TaxCloud: Sales Tax at the Speed of Commerce
One of the most frequent concerns we hear from online retailers about collecting sales tax is that it will simply be too costly. We’ve heard estimates that range up to $400,000 per year—which is insane. We don’t think that anyone should have to spend that kind of money simply to collect sales tax.
In fact, we don’t think that anyone should have to spend money to collect sales tax, full stop. That’s why we created TaxCloud, to give online retailers a free way to manage sales tax. Instead of charging to use TaxCloud, we receive a commission from states based on the amount of sales tax we help retailers collect.
That’s also why the Marketplace Fairness Act requires states to provide free sales tax software for retailers.
But even with the promise of free sales tax software and services, concerns about costs remain. Nothing is really free, the argument goes; there must be hidden costs somewhere.
So let’s look at the most common arguments we hear on why collecting sales tax online would be too expensive.
Keep in mind, we can only speak to how TaxCloud works, so all the information here pertains to TaxCloud and not to any other sales tax management software or service.
Training employees to use sales tax software is costly and time-consuming. TaxCloud was designed to be easy for anyone to use. From registration to going live takes as little twenty minutes. What’s more, once TaxCloud is activated for a store, there’s next to no upkeep. If we’re filing the store’s sales tax returns, we ask that they review their returns once a month. Other than that, retailers don’t need to think about it—they can just set it up and forget it. There’s no training involved, and anyone who can manage an online store won’t have any trouble using TaxCloud.
Necessary software upgrades cost money. Because TaxCloud is a real-time web service, not software that’s uploaded or downloaded, there are no upgrades. Tax rates are updated and new features are added behind the scenes, so retailers see those results automatically, without doing anything extra. And as always, there’s no charge for the service at all.
It’s too expensive to hire developers to set up software to work with existing systems. TaxCloud is integrated directly with the e-commerce platforms that most online retailers use to run their shops. That means that our developers work with the platform’s developers to make TaxCloud available to users. Retailers using e-commerce platforms that are integrated with TaxCloud don’t need to hire their own developers. If your e-commerce platform doesn’t support TaxCloud yet, then call them and ask when TaxCloud will be available—TaxCloud is free for platforms as well.
We’d have to hire an accounting staff just to keep track of everything. This is the beauty of sales tax management services: It’s all automated. There’s no need to calculate anything, or look up sales tax rates, or fill out sales tax returns, or even write a check to remit the sales tax that’s been collected. TaxCloud handles all of that.
We completely agree that there shouldn’t be any compliance costs associated with online sales tax, and we’ve worked hard to create a free service that handles every aspect of sales tax for retailers. Cost simply shouldn’t be a factor, and with TaxCloud, it isn’t.
Posted by TaxCloud 
Let’s say an online retailer is selling 0.5-liter bottles of water in cases of 24. At $6 per case, $1 million is equal to 166,667 cases of bottled water, enough to fill 125 fifty-three-foot tractor-trailer trucks.* That means that if you were selling $1 million worth of bottled water in a year to out-of-state buyers, then you would shipping out an entire truck of full of bottled water approximately every three days.
Assuming the average price of shoes is $50 per pair, $1 million is equal to 20,000 pairs of shoes. To make $1 million selling shoes in one year to out-of-state buyers, you’d need to sell about 55 pairs of shoes per day, every day, for an entire year.
Many apps go for about $1 each, so to earn $1 million selling apps, you need to sell at least 1 million apps. To sell 1 million apps in a single year, you’d have to sell 2,739 per day to out-of-state buyers, or slightly less than 2 per minute, every minute, for an entire year.
*A 53-foot tractor-trailer has approximately 4,000 cubic feet of carrying capacity, with a maximum cargo weight of approximately 50,000 pounds.
