Rory Rawlings is the founder and chief tax automation officer of Avalara, Inc., a Washington-based firm that provides sales-tax-compliance applications for ecommerce merchants.
PeC: Avalara helps ecommerce firms manage sales tax compliance. Could you explain?
Rawlings: There are over 12,500 sales tax regions in the U. S. These include states, counties and municipalities. Ecommerce merchants, those who sell products nationwide, potentially can owe sales taxes to any or all of these tax regions. Avalara’s web-based sales-tax applications integrate with online shopping carts and accounting systems to help merchants collect applicable taxes from their customers and pay the monies to the appropriate tax region.
PeC: Ecommerce merchants are responsible for collecting sales taxes?
Rawlings: Yes. Specific requirements vary from state to state. That’s where we come in.
PeC: Walk us through how your service integrates with ecommerce sites.
Rawlings: We establish a bridge between our sales tax service, called AvaTax, and the ecommerce site itself. To do this, we’ll first identify the merchant’s products, tax exceptions, shipping issues and the states in which the merchant has offices or employees, among other set-up variables. We’ll then link our AvaTax system to the merchant’s shopping cart. When customers purchase products online from that merchant, our system operates in the background and automatically detects where the customer lives and calculates if merchant should be collecting sales taxes from that customer. If so, the sales tax amount will be collected by the merchant from the customer during the checkout function.
PeC: How does the Streamlined Sales Tax Project fit into all of this?
Rawlings: The SSTP is comprised of 21 states at present. It’s a nonprofit entity whose mission is to simplify the collection and administration of sales taxes through policy changes and technology services such as ours. States and other taxing regions lose billions of dollars each year in uncollected sales taxes, and the SSTP is trying to help. Avalara is one of three SSTP Certified Service Providers.
PeC: You must be a CPA.
Rawlings: Yes, earlier in my career I was a practicing CPA. We also have many more CPAs on our staff.
PeC: How much does your service cost?
Rawlings: We charge an initial activation fee and an annual contract fee based on the size of the business. For a merchant doing, for example, 14,400 transactions per year, the activation fee is roughly $1,495 and the annual contract fee is roughly $3,990. The annual contract fee equates, in that example, to roughly 27 cents per transaction.