Xero Avalara Auto Sales TaxSales tax in the US can be complex, with different rates across sectors and various levels of government. Xero has partnered with Avalara to address this complexity and ensure organisations are compliant as they raise invoices and tax returns for transactions across the US.

The solution enables organisations to configure sales tax correctly for every state they are registered in to collect sales tax. Xero will then automatically calculate the correct sales tax for every transaction. The solution supports over 13,000 tax jurisdictions. The system will then produce detailed and accurate sales tax reports to make filing easier.

Users wanting to take advantage of this new feature will need an Avalara account. Pricing on the Avalara site is obfuscated, though it indicates that pricing is volume-based. This is the latest iteration of the partnership between Avalara and Xero that was first announced in August 2022. The solution is available for Xero customers using the new invoicing module.

The solution will help existing organisations that operate across boundaries and with goods in multiple tax categories streamline and increase the accuracy of invoicing and reporting. It can also help with business expansion. As one accountant noted, “Until now, I haven’t taken on goods-based businesses across multiple states because the sales tax is just too hard. I can now expand my services to more complex goods-based businesses.”

Meg Higgins, SVP, Global Partners at Avalara, “With more than 13,000 sales and use tax jurisdictions in the US, and constantly changing rules and regulations, businesses are spending valuable time on calculations and reporting — and still ending up with errors. 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.”

What is in the new solution

Xero notes the four key features that Auto Sales Tax provides:

  • Self-guided onboarding: Users can easily set up sales tax in every state where a business is registered to collect sales tax. The sales tax attributes can be managed on services or products offered to save time and increase accuracy.
  • Automatically calculate the appropriate sales tax rates on invoices: 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. Users can view the breakdown of the tax calculations if required to validate the information and calculation. Sales tax exemptions can be added as required.
  • Comprehensive sales tax reports: An enhanced Sales tax report provides a summary of sales tax obligations. Users can then drill down into this information to provide a view of a report by state, jurisdiction, and tax exemption, making sales tax filing easier. As with other Xero features, it is possible to drill down to a transaction level to help identify any anomalies and confirm the calculations.
  • Option for seamless e-filing with Avalara: Xero customers have the option to sign up for Avalara’s automated e-filing. Xero’s sales tax data will connect to Avalara for easy filing to all jurisdictions where they have a connection. This, presumably, incurs an additional charge.
Diya Jolly, Chief Product Officer at Xero
Diya Jolly, Chief Product Officer at Xero

Diya Jolly, Chief Product Officer at Xero, said, “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.”

Enterprise Times: What does this mean

Auto Sales Tax is just the latest iteration of this partnership. In the coming months, Xero hopes to share how auto sales tact will expand beyond invoices. Avalara supports several features that could be useful to Xero customers, including cross-border tariffs and e-invoicing mandates. The integration could be popular, and it will be interesting to see whether Xero rates a space on Avalara’s most popular integrations in a few months.

The new feature will mean that organisations operating across multiple jurisdictions can focus on the business and selling rather than looking up the latest tax code for every transaction. For some organisations, this will save a huge amount of manual work for bookkeepers and those who create invoices, making the business more efficient.


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