Getting a handle on the magnitude that sales tax can impact your business can be difficult. As a software company, you're making sales across the different states, each of which have their own taxability and rate determinations.
To keep things simple, we put together a model to help calculate the potential drag (or cost) on revenue that sales tax represents for SaaS businesses. Based on that model, the average SaaS business that is non compliant with sales tax will spend about 4.3% of their revenue on dealing with historical compliance. For businesses with concentrations of customers in high tax states that figure can exceed 11% of revenue. This is revenue that your business could have otherwise spent on hiring engineering and sales teams and investing in other areas to grow your business.
Modern tax automation tools will help you calculate exposure in real-time. This saves you from having to engage in periodic engagement surveys and equip you with the information you need to ensure sales tax compliance. Couple this guide with our sales tax VDA playbook.
Sales tax noncompliance is an expensive and unnecessary burden on your business. It costs meaningful time and money if not addressed. The wasted money spent on non-compliance could be put towards use in your business to help grow and invest in the future.