Thought Leaders in Financial Technology: Peter Horadan, CTO and EVP of Engineering at Avalara (Part 4)

Sramana Mitra: You parameterize all these different pieces that are used in calculating the taxes. If I understood you correctly, even in a situation where merchants are selling through Amazon, Amazon will calculate the total sales tax to be collected on the transaction but when it comes to the merchant’s actual filing in all these different states and counties, you take care of all of that.

Peter Horadan: That’s exactly right. The second part is the filing. When the filing period ends, we add up all of the commercial activity. This needs to be separated out by jurisdiction. You need to file with the specific jurisdiction that the activity happened in. For most sellers, it’s every month. You have a monthly burden to file in every jurisdiction.

If you’re looking at a state tax form, they will make you break out your sales by jurisdictions because they need to apportion the tax collected to those jurisdictions. If you consider selling nationwide, you have to go state by state and break your sales by each jurisdiction. In some state, you can file one return for the whole state. In other states, you need to file individually with each jurisdiction.

For example, in Louisiana you need to file an individual tax return with every single parish that you’re doing business in. If you’re an online seller, you have to look at what parishes in Louisiana did you have sales in this month. You need to be registered with each of these jurisdictions. We manage all of that. We can take any address, figure out the jurisdictions, break down all your sales by jurisdiction, and then do the filing in those jurisdictions. We filed about a million tax returns in 2015. We remitted, on behalf of our customers, $14 billion in taxes.

Sramana Mitra: There’s some sort of an electronic filing and you get digital authorization from your clients. All this is automatically done. Everything, pretty much, happens in the background.

Peter Horadan: Yes. I wish it was as simple as electronic filing. It’s not. This is where we really get into software eating the world. We are delivering a cloud solution but the rest of the world is not cloud-based. There are some jurisdictions that allow you to upload an electronic file. There are other jurisdictions that require you to file in the paper media. You print out on paper and mail it to them along with a check.

There are other jurisdictions that only have a website and you must file on their website. That requires human manual entry to log in and fill out the form on the website. Those are the three major categories of filing methods. We handle all of those. From the customer’s point of view, it’s all automated. From our point of view, we have made that opaque to the customers by automating that with our cloud service.

This segment is part 4 in the series : Thought Leaders in Financial Technology: Peter Horadan, CTO and EVP of Engineering at Avalara
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