"We are excited to announce the early access launch of Sales Tax Automation in Zoho Finance solutions for the US and Canada markets.

We understand that managing sales tax compliance is one of the most demanding and high-risk aspects of business finance. The effort required to identify the correct tax for every transaction manually, keeping up with frequent rate and rule changes, and mitigating compliance risks can take significant time and focus.

With this enhancement, Zoho Books will automatically determine and apply the correct sales tax for every transaction ensuring accuracy, saving time, and reducing compliance risk.

In partnership with Avalara, we bring seamless sales tax automation to you. This integration provides a dependable, hands-free compliance experience - without requiring users to pay anything additional for tax determination.

We kindly request you to try out the features and share your feedback that will help refine and enhance the experience."

Note: This feature once opened to all customers will be supported only in paid plans of Zoho Finance products. It will be included in Zoho One.

Zoho Books leverages Avalara’s tax engine to apply the correct sales tax to every transaction automatically. The calculation is based on:

• Your tax registrations - where your business operates, has established nexus and is legally required to collect sales tax. Please ensure the nexus details are kept up to date so the right taxes are applied every time.

• Your customer’s location - using their billing or shipping address to determine the correct rate.

• What you sell - the tax category under which the products and services fall.

• Customer exemptions - such as resellers, non-profits, or government entities.

Setting up Sales Tax automation in Zoho Books:

➤ Navigate to settings, select taxes under taxes & compliance and click set up sales tax automation.

➤ On the next page under Automate Sales Tax, review the terms, check the consent box to share necessary data with Avalara, and click Enable & Continue. Sales Tax Automation will then be activated for your Zoho Books organization.

➤ Under Validate Organization Address, review your Organization Name and Address as Zoho Books uses this information to determine the correct sales tax.

➤ If needed, click the Edit icon to update the address and choose whether the change applies only to new transactions or to all transactions.

➤ When ready, verify the address, click Save & Continue.

➤ Under Add Tax Registration Details, enter your business’s tax registration information. This allows Zoho Books to apply the correct sales tax to your transactions based on where you are registered to collect tax.

• State: Automatically populated based on your organization address from the previous step.

• Tax Registration Date: Choose the date your business became registered to collect sales tax in that state.

• Local Tax Registration Details: If you are also registered for city, county, special, or other local taxes, add them for accurate tax calculation.

➤ Outside of this, if your business is labile to pay taxes in a state other than where it operates from, you can add these tax registration details by navigating to: Settings - Taxes - Taxes & Compliance - Tax Registrations - New Tax Registration

Applying tax category while creating items:

➤ When creating an item, the Tax Category field lets you classify the goods or services you sell.

➤ When the item is added to a transaction, its tax category is used to determine the correct sales tax - based on your customer’s billing or shipping address and your business’s tax registrations.

Address Verification:

➤ While creating customers, you can also verify their billing and shipping address to ensure accurate tax calculation.

➤ Navigate to the Address tab - Enter the complete billing and shipping address - Click Validate address with Avalara.

➤ If the address isn't recognized by Avalara, edit the address you've provided, and click Validate Again and then save.

Below is a brief video explaining how sales tax automation happens while creating transactions in Zoho Books.

There's more:

➤ Exemption Certificate Management

• You can upload and manage exemption certificates at the state level.

• Record exemption details so that eligible transactions automatically receive the correct tax exemption.

Note: We currently capture exemption details based on customer's location, but exemptions by business type are yet to be automated.

➤ Fallback Tax Rates

• Set up and apply a backup tax rate for scenarios where sales tax cannot be automatically determined, ensuring transactions can still be completed without delays.

➤ Reports

• Sales Tax Liability Report

  • In addition to the existing sales tax liability report, we have added an state-level liability summary that groups sales tax owed across all applicable jurisdictions within that state.

• Exception reports:

  • When required details for automated tax calculation are missing or incomplete, Zoho Books will still compute tax using the information available. Such transactions are flagged in the Exception Report, along with the specific reason they require review.

  • This report also highlights cases where tax was applied manually, even though automation was enabled, helping you maintain accuracy and compliance.

You can read more about sales tax automation in the help documentation here.

By getting access to accurate, real-time tax rates and automatically determining and applying the correct tax, we believe this feature will help you and your clients ahead of evolving tax rules and rate changes and significantly enhance your's and your clients compliance workflows and enhance efficiency across finance operations.

This feature is currently in early access (for organizations without tax enabled) in Zoho Books, Zoho Inventory, Zoho Billing* however will be rolled out to all users and in Zoho Commerce and Zoho Checkout shortly.

(In Zoho Billing, Phase 1 supports one-time billing; subscription billing automation will follow in Phase 2.)

Note: The following enhancements to sales tax automation will be rolled out soon.

• Exemption Certificate Management, and Fallback Tax Configuration.

• Migration support for existing organizations with tax enabled along with support for new sign-ups.

If you wish to try out the feature or have any queries, please feel free to drop a note to support.usa@zohobooks.com / support.ca@zohobooks.com