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Xero unveils ‘auto sales tax’, powered by Avalara, making tax calculations and reporting more seamless

November 28, 2023

New capability simplifies and automates sales tax calculations, reporting and filing for small businesses and advisors.
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Xero, the global small business platform, today announced the release of its auto sales tax capability, helping to provide reliable sales tax calculations, comprehensive reporting, and automated filing options for small business owners and their advisors.

Developed in partnership with Avalara, a market leader in tax compliance automation, the embedded solution brings advanced sales tax workflows and management directly into the Xero platform, enabling advisors and business owners to automate sales tax calculations, reporting and filing.

This new capability is currently best suited for those who invoice for their goods and services in Xero, operate across multiple jurisdictions, and have a mix of taxable, non-taxable and exempt goods. Use cases for auto sales tax will expand beyond invoices in the coming months.

“With more than 13,000 sales and use tax jurisdictions in the U.S., and constantly changing rules and regulations, businesses are spending valuable time on calculations and reporting — and still ending up with errors,” said Meg Higgins, SVP, Global Partners at Avalara. “Avalara’s expansive tax content database and sales tax calculation engine, coupled with Xero’s invoice and reporting capabilities, make it easy for both small business customers and their advisors — who often file on their customers’ behalf — to get tax right. With Avalara embedded in the Xero platform, customers and advisors will benefit from a seamless delivery of tax determinations and calculations on every transaction."

Key features include:

  • Quick, guided setup: Users can easily set up sales tax in every state where a business is registered to collect sales tax. Additionally, sales tax attributes can be managed on services or products offered to save time and increase accuracy.
  • Ability to calculate appropriate sales tax rates on invoices, automatically: Avalara handles the ever-changing rates and rules of what’s taxable. Tax rates are calculated based on where a business is selling from, selling to, and whether an item is taxable according to state rules.
  • Comprehensive sales tax reports - all in one place: View a summary of sales tax obligations or break this information down by state, jurisdiction, and tax exemption to make sales tax filing easier. Breaking this down further by transaction also helps trace discrepancies to invoices before exporting reports.
  • Option for seamless e-filing with Avalara: Xero customers have the option to sign up for Avalara's automated e-filing capabilities. Xero’s sales tax data will connect into Avalara for easy filing to all jurisdictions where they have a connection.

Xero plans to add new features and functionality to the solution over time, including enhancements like adding filing deadlines, expanding past invoicing to other documentation and adding other revenue sources.

“Services and goods-based businesses struggle with sales tax implications while navigating a multitude of channels. This is particularly challenging for goods-based businesses who have been underserved in having a reliable sales tax solution, and it is essential to their operations. We are thrilled to unlock incremental value for them, giving them time back to focus on growing their business, and increased peace of mind,” said Diya Jolly, Chief Product Officer at Xero.

Customers can access Xero’s auto sales tax feature on Xero’s new version of invoicing. This version makes invoicing easy for small businesses, including time-saving and customization tools, and is where all new invoicing functionality and updates will be available going forward.

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