How Optimizing Sales Tax Can Indirectly Boost Your Bottom Line
Is it possible that pulling in sales tax rates at checkout is negatively impacting your conversion rate? Should you be concerned about accuracy or audit risk? Is your team spending too much time managing all the nuances that come with sales tax?
These are questions all eCommerce business owners should be asking.
The Impact of Sales Tax on Conversion Rates
If your eCommerce company is running on Salesforce Commerce Cloud, you’re likely keeping an eagle eye out for anything that can negatively impact conversion rates.
But did you know that site performance, including the time to calculate sales tax on orders, can have a significant impact on your conversion rate? According to a recent study on Walmart.com, every one-second reduction in page load time resulted in a 2% conversion increase. If your eCommerce site produces $1 million in sales each month, and your conversion rate increases by 2%, a one-second reduction in page load time equals $20,000 in additional revenue per month!
Each piece of technology that you add to your site will impact site speed and likely conversion rates. Look for solutions that prioritize technology and performance. And don’t forget to ask about downtime. Some good questions to ask your solutions and developers are:
- How many times does this solution call the API for a single action?
- What is the speed of these API calls in terms of milliseconds?
- In terms of sales tax, this would translate to how many times your site needs to call the solution’s API for a given order and how quickly this is done?
Nobody wants to spend time shopping, picking their favorite products, and getting through checkout only to be held up because the shopping cart is taking too long to calculate sales tax rates. In a world where site performance directly impacts revenue, speed wins.
The Hidden Costs of Sales Tax Management
When an eCommerce business establishes nexus in multiple states or has a significant catalog of products, sales tax management gets complicated — fast. For large companies, it can even take an entire team to keep up with the changing laws and rates by jurisdiction and specific product categories.
Even when automating, the conversation around value is important. A good practice would be to determine how much you are paying per order for calculations at checkout. Next, you can evaluate whether the value derived from automation is equal to or greater than the impact on cost of acquisition, or decrease in audit liability.
Unplanned, incremental fees can add up quickly. Check with your team to find out if you pay additional fees for implementation or support. Likewise, the quality of support can save you wasted time or potential business costs before they happen. Service-level agreements become important, even with purely operational tools like a sales tax solution.
As your business grows, so do your number of sales tax filings. Not only will you likely need to get sales tax compliant in more states, as your sales volume grows, states will also require you to file more often, adding to your total filing costs.
Of course, the risk of loss due to audits also exists. Sales tax audits are a line-by-line examination of your sales tax collection by state tax auditors. They are painful and time-consuming, but worse, sales tax debt can’t be discharged in bankruptcy. This is where accuracy while collecting sales tax comes in. If you do use a sales tax service, take a look to see if they allow any protection in the form of an accuracy guarantee.
How to Automate Sales Tax
Ready to automate sales tax for the first time? Or to transfer to a new provider that meets your business’s changing sales tax needs? Here are a few things to consider:
- Implementation and Onboarding Time — Ensure you have full visibility into how long it will take to onboard with your new provider. Your provider should provide you with timelines and milestones so that your company’s sales tax collection and related processes are never delayed or disrupted.
- Avoiding Lost Calculations Due to Downtime — Work with a company with experience making the switch so that your customers don’t experience a delay, or worse, a totally broken checkout. Failing to collect sales tax even for a short time can leave you paying out of your profits.
- The Omnichannel Approach — One of the most common issues we see is omnichannel businesses forgetting to collect sales tax on one (or more) of their platforms. Discuss all of your sales channels with your provider before making the switch to ensure that no sales platform is left behind.
Optimizing sales tax collection by choosing the right provider can increase your eCommerce business’s conversion rate while decreasing your team’s sales tax headache.
Learn how TaxJar offers integration with your Salesforce Commerce Cloud store to make sales tax automation effortless.
