What is the future of e-commerce compliance?
by October 21, 2021
The challenge of e-commerce compliance
It’s clear that the global pandemic has created a plethora of challenges for finance leaders and their teams. As online shopping has increased, it’s provided a clearer path to purchase and a more inclusive shopping experience for customers. However, the huge increase in e-commerce activity has created complexity of sales tax compliance for many companies.
To understand how consumer shopping behaviors impact e-commerce compliance, we partnered with a research firm and surveyed over 500 financial professionals to create ‘The Future of E-Commerce Compliance’ report. Download the full report here. And sign up for our webinar happening October 21 at 2pm ET to get insights from the architects of the report and learn how to manage your compliance strategy.
The e-commerce shift
Let’s look back at some e-commerce stats. About ten years ago, in 2010, e-commerce emerged as a revenue driver for businesses. E-commerce revenue grew 13%-17% annually until 2020, putting it 10 points ahead of overall retail growth. In 2018, consumers were evenly split on whether they preferred shopping online or in-stores. For many companies, selling online was still a smaller slice of revenue than the overall pie, but it had potential to grow.
Fast forward to 2020, of the companies surveyed, 74% have done more business in e-commerce since the start of the pandemic, and 78% believe their e-commerce business will only grow in the future. E-commerce sales as a percentage of overall retail sales rose from under 5% in 2012, to 12% in 2020. Put another way — during the pandemic, US retail sales grew by 44%.
The challenge for financial professionals
This massive shift in buyer behavior has accelerated the path to digital for many companies. However, there are a lot of obstacles to consider, such as sales tax compliance. As organizations move more of their business online, it’s likely their sales tax obligations will increase as well. It gets a lot more complicated when your customers buy online rather than a store.
It was easier to determine how much sales tax to charge when your buyer was in the store. You charge the sales tax rate for the address of your store, easy. However, when your shoppers buy online, things get complicated. You now have to determine the sales tax rate for each buyer depending on their location. If you have buyers in 25 states, that’s 25 states that may require you to collect and remit sales tax if you have economic nexus in those states. With this in mind, it’s no surprise that 88% of financial workers have faced challenges with sales tax compliance.
And it can’t simply be swept under the rug. As one financial professional told us, “The challenge is very obvious: when our sales tax is not compliant, we will not be able to continue our business.” Think audits, paying back taxes, or having any sales tax liabilities that could threaten the company.
Given the steep consequences, financial workers are doing everything they can to be compliant. But it’s not easy – 82% of those surveyed have had a negative experience with tax compliance. All of this complexity takes an emotional toll as well. Managing the stress that comes with tax compliance is another aspect of the financial professional’s job, especially since our research found that financial professionals are increasingly overwhelmed by the requirements.
The research is clear – paying taxes is one of the most common concerns financial professionals share. How can they juggle the many moving pieces of sales tax compliance while staying sane in the process?
Using automation to increase efficiency
Automation is the answer for addressing the most significant challenges of staying compliant, with confidence, without sacrificing efficiency. Today, four in five companies are using automation; the rest say they plan to do so in the near future. Of those who use automation, 60% report increased efficiency is a benefit, and 44% use automation to save time on tax activities.
As TaxJar’s SVP of Operations, Lydia Chen, notes, “If you want to be compliant, automating is really the only option that makes sense. It would take an army of people to perform all the steps necessary for a mid-market company to stay compliant – and that seriously cuts into your margins.”
It’s clear from our survey results that by automating sales tax compliance, financial professionals will feel more confident, prepared, and supported when it comes to compliance. We’ll dig more into how automation supports financial professionals during our webinar on October 21 at 2pm ET. Sign up here!
Eliminate the heavy lifting of sales tax compliance
Automating compliance helps you reduce human error, stay up to date with the latest sales tax laws and rates across jurisdictions, submit filings, and remit on time so that finance teams can focus on high-value, revenue-driving activities.
But how? TaxJar can help. Our cloud-based platform automates the entire sales tax life cycle across all of your sales channels — from calculations to reporting and filing, simplifying sales tax compliance. Contact a member of the TaxJar team today and see how we can help you stay compliant now and in the future.
Want to learn more about the future of e-commerce compliance? Get the full report and register for our upcoming webinar.
