Delivering Consistent Consumer Experiences With Tax Compliance

In today’s digitally driven world, consumer shopping habits are reshaping the world of retail. KPMG reports 78 percent of consumer and retail executives plan to invest more into e-commerce in the coming years. However, expansion plans should extend beyond developing a solid business strategy and identifying key markets based on consumer demand. To ensure sustainable growth, retailers must carefully consider tax compliance as a crucial element of their growth strategies. Here’s how ...

Charting a Path to Expansion With Clear and Accurate Tax

Retailers can navigate their tax landscape by first establishing a thorough understanding of what they sell and where, particularly regarding product-specific taxes. The 2018 Supreme Court decision in South Dakota v. Wayfair, Inc. significantly impacted the tax landscape by ruling in favor of the state’s imposition of sales tax on remote sellers. This case defined a new economic nexus based on the amount of sales into a jurisdiction, meaning retailers may be obligated to charge, collect and remit sales tax even without a physical presence in that area. When considering expansion, retailers must have a comprehensive understanding of what channels are in play, whether that be brick-and-mortar, digital, and/or a marketplace presence.

International tax laws can add further complexities. Some retailers mistakenly assume tax calculations are uniform across all European countries, only to discover that value-added tax (VAT) rules and rates differ by nation. While tax calculation is rarely required at checkout as in the U.S. due to tax-inclusive pricing in most VAT countries, the invoicing, reporting and filing requirements are more complex. By acknowledging these potential challenges, retailers can develop a tax strategy that effectively addresses the intricacies of both international and domestic markets.

Answering the Call for Automation

Tax automation alleviates an organization from manually tracking ever-changing tax rates and rules. This efficiency is crucial for current operations and becomes even more vital during expansion into new geographies or new sales channels.

Automated solutions ensure consistent and accurate calculations across all channels, including complex multichannel transactions like “buy online, pick up in-store" (BOPIS) or “buy online, return in-store (BORIS)" purchases that 87 percent of retailers have adopted. Consider the benefit of last-minute changes to tax legislation (e.g. sales tax holidays) that can be updated seamlessly, thereby creating a stronger customer experience and reflecting the viscosity of the brand.  

Continuous Compliance for Customer Satisfaction

Often overlooked in expansion strategies, tax compliance can significantly impact customer experiences. Inconsistent calculations across various ordering channels can be obvious to customers, even when the difference is small. For example, a restaurant using different tax solutions for its mobile app and in-store point-of-sale (POS) system might charge slightly different amounts for the same order. A regular customer accustomed to online ordering would quickly notice even a penny’s difference when ordering in-store, impacting their experience with, and impression of, the business.

To prevent discrepancies, businesses should leverage a single, automated solution across channels — consistency and accuracy are key. 

Choose a Strategy That Grows With You

Improper and inaccurate tax calculation is a high price to pay. As businesses expand, an automated tax solution becomes a critical part of the tech infrastructure. Leading retailers must complement their growth strategies with tax compliance to prioritize personalized and transparent omnichannel experiences that capture customer attention and, perhaps more importantly, customer loyalty.

Pete Olanday is the director of consulting, vertical solutions at Vertex, a tax compliance solutions provider.