Filing taxes for your online business can be time-consuming and overwhelming—especially once your business starts to grow.
If you’re selling on Amazon, you must know by now that for every transaction, Amazon charges 2.9% to collect sales tax. And that, in order to set up sales tax collection, you must get your state sales tax registration number to avoid any unpleasant surprises like collecting sales tax in a state you’re not even registered.
In this article we will discuss TaxJar: a tool designed to calculate and file your sales taxes easily. Read on to learn how it works, pricing, pros and cons, and main features.
What is TaxJar?
TaxJar is a service that helps entrepreneurs to keep track of the sales taxes they own in each state along with their tax processes and its businesses with easy-to-access resources. It also allows you to automatically file sales tax returns for the state of your choice.
TaxJar also has a Tax Advisor plan created for accounting professionals that provide sales tax management services to their clients.
Why You Should Get TaxJar
TaxJar is a trusted tool used by over 20,000 enterprises and it is a leading solution for e-commerce sellers of any size. TaxJar is an excellent tool that offers flexible options, sales tax management features, and automatic filing.
TaxJar is the right fit for your business if you need to file sales tax returns in multiple states, from multiple sales channels (marketplace and ecommerce) and prefer to streamline your tax process.
A sales tax nexus is when your business has a physical presence or economic connection to a state. Sellers have to file taxes according to each state´s legislation, which can be hard. Since Amazon keeps its FBA sellers’ inventory stored in different warehouses across the country, you might be affected by it. If you live in a state with complex tax legislation, like Texas or South Carolina, TaxJar is a lifesaver; it ensures you collect the right rate on every product in over 14,000 taxing jurisdictions.
How It Works
In order to use TaxJar, you need to link it to your seller account. TaxJar has clear step-by-step instructions on giving the proper permissions to TaxJar so it can work properly for Amazon.
Other e-commerce platforms that TaxJar can integrate are:
- Amazon Seller
In case your platform is not supported, you can try to import your sales data via CSV file.
On TaxJar’s dashboard, you can choose different categories:
- Auto Filing
- Collect Sales Tax and file them manually
- There might be a nexus, but without collecting
TaxJar is user friendly and easy to navigate. Users can access a range of system functions through the dashboard and view important data such as year-to-date sales totals, gross sales, taxed sales, and sales tax collected.
TaxJar has two options: Manual and Auto File
TaxJar instructs you on how to file sales tax returns. It also provides the necessary information to complete filings for each state’s website. It is your responsibility to file your taxes on time and meet all the criteria when you choose this option.
The main advantage of Auto File is that you don’t need to worry about deadlines, filing returns at multiple times, or submitting late returns.
This feature is available for all US States for an additional fee. Auto File is not included in the monthly TaxJar plan. You only need to use Auto File when it’s time to submit your tax return.
SmartCalcs is an API designed to calculate sales tax for anywhere in the U.S., whether you have a nexus or not. It also calculates international rates for Canada, Australia, and the European Union with VAT calculations, too.
TaxJar provides support resources and access to guides and getting started videos on the Help Desk page. The Help Desk includes matters on integrations with 3rd party ecommerce platforms. Direct product support is available via email only, or through a support request form the TaxJar website.
The Basic TaxJar plan starts at $19 USD a month per filing and state. This is for smaller businesses with under 1,000 monthly transactions to help them streamline the sales tax process. It includes email support, jurisdiction-level tax reporting, eCommerce website integrations, and multi-channel ecommerce platform data aggregation.
Custom Price Plus Plan
This plan offers 24/7 phone support, prioritized email support, account management and API onboarding. You can register multiple users on your account to access TaxJar, and assign specific roles to your team. You also get real-time tax calculations, XLS report exporting and advanced ERP integrations. The custom plan unlocks technical features that guarantee 99.99% uptime, address validation, and the developer sandbox.
The AutoFile fee is $25 USD for when you need to use it. To enroll, just click a button under the name of your state on the TaxJar dashboard. The option is available only when the submission window for that state opens. Annual subscribers pay only $20 USD.
- Ten auto files: $18.75 each
- 50 auto files: $17.50
- 100 auto files: $16.25
TaxJar offers a 30-day free trial for you to find out if this is the right tax solution for you.
- Helps you keep track of all your sales tax information and keep everything organized from a single place.
- Integrates different marketplace and ecommerce platforms.
- You can compile sales data from different channels and view key metrics on the dashboard.
- You can choose Auto File for your sales tax in every state of the U.S.
- TaxJar has a Help Desk with plenty of valuable sales tax information.
- A Facebook group where you can get your sales tax questions answered.
- An ongoing increase of its native integration features.
- If you already have a certified personal accountant (CPA), they can use TaxJar to make their work easier.
- Can become a bigger expense for large sellers.
- TaxJar doesn’t provide support for state sales tax registrations.
- Accountants don’t get access to support over the phone. Accountants can only contact TaxJar via email.
- Some new reports from a couple of states need improvement. TaxJar doesn’t get local legislation completely in some states.
- The current plans don’t fit all businesses yet, since some customers with more advanced needs will have to get in touch with TaxJar to discuss features.
- If you only file taxes in states with simple regulations, it only takes one or two tries to get the hang of it. In this case, TaxJar might not be necessary.
The sales tax return process and filing can be complicated to carry out, due to new and pending legislative changes. TaxJar helps you keep track of how much you owe for sales tax and makes it easier to file your sales tax automatically or monthly.
It is a solution to automate the process, but not completely. Businesses should still make sure they are fully aware of each state’s legislation and regulation.