When it comes to sales tax compliance, e-commerce and software companies face some challenges that more traditional businesses don’t. Sales tax laws governing digital commerce and services vary widely from jurisdiction to jurisdiction, and they change frequently.
Furthermore, selling goods or services online means staying on top of tax regulations and tracking economic nexus in every jurisdiction where you have customers — potentially in all fifty states and dozens of countries.
In addition, staying in compliance can be even more challenging if your business is growing rapidly, selling through multiple channels, or using a combination of billing platforms.
So it’s important to use a reliable compliance platform to calculate and manage your sales tax responsibilities.
Two of the most prominent options for sales tax compliance are Vertex and TaxJar. In this article, we’ll explain everything you need to know about these two solutions, so you can choose the one that’s right for your business. We’ll also introduce a third, newer option that is making an impressive name for itself.
At a glance
Vertex
Vertex was founded in 1978 and has focused on tax technology and compliance solutions for sales and indirect tax ever since. It’s known for working with large enterprise clients and integrating with complex ERP platforms, including Oracle, SAP, and NetSuite.
Vertex provides users with a suite of sales tax compliance tools, such as its pinpoint-accurate rate calculations backed by comprehensive tax data, that help businesses handle complex sales tax scenarios. With its extensive feature set, Vertex is often a good choice for larger enterprises.
TaxJar
Founded in 2013, TaxJar is a relative newcomer to the sales tax compliance space. Nonetheless, it has built an impressive reputation, which led the payment giant Stripe to purchase the company in 2021.
TaxJar takes an API-first approach to sales tax compliance, with a focus on fast-growing U.S.-based SaaS and e-commerce companies. Its platform was designed with ease of use (and deployment) in mind, providing simplicity without sacrificing accuracy or effectiveness. TaxJar offers real-time sales tax calculation, an economic nexus dashboard, and streamlined autofiling.
Key considerations
Online businesses need to consider a few issues related to sales tax that brick-and-mortar businesses typically don’t have to worry about, such as:
- Nexus tracking: Monitoring an e-commerce or SaaS business’s progress toward reaching economic nexus thresholds is essential, especially when the business is expanding quickly. TaxJar has a nexus-tracking dashboard that alerts users when they approach or meet thresholds.
- Geographic reach: If you plan on doing business internationally, you need a sales tax compliance solution that can grow with your business, is equipped to handle international sales and use taxes such as VAT, and can adapt to the ever-changing international sales tax landscape. Vertex offers expansive global tax coverage.
- Product types: Often, physical goods, digital products, and SaaS are taxed at different rates, and the taxability of digital goods and services varies from place to place. This is why it’s crucial to use software that can distinguish between different product types and apply the appropriate sales tax rates. Both Vertex and TaxJar can accurately track product types and tax rates, but Vertex is much more robust for businesses with international clients.
- APIs and integration: Having fully integrated systems is key when it comes to scaling a company, which is why using software with the right APIs and integrations is important. When your ERP system, sales tax compliance software, and e-commerce platform are integrated, you need to devote less time to manual data entry, and there is less risk of costly errors. TaxJar is built with APIs in mind, so it’s easy to integrate with your existing software stack.
- Accuracy of sales tax rates: Charging accurate sales tax rates is central to compliance; overtaxing or undertaxing your customers could lead to additional fees or penalties. That’s why using software with the latest sales tax data is crucial. While both Vertex and TaxJar provide accurate domestic sales tax rates, Vertex is much better in terms of international data.
Feature comparison
In addition to these considerations, there are a few other features that you should pay attention to when choosing a sales tax compliance solution for your business, including:
Focus and scope
Vertex was built with enterprise clients in mind. It has an incredibly powerful and accurate tax engine designed to address a wide variety of taxation and compliance needs. The platform supports multi-jurisdictional sales tax and other indirect taxes such as VAT and GST, making it a great choice for enterprises that operate in multiple countries.
TaxJar was designed with U.S.-based SaaS and e-commerce businesses in mind. The platform is easy to use, with dashboards that can be integrated into your existing tech stack in just a few minutes. It’s a great option for mid-market companies with primarily domestic sales.
Tax calculation and coverage
Vertex has an extensive database of sales tax data, which allows it to quickly and accurately calculate sales tax burdens during checkout. Its database is meticulously maintained and includes data from the entire U.S., as well as many international markets.
TaxJar can provide accurate U.S. sales tax calculations through the use of its up-to-date tax tables. As of this writing, TaxJar doesn’t offer an international sales tax compliance solution, but its sister company, Stripe Tax, does.
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Integration and ease of use
Since Vertex is meant for enterprises, it can take some time to set up and get your team acquainted with the application. Some Vertex users have mentioned that they needed custom-coded solutions to integrate Vertex into their existing tech stack. This means that depending on the complexity of your existing systems, you might have to invest some time and money into integrating Vertex.
However, TaxJar was designed to be lightweight and easy to integrate into almost any existing tech stack. Since they are owned by Stripe, integrations with Stripe are a breeze. TaxJar can also be easily integrated into a number of e-commerce and payment platforms, including Shopify, WooCommerce, and BigCommerce.
Nexus tracking
Nexus tracking is particularly useful for fast-growing businesses, which is why Vertex enables them to monitor their real-time progress toward various nexus thresholds. It can also identify upcoming registration, collection, and filing needs.
TaxJar also offers a nexus dashboard that allows users to track sales across states and notifies them when they approach or meet these thresholds. This easy-to-use dashboard helps companies maintain compliance without manually monitoring their sales footprints.
Filing and remittance
Vertex provides its customers with fully automated domestic and international filing services. It can handle all tax returns and remittances in almost any location, which drastically reduces the amount of manual work necessary and the risk of error.
TaxJar has a similar feature, called AutoFile, that allows users to automatically submit returns to participating states. This drastically helps in streamlining domestic compliance for businesses, but TaxJar does not offer any way to track, file, or remit international sales taxes.
Reporting, invoicing, and analytics
Vertex has detailed enterprise-grade reporting, comprehensive audit trails, and analytics dashboards, built with large organizations in mind. These dashboards and reports are designed to provide extensive visibility and sales tax compliance.
TaxJar also offers user-friendly dashboards and reports. However, they are not nearly as granular as the data visualization and reporting features offered by Vertex. TaxJar’s reporting capabilities are great for small and mid-sized businesses that need actionable insights without overwhelming dashboards.
Customer support and resources
On review platforms like G2, users largely report liking Vertex and describe it as quite helpful; however, many people say they struggled with integrating it into their existing stack. Additionally, some find the interface to be complex and confusing. It has earned an overall score of 4.5 out of 5 stars.
Likewise, users seem to love TaxJar, with their G2 page boasting 4.7 out of 5 stars. Small and medium-sized business owners love the simplicity that TaxJar brings to the table. However, some say that TaxJar isn’t as accurate as some of its competitors.
Pricing and scalability
Vertex doesn’t publish its pricing online, as most customers have custom plans. Quotes are based on the needs of an individual company, as well as transaction volumes and where the company does business. However, if you’re looking to implement Vertex, you can expect to pay several thousand dollars (potentially ten thousand dollars or more) per year, depending on the size and needs of your business. Given the customizability of Vertex, it can easily scale with your company and its needs as it grows.
Pricing for TaxJar is a bit more transparent; plans start at $19 per month. While this pricing is a bit more straightforward, companies that grow into international markets can expect to outgrow TaxJar over time.
Use cases and ideal customers
When it comes to online businesses, there are certain situations where either Vertex or TaxJar might be a good choice for you. Here are a couple of common scenarios:
When Vertex is the better fit
Vertex is a better option for large enterprises with complex sales tax compliance situations. It integrates well with legacy ERP systems and can easily support companies with complex product lines and extensive audit requirements. Vertex is also a great choice if your business has customers in multiple countries. Vertex’s vast database of international sales tax policies will ensure that your business is compliant with local laws, no matter where you’re selling.
When TaxJar is the better fit
TaxJar is best for startups and small to mid-sized businesses. It has an affordable and straightforward pricing model, and its API-focused approach makes it easy to integrate into your existing tech stack. In addition, if you don’t plan on expanding your business outside of the U.S., TaxJar is a great option, no matter the size of your business.
Final thoughts: Which is right for you?
Vertex and TaxJar are great sales tax compliance solutions. They both offer robust coverage within the U.S. and can integrate with existing tech stacks. However, it’s important to keep the needs of your business in mind when choosing a sales tax compliance solution.
If budget is a concern, and you don’t have thousands or tens of thousands of dollars to spend on sales tax compliance, then TaxJar is probably the right choice for you. However, if you already run an established business that sells to multiple countries, then you might want to invest in the robust systems offered by Vertex.
Although Vertex and TaxJar are great sales tax compliance solutions for e-commerce and SaaS businesses, there is a new entrant in this space that bridges the gap between enterprise power and agile deployment. Numeral was designed to support both SaaS and e-commerce businesses. It combines cloud-native scalability with advanced automation for sales tax and indirect tax compliance worldwide.
Numeral’s real-time tax calculation API, built-in nexus tracking, automated filings, and insightful reports help you simplify your business tax compliance needs. This means you can spend more time running your business, instead of worrying about sales tax compliance.
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