Avalara vs TaxJar: Who’s the Winner?
Are you overwhelmed with filing sales tax returns for your business? What if I told you there was a way to maintain complete compliance with sales tax filings without spending hours each month going through reports? Sounds pretty good, doesn’t it? Many businesses struggle to accurately report sales tax in their business, especially as the business begins to grow and expand into new states. Luckily, there are software applications that can ease this burden and allow you to focus on other critical aspects of running your business. TaxJar and Avalara are two top-of-the-line software programs that offer users a wide variety of capabilities, from automation abilities to cost-effectiveness. Choosing the right one for your business can be tricky, so let’s break down the pros and cons of each.
Industry Focus
The first aspect you want to consider is the industry focus of each software. Avalara advertises to retail, ecommerce, software, and manufacturing companies, while TaxJar focuses on ecommerce, retail, food and beverage, SaaS, and service industries. If you don’t fit into one of these categories, don’t worry as this is just a rough outline of the primary industries they serve. While neither Avalara nor TaxJar have limits on the size of the company that they work with, Avalara is capable of growing with a larger size company than TaxJar. However, like all enterprise applications they are more complex and less friendly than those focused for small businesses.
Automation
Moving along the list, automation ability is a critical component to look at. Automation focuses on integration with your other accounting programs, reducing or completely eliminating the data entry needed. Avalara has over 1,000 signed partner integrations with ERP and ecommerce applications that utilize cloud technology and AI. TaxJar also has ecommerce and ERP platform integration options, such as with Amazon and Shopify. Both have the ability to integrate with accounting software, like QuickBooks or Xero, which is what most small businesses utilize. The way the integration works is you’ll connect your sales channels directly to your accounting system AND connect the sales channels directly to the sales tax software.
Sales channel > QBO/Xero
Sales channel > TaxJar/Avalara
The remitted sales tax return payments via TaxJar/Avalara get applied to the sales tax liability in QBO/Xero and the circle completes.
Features
Looking at the overall features of Avalara and TaxJar, both are very similar in what they offer to users. Avalara and TaxJar focus on all things sales tax filings with each tracking nexus in each state. However, Avalara does seem to offer more in-depth services with their website going into detail on other filings for returns, documents, and licenses. Both software companies have access to e-filing processes, reducing remittance times and the risk of receiving fines and penalties for late filings. Avalara is built directly into Shopify Plus, so if you use that higher-level platform, Avalara is the winner since it's there and fully integrated.
If you plan to sell internationally, you’ll need to look towards Avalara as TaxJar does not yet support international sales tax compliance.
Scalability
The goal of most businesses is to maintain a steady growth rate, meaning your business needs a software program that has the ability to scale right alongside you. Interactive dashboards are found in each program that show charts and graphs of sales tax by state and filing deadlines, which can be beneficial when looking to achieve complete compliance. Avalara provides users with horizontal scalability, data analytics and global resources. TaxJar directs their attention to national nexus reports with proactive changes and alert capabilities. The ability of both programs to track sales tax nexus can take the burden off you and your outsourced bookkeeping company, allowing for accurate and timely filings.
Report Creation
The final output in any software program should be user-friendly and provide your company with value. As we touched on before, both Avalara and TaxJar offer interactive dashboards that give transparency into when nexus is triggered. Instead of researching specific state laws, the software programs have all the data laid out for you right when you login. However, TaxJar does promote more safety checks compared to Avalara with enhanced error checking before reports are viewed. Helpful report creation can be useful not only to you, but also to your outsourced accountant.
Customer Reviews
Analyzing customer reviews can give first-hand insight on customer service, functionality, and features. Often, companies will only highlight positive reviews on their website, making it important to check places like Google and the Better Business Bureau for transparency. According to 304 reviews from an outside party, Avalara is currently ranked at 4 out of 5 stars, while TaxJar sits at 4.7 out of 5 stars based on 231 reviews. This is starkly different from the 30,000+ positive customer reviews that are listed on Avalara’s website. Additionally, TaxJar promotes that they have 20,000 high-growth businesses, all of which are content with the services. Looking at 3rd party websites gives you clearer information and unbiased opinions about the software, ringing in TaxJar as the winner based on consumer opinions.
Learning Curve
As with anything new, there is bound to be a learning curve. The good news is that both Avalara and TaxJar offer some sort of training content to help guide you through the new transition. Avalara has something called Avalara University that has step-by-step videos on common issues. TaxJar has a knowledge base that allows you to search, watch videos and even set up a video call to chat with a specialist on issues you are having, which makes TaxJar easier to use. However, the free help that these two companies offer can greatly decrease setup costs, making the switch easier on your checkbook.
Updates
Another essential aspect to evaluate is the procedures in place for updates. Tax law is constantly changing, resulting in the need for updates throughout the year. Strong software should have procedures in place for automatic updates. Both Avalara and TaxJar provide users with automatic updates and gives a detailed report of the changes made. This can help you understand the rationale behind the changes and the impact you can expect to see on your business.
Cost
One of the top areas to consider before purchasing a software is the cost. Avalara is not as transparent as TaxJar with their pricing structure. Avalara currently offers users an annual or monthly subscription based on transaction level, and they do charge for each additional service. State tax registrations start at $349, which can be a steep price for a small business. However, they do offer a 60-day free trial for their services. On the other hand, TaxJar is fully transparent in its pricing model, offering 3 levels of packages. The starter is $19 a month and includes basic services, the professional package is greater in scope and starts at $99 a month and for all other needs, you will have to reach out and discuss a custom plan. TaxJar also offers a free trial, but theirs is only set at 30 days.
Our general experience is that Avalara has the cheapest entry-level solution to start but gets quite expensive very fast. It’s hard to know what the cost will be due to the pricing structure. TaxJar is more predictable and is our go-to solution if the pricing is a good fit.
The winner is…
Although Avalara and TaxJar are very similar in the services they offer, one does pull ahead to be named the winner. TaxJar’s transparency in pricing, customer reviews, and learning platform offer users greater advantages compared to Avalara. Ultimately, your final decision comes down to what you value most in a sales tax software and how the software can assist your outsourced accountant. Consider all of the factors we laid out and chat with your outsourced accountant before making your final decision and start enjoying the benefits the software has to offer you.
