Handling sales tax compliance in the US can be a challenging task for businesses, given the complexity of state and local tax regulations. Fortunately, Avalara and Xero offer a robust solution to simplify this process, especially when integrated with Shopify through Hyve Post to Xero.
In this article, we’ll dive into how Avalara manages US taxes within Xero and how our Shopify-Xero integration, Hyve Post to Xero, makes it even easier for Shopify merchants to handle sales tax compliance seamlessly.
What is Avalara, and How Does it Work with Xero?
Avalara is a tax compliance software that automates the process of calculating, collecting, and reporting sales tax for businesses. It is particularly valuable for companies selling across multiple US states, as it helps track different tax jurisdictions, which is otherwise a manual and time-consuming process.
When integrated with Xero, Avalara becomes the driving force behind automated tax calculations and returns. Xero users can leverage Avalara’s extensive tax database to ensure accurate sales tax calculations across the US.
Why Use Avalara for US Taxes?
Sales tax rates and regulations differ from state to state, and even within states, you might encounter variations between cities, counties, and districts. Avalara:
- Automates tax calculations: Avalara automatically applies the correct sales tax based on the shipping location, ensuring compliance with state and local regulations.
- Handles tax exemption: Businesses dealing with exempt customers or items can also track and apply the correct tax exemptions.
- Simplifies filing: Avalara helps automate tax filing by preparing tax returns and submitting them on time, avoiding costly penalties.
Avalara and Xero
As of 2024, Avalara is included as part of Xero. See Xero press release here.
Once Avalara is connected with Xero, it acts as your sales tax engine. Here’s how it works:
- Accurate Tax Calculation: As sales are processed in Shopify, Avalara calculates the appropriate sales tax based on the customer’s shipping address.
- Tax Syncing: Avalara syncs the tax data into Xero, ensuring that your sales tax obligations are recorded correctly.
- Tax Filing: Avalara not only helps calculate the taxes but also files them on your behalf, saving you time and reducing the risk of human error.
Introducing Hyve Post to Xero
For businesses using Shopify as their ecommerce platform, our Hyve Post to Xero integration acts as the perfect bridge between Shopify and Xero, making it easier to automate the flow of orders, invoices, and tax data.
Here’s where the magic happens: when US Shopify merchants integrate with Xero through Hyve Post to Xero, the system can seamlessly map Shopify orders to the appropriate Avalara tax type code in Xero.
How Hyve Post to Xero Maps Avalara Tax Codes
For US clients, sales tax is more than just a percentage. It’s about ensuring that the tax type code matches what Avalara is calculating. In our integration:
- Order Data Mapping: With the Avalara tax type code selected as the default tax type code for all orders, when a Shopify sale is posted to Xero via Hyve Post to Xero, Xero and Avalara would handle and record the correct sales tax amount.
- Tax Type Code Syncing: Xero pulls the tax data based on the Avalara integration, ensuring that the taxes calculated on Shopify orders are accurate and fully compliant with US state and local tax laws.
For instance, if Avalara calculates that a sale made to a customer in New York requires a combined state and local tax of 8.875%, this rate is mapped to the correct Xero tax type code within the invoice. This ensures that your Xero records remain consistent and accurate.
Benefits of Using Hyve Post to Xero with Avalara for US Sales Tax
- Accurate Tax Calculations: By syncing Avalara’s tax data with Shopify orders in Xero, you eliminate the risk of manual errors.
- Seamless Tax Compliance: Avalara handles the complexity of varying tax rates, with the Hyve Post to Xero app mapping to the single Avalara tax type code in Xero.
- Automated Workflow: The integration reduces manual entry and makes your tax filing process faster and more accurate.
- Real-time Data: With Hyve Post to Xero, tax data from Shopify orders flows directly into Xero, allowing you to keep your books up to date.
Using Avalara within Xero simplifies the daunting task of managing US sales taxes, while Hyve Post to Xero ensures that the Shopify orders are mapped correctly to Avalara’s tax type code. Together, these tools create a seamless and automated workflow for handling US tax compliance, allowing your business to focus on growth without worrying about tax complexities.
If you’re a Shopify merchant managing US sales, integrating Avalara with Xero and utilizing Hyve Post to Xero could be the game-changer you need to ensure accuracy, compliance, and efficiency in your tax processes.