Sales Tax Fundamentals
Get up to speed on the basics of sales tax
Over the past 20+ years, Musicnotes has changed the way people purchase and play sheet music. Since opening their digital doors in 1998, they have become the world’s leading digital sheet music retailer, providing content for every instrument and every skill level.
Like many companies who sell online, Musicnotes was impacted by the 2018 South Dakota vs Wayfair Supreme Court ruling that said states could set their own economic nexus thresholds. The company’s Chief Financial Officer, Dan Heiliger, knew that ruling would drastically change the way Musicnotes handled their sales tax compliance — and knew he had to do something about it, fast.
Staring at a long list of filing jurisdictions
When all they had to worry about was physical nexus, Musicnotes’s sales tax responsibilities were much simpler, according to Dan. “We were a Wisconsin-based company, only collecting and remitting sales tax in our home state,” he said. “Our tech team was able to create a table of sales tax rates for Wisconsin, and that worked until 2018.”
That all changed when the Supreme Court ruled in favor of South Dakota in the South Dakota v Wayfair case in 2018. After consulting with their CPA, Musicnotes determined that they would soon be required to collect and remit sales tax outside of Wisconsin. “Wayfair created a big, long list of filing jurisdictions.”
The Musicnotes tech team understood how much work it would require to create manual sales tax rate tables for all the places where they were now required to collect and file, but they didn’t want to hire another accountant just for this tedious task. So, they started the search for a sales tax automation solution.
Automate as much as possible
To begin the process of researching sales tax compliance solutions, Dan created a committee to find and evaluate sales tax compliance software which consisted of himself (the CFO), the chief technology officer, the manager of their web team, and the chief operating officer. The committee’s search started as many do: with an internet search.
Together, they put together a comprehensive list of sales tax automation software companies. After looking through multiple reviews online and researching the price options, the committee met with the TaxJar sales team. “It was a really good sales pitch,” Dan recalled. “We had a lot of back and forth questions to make sure we met our requirements and TaxJar put their best foot forward.”
Since Musicnotes is a high order volume business with thousands of transactions a day, the ultimate goal for Dan and team was to automate as much as possible. That’s why TaxJar AutoFile was a particularly attractive — and business-critical — feature. Musicnotes also needed a solid, reliable integration since they have a third party payment processor on their website.
The Musicnotes team was also impressed with the TaxJar dashboard. Having the ability to go back and see where they have filed in the past, and how much they paid, was important so they could keep an eye out for discrepancies.
“The dashboard is very user-friendly,” Dan said. “Since we’re a technology company, we can appreciate a nice website that has been put together well.”
Ultimately, the Musicnotes team decided to go with TaxJar based on price, value, the high-end dashboard, integration options, and automation capabilities.
Here’s what Dan has to say about their decision: “The pricing was there, Autofile was a big key, and the integration options were compatible with what we were looking for. TaxJar has great reviews online, so we felt comfortable with our decision to select TaxJar.”
From integration to automation in 20 states
From the beginning, it was important to the Musicnotes team that whichever sales tax automation software they went with, it had to have a solid integration with their website and third party payment processor.
The TaxJar technical support team worked with Musicnotes’s tech team to implement TaxJar without disruption.
“We have great access to the support team at TaxJar,” Dan said. And when issues do arise, he continued, “the response times are excellent.”
With the integration successfully in place, the Musicnotes team was able to automate sales tax filings in 20 states, a process that would have wasted significant time and money for the Musicnotes staff. More importantly, Dan spends less time worrying about receiving notices from states regarding how Musicnotes is handling sales tax.
“I’m a CPA myself, but tax is not my expertise. With TaxJar, we know we’re getting the right rates, saving me from worrying at night. I was worried we were going to get letters from states that we weren’t filing, or weren’t filing correctly. AutoFile has alleviated those concerns.”
Take your time to find the right solution
When asked what advice Dan has for other online sellers looking to automate sales tax, his answer was clear: “Do your due diligence and determine what key features you need for your business. Every business is different, but we focused on AutoFile and integration, two attributes TaxJar could provide us.”
Outside of the technical side of things, another reason Musicnotes decided on TaxJar was the team itself. “Transparency was a big key for us in selecting TaxJar.”
Transparency was a big key for us in selecting TaxJar.