Tax & Accounting Blog

How to Ensure Successful Sales Tax Calculations on Free Shipping Day

Blog, Indirect Tax, ONESOURCE, Sales and Use Tax December 14, 2015

Are you a Taxologist? Are you responsible for ensuring successful online transactions this holiday season? By now you have survived pre-holiday sales, Black Friday, Cyber Monday, and even Cyber Week. You’re probably thinking, “Free Shipping Day – bring it, I’ve got this.” Hopefully this sounds like you! If so, keep doing what you’re doing. If not, please read on for a few tips to help you prepare for the busy season.

Today’s businesses have to compete in an ever-changing global online market and a critical part of each transaction is indirect tax, like sales tax, that has to be calculated in real time. Tax calculations are a critical part of your core transactions and embedded in every sale. We often remember to think about rate changes, taxability rules, and compliance in our preparation, but we overlook the importance of ensuring the right infrastructure is in place to manage increased cyber traffic during peak seasons. I suggest you prepare by considering transaction volumes, testing, and actions plans:

    Know your expected transaction volume. Share your expectations with your tax calculation service provider at least a month or two in advance so you have time to make changes.
    Establish a tax calculation through put baseline and load testing. Do you know how long it takes for a round trip tax call to your service provider? You can work with your provider and your IT staff to set up a series of tests to collect this information. Here are some that I suggest:

  1. First, how long does it take for a transaction to leave your firewall? You can test this with by performing a ping test from your financial system server to your border.
  2. Second, how is the internet impacting my performance? Running a trace route will provide visibility to how many hops a tax call takes before reaching your service provider.
  3. Third, how long does a round trip call take to your service provider? Running a ping test to the calculation end point will provide you with this information.
  4. Fourth, load testing is an important part of preparation for end of year sales events. If you haven’t tested your system under load, how can you expect it to perform under load? It is important that you establish a baseline during the load test. For example, if you achieve 90% of your tax calculations return in fewer than 700 milliseconds you can use this information when monitoring for slowing calculations.
  5. Last, collect and share this information with your provider, and if concerns arise during any step, work with your provider to resolve.

Watch for my soon to be released recommendation on Action Plans! In the meantime, learn more about how ONESOURCE Indirect Tax applications can help!