Building Tax Compliance Into Your Retail Technology Strategy from the Start
Tax compliance often creates unforeseen friction in retail. With the increasing complexity of global supply chains, ever-changing tax mandates, and the prevalence of eCommerce and other online sales channels, retailers can no longer treat tax compliance as an afterthought. While tax plug-ins exist and manual processes can help you get by, these systems are rarely advanced enough to integrate with complex retail systems, let alone scale as businesses grow.
BTM Global recently co-authored a whitepaper with cloud-based tax automation platform Avalara to explore how integrating tax compliance early on helps retailers avoid risks, keep roll-outs on track, and maintain positive customer experiences. Let’s look at a few of the most important takeaways for retailers..
The Hidden Consequences of Ignoring Tax Compliance
Paying taxes is a given in retail, but compliance is nuanced and complicated. Too often, retailers don’t consider tax compliance until new systems have already rolled out or after their brand has either scaled geographically or branched into new commerce channels. While tax compliance can be addressed after the fact, this approach creates unnecessary friction that can affect everything from the customer experience to profit margins and even personal liability for CFOs and executives.
Late-stage tax implementations and tacked-on compliance apps can lead to:
- Bottlenecks with deployments and rollouts, leading to delayed timelines and unforeseen budget increases.
- A slower checkout experience and potentially inaccurate tax calculations that can erode customer trust and loyalty.
- Creating unnecessarily complex architecture just to maintain compliance when reaching the tax nexus in new regions or scaling.
- Higher regulatory scrutiny and potentially lower valuation during funding rounds or acquisitions.
Why Manual Tax Compliance Processes Fall Short
Instead of tax add-ons and plug-ins designed to simplify compliance, many businesses use manual processes. Relying on spreadsheets and native eCommerce POS settings often seems like a more agile solution because the tech overhead is virtually nonexistent, and these methods feel easier to customize for situations that are too nuanced for off-the-shelf software to address.
But as with eCommerce plugins with light features or overly simplified ERP extensions, manual processes create risk. Businesses that rely on spreadsheets and paper sales tax reporting can face:
- Increased audit exposure and financial penalties from calculation errors and tax oversights.
- Inefficient processes that divert resources towards finance and IT departments and away from business growth initiatives.
- Missed opportunities to expand into new markets with more complex tax rules.
Why Purpose-Built Tax Compliance Wins
Basic tax plugins are designed to get a store up and running fast, but they struggle to keep it growing. Meanwhile, manual tax processes are prone to human error, and the customizability of spreadsheets and formulas can only go so far.
A scaling business can’t afford to have gaps in tax compliance. Rather than treating taxes separately from the systems processing each transaction, compliance can be built into the technology infrastructure from the beginning. By integrating taxes with POS, ERP, and eCommerce systems rather than treating taxes as an add-on, retailers can:
- Automatically calculate taxes in real time using transaction data from the systems already running the business.
- Expand into new territories, sales channels, or product categories without complicated workarounds to meet new tax obligations.
- Improve the customer experience with instant tax calculations that don’t slow down the checkout process.
See How an Integrated Approach Works
The cost of addressing tax compliance from the beginning is often much lower than dealing with regulatory penalties or reworking integrations that weren’t designed to support business growth from the beginning. By combining BTM Global’s expertise in retail system integration and POS transformation with Avalara’s automated global tax compliance platform, retailers can manage taxes in any market without being held back by compliance issues.
Want to learn more about building tax compliance into your business architecture?
Read the complete joint whitepaper co-authored by BTM Global and Avalara for practical strategies to future-proof your infrastructure and transform your digital roadmap.
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