Sales Tax Software for SaaS: How to Choose the Right Platform

Sales tax compliance isn’t just another accounting task, it’s a scaling problem. And it gets more complex the faster you grow.

If your company sells software, digital products, or subscriptions across multiple states, you've likely already felt this pain. Each jurisdiction has its own tax rates, rules, and filing deadlines. Add international sales into the mix, and things get complicated fast.

This guide breaks down how modern sales tax software works. You’ll learn what features actually matter, why US-only tools will break at scale, and how to pick a sales tax platform that grows with your business. 

Sales Tax Compliance Gets Risky Faster Than Most Teams Expect

Sales tax exposure can snowball before your team even realizes it’s happening. How? A big order might push you over the sales tax nexus threshold in a new state. The same goes for hiring an employee or contractor in a state where you aren’t currently required to collect.

Most SaaS and digital businesses hit cascading sales tax compliance obligations between $1mm and $10mm in annual revenue. Complying would be difficult enough if your finance team just had to add new states. But, to make matters worse, each state’s tax laws and rules are different. Without automation, simply keeping up with new tax rules would become somebody’s full-time job.

Economic Nexus Creates Hidden Tax Obligations

Having an economic nexus means that your business is required to collect sales tax in a state even if you have no office, warehouse, or employees there. All it takes is crossing that state’s revenue or transaction threshold. 

Economic nexus is the result of the landmark 2018 South Dakota v. Wayfair Supreme Court decision. Before that ruling, states could only require businesses with physical presence, such as an office, employee, or inventory, to collect sales tax from buyers in-state. Wayfair changed the rules of the game, and now every US-state with a sales tax has economic nexus laws on the books.

In most states, if your business makes more than $100,000 in sales or 200 in transactions in the state per year, you’ve exceeded the threshold and must collect sales tax. Keep in mind that, in the US, states make their own sales tax rules and laws. So, the exact threshold varies by state, as do other sales tax obligations. 

These days, businesses need to track their sales continuously in order to determine if they’ve crossed a new economic nexus threshold. Once you have a sales tax obligation in a new state, you’re required to register for a sales tax permit and begin collecting the tax on your sales there. 

Fortunately, sales tax software tracks your nexus states automatically, giving you time to register and avoiding surprise penalties and interest for non-compliance.

Multi-Channel Sales Multiply Complexity

Most businesses don’t sell through only one channel. You may sell directly via your website, an app store, and maybe a marketplace or two. Multi-channel sales equal multiple headaches.

Different platforms handle sales tax differently. Online marketplaces generally handle sales tax for you, while you’re responsible for collecting on your direct sales. Amazon, for example, collects and remits sales tax for third-party sellers in all states that require it. But if you also sell through your own Shopify store and send invoices through QuickBooks, those sales are your responsibility entirely.

Then there’s the issue of product taxability. SaaS might be taxable in one state and exempt in another. Or, even more confusingly, sometimes SaaS is only taxable based on whether you’re selling it to businesses or consumers. The same goes for digital products. States tax digital products differently based on whether the end user is buying the product to keep, or renting access to it.

If this sounds like a nightmare to keep track of, you’re right. Only real-time sales tax calculation at checkout ensures you collect the right amount of sales tax from the right customer every time.

What Sales Tax Software Is Expected to Handle Today

Modern sales tax software should handle five things:

• Registration
• Calculation
• Filing tax returns
• Remittance
• Exemption Certificate Management 

Let’s break down what each function should look like in practice.

Registration Across Jurisdictions 

Before you can legally collect sales tax from buyers in a state, you need to register for a sales tax permit from that state’s Department of Revenue or equivalent taxing authority. 

No state registration is uniform. Each state has its own forms, rules, and requirements for registration. 

Your sales tax software should automate this process. The best platforms directly integrate with state taxing authorities. They handle the application, track your status, and keep your registration current in states that require renewal.

Without automation, registration quickly becomes a bottleneck.  Teams delay registering in a new state because the process is tedious. Or registrations get kicked back due to manual errors. This delay creates compliance risk and potential fines and penalties. 

It’s important to note that businesses must never collect sales tax without a valid registration. Doing so could result in criminal penalties. 

Real-Time Tax Calculation and Determination

Tax calculation happens at checkout or when your customer receives an invoice. And while that may sound straightforward, a lot of logic goes into making the right sales tax calculation. 

The software must first identify the customer’s taxing jurisdiction (which can include state, county, city and special taxing district). It must also know whether your product is taxable there. And lastly, it must apply the most up-to-date sales tax rate.

With more than 13,000 sales tax jurisdictions in the US, keeping track of the exact rate in Longmont, Colorado or an exact neighborhood in the Chicago suburbs is a manual nightmare. That's why calculation engines need to pull from continuously updated databases. They also need to integrate with your billing system, ERP, or payment processor so tax gets applied automatically at checkout.

Filing, Return Preparation, and Remittance

Sales tax is due periodically, depending on how much you collect. The highest volume businesses generally file monthly, while others file quarterly or annually. But each state’s threshold is different, so you may file monthly in one state but quarterly in another. 

Due dates vary, too. Most US states require payment by the 20th of the month following the end of the reporting period. But some require payment by the last day of the month, or on the 15th. It’s important to keep track of deadlines for each state, because missing a filing means fines and penalties. 

But, as with everything sales tax-related, filing gets more complex. Most states don’t want the lump sum of sales tax you collected from buyers. They want you to break that amount down by county, city, and other special taxing jurisdiction so they can route the money to the right place. 

With over 13,000 taxing jurisdictions in the US, this level of detail is nearly impossible to compile manually. Your transaction data needs to be mapped to precise geographic boundaries, then aggregated correctly for each return.

Sales tax software consolidates all of this. It pulls your transaction data, calculates what you owe in each jurisdiction, and prepares the returns. Many platforms can file directly with state tax authorities on your behalf.

Remittance works similarly. Instead of cutting checks to 15 different states, you authorize a single payment. The software distributes funds to each jurisdiction according to what you owe.

This automation eliminates the most time-consuming parts of compliance. It also reduces errors. Manual filing mistakes are one of the top triggers for sales tax audits.

Exemption Certificate Management

Not every sale is taxable. When you sell to a reseller, nonprofit, or government entity, they're often exempt from sales tax. But you need documentation to prove it.

This documentation is generally an “exemption certificate.”  Buyers provide them when they claim a tax exemption. You're required to collect, validate, and store these certificates in case of an audit.

Managing certificates manually is a nightmare. They expire. They get lost. And when an auditor asks for proof of an exemption from three years ago, you need to produce it or you’re on the hook for paying the sales tax you didn’t collect.

Sales tax software automates certificate management. Some platforms accept certificates via email, validate them automatically, and flag expiring documents before they lapse. This protects you during audits and saves hours of administrative hassle.

Why US-Only Sales Tax Software Breaks at Scale

US sales tax is complicated enough. But once your business expands beyond US borders, you have entirely new tax systems to deal with.

Most US-focused sales tax tools don't handle VAT or GST well. They either ignore international compliance entirely or cobble together third-party integrations. That creates gaps, manual work, and risk.

Sales Tax vs VAT and GST

US sales tax and international VAT/GST work very differently. 

With sales tax, the tax is charged at the point of sale by the business. The business remits the tax collected to the state at the end of the filing period.

With Value Added Tax (VAT) and Goods and Services Tax (GST), the tax is collected at every stage of the supply chain. A raw materials supplier charges VAT when selling to a manufacturer. The manufacturer charges when selling to a distributor. Then the distributor charges when selling to a retailer. And the retailer charges VAT when selling to the end customer. At each step businesses pay VAT. They then claim “input tax” when they file their VAT return.

With VAT and GST, you’re not just collecting from the buyer and remitting. You’re both paying and collecting, and you must keep track of these multiple obligations. 

Similar to economic nexus, many countries with VAT/GST require that businesses register and collect after crossing a certain sales threshold. But beyond that, the rules, rates, and filing requirements are completely different. 

A US-only tool simply doesn’t translate to VAT or GST compliance.

International Expansion Multiplies Compliance Complexity

Selling internationally means dealing with new tax regimes, each with their own rules. 

The EU alone has 27 different member states with different VAT rates. The UK has its own VAT system post-Brexit. Some countries like the United Arab Emirates have only recently implemented VAT and are still getting up and running. APAC markets like Australia, Japan and Singapore each have their own unique systems. 

Filing requirements also vary. Some countries require quarterly returns, others want monthly. E-invoicing mandates are spreading, requiring real-time invoice validation with tax authorities.

It’s impossible to manage multi-country sales tax compliance with a patchwork of US-focused tools. Growing companies need a platform built for global tax compliance from the start.

1. Sphere

Sphere is built for global businesses that need unified tax compliance across US sales tax, VAT, and GST. It's the only platform offering native coverage in major international markets like the EU, EMEA, and APAC within a single system. 

Unlike legacy tools that bolt on international support through partners, Sphere handles everything directly. This means consistent data, consolidated reporting, and no third-party coordination headaches.

Key Features

Sphere covers the full indirect tax compliance lifecycle:

• Automated registration with direct connections to state Departments of Revenue and international tax authorities
• AI-powered tax determination that stays current as regulations change
• Real-time calculation integrated with Stripe, Shopify, QuickBooks, and major billing platforms
• Automated tax filing and remittance across all jurisdictions
• Exemption certificate management with automated email intake and expiration tracking
• E-invoicing support for markets requiring real-time invoice validation
• Input tax tracking for reclaiming VAT/GST

Pricing & Support

Sphere charges a flat $100 per month per jurisdiction. No usage fees, no overage charges, no long-term contracts with cancellation penalties.

Support is fast and direct, with direct access through Slack. Customers consistently cite response times as significantly better than legacy alternatives, where wait times can stretch to 24 hours or more.

Best For

Growing companies selling digital products or software globally. Particularly well-suited for SaaS, AI, and technology businesses expanding beyond the US.

2. Avalara 

Avalara is one of the longest-established names in tax compliance software. It serves large enterprises across retail, manufacturing, and technology with a comprehensive platform.

Key Features

Avalara offers tax calculation, exemption certificate management, and filing services. It integrates with a wide range of ERP and ecommerce platforms.

International coverage exists but relies heavily on third-party partners, which can create coordination challenges and gaps in automation.

Pricing & Support

Pricing is custom and often includes add-on fees for specific features or jurisdictions. Multi-year contracts with cancellation fees are common. Customer support response times vary, with enterprise customers generally receiving priority. Other customers complain that responses take days or weeks.

Best For

Large enterprises with dedicated tax teams and complex, established ERP environments. Less suited for fast-moving companies seeking a set price and simplicity.

3. Vertex

Vertex positions itself as an enterprise tax engine, with deep integration into ERP systems like SAP and Oracle. It's designed for enterprises with complex, custom tax needs.

Key Features

Vertex offers a sophisticated tax rules engine, extensive ERP integrations, and detailed reporting capabilities. It handles complex scenarios like use tax and multi-entity structures.

International support is available but adds complexity and cost.

Pricing & Support

Vertex is enterprise-only, with pricing reflecting that positioning. Implementation typically requires dedicated project management and IT resources.

Best For

Large organizations already running SAP, Oracle, or similar ERPs that need tax deeply embedded in their finance stack.

4. TaxJar

TaxJar focuses on US sales tax for ecommerce sellers. It's known for an accessible interface and features like nexus tracking and AutoFile.

Key Features

The platform handles tax calculation, nexus monitoring, and automated filing for US states. It integrates well with ecommerce platforms and marketplaces.

TaxJar is a US-only solution.

Pricing & Support

Entry pricing starts around $19 per month, with additional per-filing fees. This makes it affordable for smaller sellers but costs can add up as filing volume grows.

Best For

Small to mid-sized ecommerce businesses selling physical products within the US. It’s less suited for SaaS or international expansion.

5. Stripe Tax 

Stripe Tax provides tax calculation directly within the Stripe checkout and billing flow. For businesses already running on Stripe, it requires minimal setup.

Key Features

Tax calculation happens automatically at checkout based on product type and customer location. Stripe handles rate updates and supports a growing list of countries.

Filing and remittance are not included. Stripe calculates tax, but you're responsible for filing returns and paying tax authorities.

Pricing & Support

Stripe Tax charges 0.5% of each transaction where tax is calculated. This transaction-based model works for lower volumes but can get expensive at scale.

Best For

Early-stage businesses built entirely on Stripe that need basic tax calculation without immediate filing automation.

Getting Sales Tax Right as You Scale

Sales tax compliance is complex, but today’s technology solves the problem. 

Companies that automate early and that pick a platform that handles registration, calculation, filing, remittance, and certificates in one place have won half the battle. Companies that choose a sales tax solution based on not where they are but where they plan to grow have won the war. 

Ready to simplify SaaS sales tax compliance?

Schedule a demo with Sphere today.

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For US-only sales, most tools can get the job done. But the moment you sell your first subscription in Europe or invoice a customer in Australia, US-only software becomes a liability. You end up with fragmented systems, manual workarounds, and growing compliance risk.

The better path is unified global coverage from day one. One platform. One source of truth. Automated from registration through remittance, whether the customer is in California or Copenhagen.

That's what separates tax software that solves today's problems from a system of record that supports growth for years to come.