Make sales tax easier with Xero’s new auto sales tax, powered by Avalara

LAST UPDATED: Dec 20, 2023

It’s no secret that businesses are always looking for ways to work smarter and faster. In fact, according to a recent survey of finance professionals commissioned by Avalara, 71% are investing in more tools and solutions to close overall efficiency gaps.

When it comes to manual tasks, there are few that are more burdensome than sales tax. There are more than 13,000 jurisdictions across the US, so sifting through them all and making sure you’re selecting the right ones for your business can be a real compliance headache.

But we have some great news. Instead of manually searching through a state-by-state shipping guide for tax rates and looking up which items in your shipment are exempt, you can now automate this with our auto sales tax feature, powered by Avalara — available for free with your Xero subscription.

Automate your sales tax calculations in Xero

Auto sales tax brings advanced sales tax management directly into Xero, helping you automate sales tax calculations, reporting and filing. It’s particularly well-suited to you if you operate across multiple jurisdictions, and have a mix of taxable, non-taxable and exempt goods.

With our new auto sales tax feature, you can:

• easily set up sales tax rates in every state where your business is registered to collect sales tax 
• create sales tax attributes for each product or service you offer, to save time and increase accuracy
• automatically calculate appropriate sales tax rates on invoices (tax rates are calculated based on where a business is selling from, selling to, and whether an item is taxable according to state rules)
• review comprehensive sales tax reports — all in one place, with a summary of sales tax obligations that you can drill down into by state, jurisdiction, tax exemption and transaction
• sign up for Avalara’s automated e-filing capabilities, where Xero’s sales tax data will connect into Avalara for easy filing to all connected jurisdictions

What’s next for auto sales tax?

We’re looking forward to adding more functionality to our auto sales tax feature over time. This includes adding filing deadlines, as well as expanding beyond invoicing to incorporate other documentation and revenue sources. 

In the meantime, we hope it helps you better manage sales tax, so you can avoid those compliance headaches. If you’re registered for sales tax, and invoice for taxable goods and services in Xero, you can start using auto sales tax now — simply select ‘Sales tax’ in the ‘Accounting’ menu.