidently because Kintsugi keeps them compliant.

Kintsugi also offers many free features that Shopify merchants can take advantage of because the same features are available for a fee from other providers. Plus, you do not have to input your credit card because Kintsugi does not require it. There are no onboarding fees, no implementation fees and no long-term contracts.

One Kintsugi customer said they used the platform's free nexus tracking, which saved them money from potential penalties.

"Kintsugi's **free US sales tax nexus tracking feature has saved me thousands of dollars in potential penalties, "**Fashionsaura wrote. "Their customer support team is knowledgeable and responsive, and the app is incredibly easy to use. "

Among the standout features Kintsugi offers that beat the other popular sales tax automation providers are its intuitive interface, accurate calculations, and the quality of customer support. Kintsugi offers 24/7 support via Slack. You can reach out anytime if you have any concerns, and within minutes, you will be connected to knowledgeable customer support or a tax expert to address your concerns.

Due to its outstanding performance, more and more business owners have already shifted to Kintsugi. And their transition from another provider to Kintsugi was smooth.

One user previously used TaxJar and decided to switch to Kintsugi and the experience was reportedly "straightforward and easy."

"The app's user-friendly design and exceptional customer support have made managing sales tax a breeze. Highly recommended," Infinity Ideas wrote.

An Avalara customer also transitioned to Kintsugi and it was seamless.

"Transitioning from Avalara to Kintsugi was quick and easy. The app's intuitive design and excellent customer support have made managing sales tax simple and efficient," Fancy Shop wrote.

Kintsugi also offers transparent pricing, so there are no surprises when it comes to how much you will pay and what services you will get to enjoy. In this way, Kintsugi saves you from disappointments and unhappy customer experiences.

It can accommodate businesses of varying sizes and growth stages. Kintsugi can grow with your business and support you as you grow your sales, enter new markets and diversify product lines amid your evolving compliance needs.

Kintsugi customers are generally happy with the product and customer support they receive and have no complaints.

Pros

• Scalability
• AI-powered automation
• Accurate tax calculations
• Easy and fast onboarding
• User-friendly interface
• Seamless integration
• Transparent pricing
• Cost-effective tax solution
• Knowledgeable and responsive customer support

Cons

• None

Shopify Merchants Recommend Kintsugi

The right sales tax automation software will help your business's long-term growth and compliance. As a Shopify merchant, you should choose a sales tax automation provider that aligns with your business goals, budget and compliance needs.

Kintsugi ticks all the boxes, from accurate calculations to auto filing, intuitive interface, seamless integration, and top-notch customer support. There is nothing to complain about Kintsugi and other Shopify merchants who have been using Kintsugi recommend it.

"Kintsugi is exactly what I was looking for, and I highly recommend it to every eCommerce business I know," E-Mart wrote. "Now, I never even think about taxes — Kintsugi handles it all."

"Kintsugi has been a lifesaver for my Shopify store!" wrote Joylike, another Shopify merchant. "The app seamlessly automates sales tax calculations and filings, saving me hours of time and reducing my stress levels. The setup was easy and the support team is top-notch. Highly recommend!"

Kintsugi stands out when it comes to sales tax automation compliance providers among Shopify merchants. So, don't take chances with others and try Kintsugi today.

Book a demo now or sign up for free.

Sources

[1] Guidance. https://www.guidance.com/blog/benefits-sales-tax-compliance-automation [2]Avalara. https://newsroom.avalara.com/2024-03-26-Avalara-Survey-Finds-Businesses-Are-Turning-to-Automation-to-Manage-Tax-on-Purchases [3] UserGuiding. https://userguiding.com/blog/ux-statistics-trends [4] Khoros. https://khoros.com/blog/must-know-customer-service-statistics