Transforming Tax Calculation for Digital Commerce in a Global Marketplace

By Marc Duclos posted 01-24-2023 11:44 AM


The complexities of transacting business in a global marketplace means that tax calculation must continuously evolve to meet these new requirements.  One of the trends that have emerged out of this complexity is the growth and expansion of digital channels—and the corresponding customer expectations.  Whether shopping in a brick-and-mortar store, or shopping from a phone, these customers’ expectations for a seamless experience are the same.  

According to TechTarget, “Frictionless commerce is a method of using data from devices, apps, and websites to integrate buying opportunities as simply and seamlessly as possible into consumers' everyday activities and natural environments. The goal of frictionless commerce, also known as contextual commerce, is for any customer to buy a product or service when and where they wish with as few clicks or other steps as possible.” 

This type of frictionless or omni-channel experience—the ability to seamlessly shop and purchase anything, anywhere, anytime—means as customers increase their emphasis on digital channels for brand engagement, shopping, and purchasing, the complexity of managing tax determination for every one of these transactions also grows exponentially. For example, there are different thresholds, rates and requirements depending upon where a good or service originates from and where it is delivered to or consumed. As a result, ensuring that tax is applied accurately in a timely manner and does not impact either the customer experience or the seller experience has become a matter of strategic importance and differentiation.  

The growth of the omni-channel experience has also led to the rise of selling through marketplaces—just as global, regional, and local governments have implemented new and diverse tax regulations and requirements regarding these types of transactions. While this has created several challenges for both operators and sellers, it has also created an opportunity.  A diverse array of sellers and their unique goods and services helps the marketplace be successful—while a well-run, efficient marketplace helps the seller be successful. And with so many sellers being small to medium-sized businesses, they don’t have the time, resources, and expertise to deal with the complexity of global tax regulations and compliance. Their expectation is that marketplace operators have built their marketplace platforms to manage this for them. They do not want to think about tax liability and compliance, they just want to focus on their business.  

This is where the opportunity for marketplace operators lies. When it comes to tax determination and compliance, marketplace operators need to be able to determine tax liability by line item within an order, to accurately calculate and charge the right sales tax.  Another opportunity is with the expansion of digital channels, both customers and sellers are able to expand and engage across regional and international borders.


About the Author

Marc Duclos is Global Partner Manager - Oracle/NetSuite for Vertex Inc. With 40 years of experience, and deep tax expertise on global scale, Vertex empowers companies to transform and modernize their tax and technology platforms—and why the Oracle/Vertex partnership provides a comprehensive, effective approach to global omnichannel sales, expands the opportunities of marketplaces, and effectively manages indirect tax. With integrated solutions from Vertex, organizations can take on business expansion with confidence, making it possible to: 

  • Confidently expand into new geographies and sales channels with Vertex’s comprehensive tax rule and rate content and cross-border logic.
  • Apply tax consistently and more accurately across channels: store POS locations, store kiosks, e-commerce sales, catalog sales, call-center sales, mobile device transactions and handheld devices for 14,000+ U.S. jurisdictions, and VAT for 250+ territories.
  • Enable an ecommerce site/marketplace to sell in any currency in any country, identify customer location and provide B2B validation, in real-time.
  • Comply with jurisdiction-specific B2C marketplace facilitator rules to transact and scale globally.
  • Outsource SUT/VAT/GST preparation, filing and remittance.