For growing businesses, reaching customers around the world is easier than ever. But a global customer base means dealing with intricate indirect tax laws that can significantly complicate operations.
What’s more, noncompliance with these laws can lead to serious penalties, lost time, and reputational damage.
This is why choosing the right indirect tax compliance platform is essential. And while there are many global tax compliance solutions on the market, two in particular have become very popular: Avalara and Sovos.
In this article, we’ll look at these two products’ similarities and differences, and help you decide which one is right for you. We’ll also introduce a third product that you might not have considered for your global tax compliance needs.
Global tax compliance: Key challenges
Before we jump into the platforms themselves, it’s important to understand the issues that companies face when it comes to global tax compliance. There are a few different tax systems in use around the world, including value-added tax (VAT), goods and services tax (GST), and retail sales tax in the United States.
While VAT and GST function in a similar way, the terminology and the way they are applied vary. In addition, rates, the taxability of goods and services, and regulations governing obligations such as filing differ from country to country, and even within countries.
The sheer number of transaction types that companies have to deal with, coupled with the complexities of currency conversion, tax localization, and transfer pricing compliance, makes things incredibly complicated. Additionally, most companies are shifting toward e-invoicing and real-time transaction reporting, which makes global tax compliance even more challenging.
Managing these complexities manually has become virtually impossible and can lead to costly compliance failures.
At a glance
Avalara
Avalara has been building a reputation in the industry for more than two decades. The platform is widely recognized for its automation capabilities and extensive tax content databases, which are a boon to companies that have a global customer base. A primary selling point is Avalara’s seamless integration with a wide variety of business software tools through the use of APIs, with nearly 40 billion API calls made to their AvaTax program in 2022.
Sovos
Sovos has been around in one form or another since the mid-1980s, and it has a much broader scope than Avalara. Sovos doesn’t just cover sales tax, GST, and VAT; it also supports 1099 reporting, ACA compliance, and FATCA reporting. However, its strength lies in its focus on countries with complex VAT and GST policies. Its extensive local tax content and support for mandatory e-invoicing and continuous transaction controls help businesses navigate difficult international compliance challenges.
Feature comparison for global tax management
Now that we know a bit about each company, we’ll dive into some of their key similarities and differences:
Focus and scope
Avalara offers a full-featured suite of tax compliance solutions that cover the sales tax and indirect tax lifecycle. The platform supports real-time tax calculation, exemption certificate management, automated filing, audit readiness, and global tax compliance, making it a good choice for e-commerce and software companies and other businesses with multi-jurisdictional obligations.
Sovos is a somewhat more comprehensive global compliance engine. It handles everything, from sales tax, VAT, and GST to common international mandates, like e-invoicing and real-time transaction reporting. This means that Sovos is able to serve the needs of practically any large enterprise, anywhere in the world.
International tax compliance
Although Avalara’s AvaTax supports international tax compliance, including for VAT and GST, its global coverage is not always turnkey. Businesses operating in jurisdictions with strict local requirements will often need supplemental configuration, additional integrations, or additional tools to achieve full compliance.
On the other hand, Sovos is built around a deep local knowledge of international sales tax laws. This allows it to handle even the most stringent e-invoicing and reporting requirements for its clients. Although its API offerings are not as robust as Avalara’s, it does offer automated workflows that reduce manual data entry and the risk of errors.
Tax filing automation
When it comes to automatic filing, Avalara shines. The platform connects directly with tax authorities, which allows it to file returns and remit payments on behalf of your business. This streamlines the entire filing and remittance process, saving your team time. Additionally, Avalara’s dashboard was built with transparency in mind, allowing users to see filing statuses and deadlines in each jurisdiction.
While Sovos does provide some tax filing capabilities, they’re not as robust as Avalara’s. This is partly due to the fact that Sovos covers a much broader area in terms of both geography and functionality. Automating the filing process in certain areas outside of the U.S. will require some additional integration or the purchase of supplementary products. This can make for a more manual experience, and/or more time spent implementing Sovos and any necessary additional tools.
API and tax engine integration
Avalara is designed with API use in mind, so its product integrates seamlessly with a variety of ERP, accounting, and e-commerce platforms. Additionally, their AvaTax engine calculates tax burdens in real time, with granular jurisdictional accuracy that’s supported by a continuously updated tax content database. Avalara’s APIs are incredibly well-documented and are designed to support high request volumes.
Sovos also provides APIs that enable tax calculation and compliance data exchange, but the product is not designed around the API offerings. Most of the API offerings are designed around compliance document generation, e-invoicing, and reporting. Much like their APIs, the Sovos tax engine is very robust and capable of handling incredibly complex local taxation laws, but the setup isn’t as user-friendly as Avalara’s.
[blog-post-inline-cta]
Reporting, invoicing, and analytics
Overall, Avalara has a very robust reporting system that’s built on top of easy-to-understand dashboards and detailed analytics. These tools allow teams to monitor tax liabilities, audit trailers, and exemption certificate statuses. Avalara also comes with a selection of prebuilt reports tailored for specific filing and audit requirements. If you’re looking for more than what Avalara’s prebuilt reports can provide, it also allows you to build custom reports!
Sovos has equally extensive reporting features. However, as you might expect, it also provides support for international reporting requirements, giving users access to country-specific reporting formats and compliance documents. Sovos can also generate compliant tax invoices, which are required throughout much of the world.
Support and customer service
When you navigate to Avalara’s G2 page, you’ll find that the general sentiment is that while people generally love the product, they find the customer service to be lacking. This is important to consider, especially if you don’t have a tech-savvy staff that can typically figure things out on their own.
Sovos also has some mixed reviews on its G2 page, with people loving the automation features but not liking the fact that it’s a pretty complex piece of software that can take a while to understand fully. Again, this type of thing may present issues if your current team isn’t very tech-savvy or doesn’t have a lot of time to commit to learning how to use a new product!
Pricing and scalability
Given the scale that these companies operate at, they’re unable to establish pricing tiers for customers. Regardless of the platform you choose to work with, you’ll have to ask for a custom quote. Since these companies tend to work with larger enterprises, you can expect your quote to be in the neighborhood of thousands to tens of thousands of dollars per year, depending on the size of your business and its transaction volume.
However, since these companies are built for large enterprises, they are both incredibly scalable, meaning the services they provide will grow with your company.
Use cases and ideal customers
As with anything, the ideal product for you is going to depend heavily on your business use cases. Below, we’ve outlined a couple of common business cases that are best suited to Avalara and Sovos.
When Avalara is the better fit
Avalara is well-suited to U.S.-based businesses and e-commerce companies that need an easy-to-implement solution for sales tax and indirect tax compliance. Its strength lies in automating U.S. sales tax calculations, returns, and exemption certificate management, with added support for VAT and GST through its international modules.
Avalara integrates directly with hundreds of e-commerce (eg Shopify), ERP, and billing platforms (eg Stripe), making it attractive to fast-growing companies that want tax compliance to “just work” in the background without requiring a large in-house tax team.
Sovos, by contrast, is typically better aligned with larger, multinational enterprises that need a truly global solution spanning complex jurisdictions. Its platform covers not only sales tax, VAT, and GST, but also highly regulated areas such as e-invoicing, statutory reporting, and industry-specific compliance (like alcohol or insurance taxes). Sovos emphasizes continuous transaction controls and real-time transaction reporting requirements, which are increasingly mandated by governments worldwide. This makes it a strong fit for companies with operations in Latin America, Europe, and other regions with strict digital reporting laws.
Final thoughts: Which is right for you?
Ultimately, the right choice for your business is going to come down to your business’s own unique situation. If you have some international business and would benefit more from easy integration with the business software you already use, then you might want to use Avalara as your business scales. It’s always important to keep in mind the needs of your own business and select the product that fulfills as many of those needs as possible.
Larger enterprises that already have offices in multiple countries and that have highly complex international compliance needs will generally be better served by Sovos.
While Sovos and Avalara are large, established names in global tax compliance, Numeral has emerged as a new entrant in the space. Numeral provides its clients with deep localization while being easily scalable. It’s a modern alternative to traditional global tax compliance products that utilizes cloud-native architectures designed to handle sales tax, VAT, and GST in one unified platform.
Numeral’s real-time tax calculation engine is built on top of advanced compliance workflows, enabling businesses to automate filing, reporting, and exemption management throughout multiple jurisdictions, without having to worry about the complexity of managing multiple products. The platform’s focus on user-friendly interfaces and robust APIs helps empower tax and finance teams, allowing them to reduce risk, improve accuracy, and scale rapidly into new markets.
.jpg)
