The modern SaaS company uses a host of billing, quoting, subscription management, and payment tools, all of which need to display the relevant tax rate. It can be hard to identify which part of your financial stack should fetch and then subsequently record the sales tax amount. Identifying the appropriate insertion point to call your sales tax management tool from your billing system can reduce conflicting or duplicate transactions. This can impact accuracy at filing time.
Should I record sales tax at the time of quote, invoice, or receipt of payment?
How does my billing implementation change when I introduce sales tax?
How should I handle self-serve transactions if the invoice is only created after a checkout session is complete?
After reading this guide, you will know at what point in a transaction lifecycle you should be calculating and including sales tax for remittance. Getting sales tax compliant can be straightforward. Couple this guide with the 8 most common sales tax mistakes.
A common misconception is that sales tax only needs to be recorded for filing purposes after payment from the customer has been received. Unfortunately, treating the calculation and return preparation steps as distinct activities is a mistake. Most states require companies to remit tax for transactions invoiced in the filing period, regardless of whether the payment has been received yet.