States generally collect sales tax at the point of retail purchase. If a consumer buys a pack of chewing gum at a grocery store, they pay sales tax in most states. However, when a wholesaler buys that pack of chewing gum from the manufacturer, the manufacturer does not collect sales tax. Likewise, when the grocery store buys products from the wholesaler, the wholesaler does not collect sales tax.
The nuances of collecting sales tax differ from state to state, so businesses that sell to many customers and in many states need to collect current exemption certificates from every customer indicating that they are exempt from retail sales tax.
Due to the number of potential customers and the expiration of the exemption certificates, companies turn to exemption certificate software to manage the process. The software also helps them comply with the relevant tax authorities and prepare for any audits that may occur.
Avalara produces exemption certificate software. The cloud-based application allows users to import existing certificates and automatically request, collect, validate, store, and access the certificates while also generating a range of management reports. It integrates into e-commerce sites, informing customers of the certificates they must provide and notifying them as their certificates are nearing expiration. Overall, exemption certificate software simplifies an otherwise complex and time-consuming process.
