https://discussion.fool.com/the-market-usually-reacts-around-6-m… is a link to where we got started on AVLR. Best to read the entire thread from there. It is only a few posts. Any subsequent discussion welcome.
Tinker
1 Like
Alright, continuing the thread (I suggested spawning a new one anyway)… Tinker said, in part:
I have not bought any yet. So much easier just to do nothing (except as I start to fret - bad habit). The company is solid, clear leader, and the recent Supreme Court decision makes it a certainty that almost every state will charge sales tax (already more than 30) do for any sales in the state. It all turned on “nexus” with a state. Use to be the state had to have some connection other than just making sales to people in the state. The Supreme Court stated otherwise, thus the new found imperative to figure out how to live with all the sales taxes everywhere.
But I also find it difficult to put a huge multiple on a company like this. It is just sales taxes for crying out loud! But if this company can expand its verticals, expand its jurisdictions, and create upsellable products it could have a very long runway with long-term hyper-growth between 25-35%.
I came to roughly the same conclusion, almost. It’s “just taxes” after all. But then I multiplied that by every vendor, online and B&M storefront, shop, etc. that’s going to be selling stuff (read: a ton of people/places), with stuff crossing state and national borders all the time, and considering that the seller has to figure out how to calculate taxes in some foreign place (state or country) is both treacherous and error-prone; or at least expensive if you’re a large organization and have to hire your own staff to figure it out.
Where I started to kind of like Avalara more was that it takes away the need for people and at least softens the deep pain of having to collect taxes. You effectively buy their plug-in (for QuickBooks or Shopify or Magento or whatever) and it figures out, based on the destination OR what is being sold, or both, what taxes need to be collected.
Revenues are growing a little over 40% QoQ (I think 43% last Q if I recall), which makes it a possible candidate here. I need to dig further into other stuff like P/S, P/E since those numbers are different than when I ran them back in early October, but it’s not “cheap.” But then, that’s a hallmark of a Saul stock to some degree, we’ve established…
More to come (hopefully from others too) – work gets in the way.
14 Likes
This is in my wheelhouse, so I’ll throw out some initial thoughts off the top of my head.
As some background, although I am not a tax expert, my financial role at my last two companies, meant that tax compliance, including for sales and use tax, falls under my area, for which I am ultimately responsible for.
Overview
To put it in layman’s terms as best I can, there are two, maybe three if we include international, main components to these taxes that are related
-
Sales tax - most of you know what this is. When you buy something, sales tax gets added. Every state doesn’t have sales tax, each state can choose to tax some products and not others, and the states set the % of sales tax they charge.
-
Use tax - It basically “is” sales tax, but is a concept primarily designed to stop companies located in high sales tax states from buying products/equipment etc in one state where there is no, or low, sales tax to avoid paying it in the state where they reside. Simple example, if a company is in New York state (where sales tax is 8%+) and orders computer equipment online from a website that doesn’t charge sales tax, but that equipment is going to be used by their employees in NY, they have to pay New York state “use” tax on that purchase (same 8%+ they would have paid as sales tax if they had bought that equipment from a vendor in NYS). You are supposed to track these purchases one by one and do a quarterly filing with NY every three months and pay the amount of sales tax that you weren’t charged, but which relates to items used by the company within NY.
You get a credit for the tax you paid to the other state, so if you buy something from a state where there is 3% sales tax charged to you and then ship it to or use it in NY, you have to pay the differential (about 5%) to NY when doing the quarterly filing.
So if you are buying something online and going to use it in NY State (assuming it is a taxable type of product in that state), it actually doesn’t save your company any money if the vendor doesn’t charge you sales tax when you buy it. You are still going to pay that sales tax, as “use tax”, to NY State at the end of the quarter, if you weren’t charged it originally.
- VAT (“value added tax”) etc - The way sales tax works in the US is unique because sales tax is only charged to the final end user. For example, if I buy something that I am going to re-sell (and I am registered as a sales tax collector in that state), I don’t have to pay sales tax to the person I bought it from, since I’m not the end user. However, in most countries, every company along the chain has to collect and pay VAT (similar to sales tax). In some countries it has different names (“GST” in Australia is essentially the same thing as VAT in Europe, etc).
Let’s say VAT tax % is 10%, so in Europe, if I buy a bunch of widgets for $100 I have to pay VAT tax, 10%, or $10, to the vendor just like sales tax. Then when I sell them for $150, I have to collect 10%, $15 from the customer. Now when I do my VAT tax filing, I show -$10 paid and +$15 received, so I need to remit the net, $5 to the government for VAT (the gov’t also gets paid the $10 by the first vendor I bought the widgets from).
Same example in the U.S.A., you would never have to collect or pay the tax on the first transaction ($10) because there is no sale taking place to the final end user. But when I sell to the final customer, I collect the $15 (if sales tax was 10%) on the $150 and pay that full $15 to the gov’t as sales tax, so the gov’t gets the same $15 total in both scenarios, the U.S. version of how everything works is more streamlined and easier for suppliers/middlemen, (but possibly also more prone to manipulation or deceptive practices).
VAT
I won’t talk about VAT/GST any more except to say that it’s complicated and requires closely tracking lots of transactions and any software to automate that process would be very valuable. Given that VAT has been around for a long time and has been more universally standardized overseas than some of the things that have caused Sales/Use tax to spread in the US recently, I would bet that most companies in Europe etc are already using special tax software for their VAT compliance. However, I bet most of those products were not originally developed for cloud, so there could be a good opportunity here if this is an area Avalara where they could build a better moustrap. Getting companies to move away from a system they have been entrenched in for many years would be a challenge tho. Avalara might be even better suited for U.S. companies using Avalara for sales/use tax here, that globalize and begin doing business overseas for the first time, as an up sell.
Sales Tax in USA
I don’t really know much about the recent Supreme court decision, but I do know that, even before that happened, more and more states are coming after companies located in other states, claiming that they owe sales taxes. Back in the day, you only really owed sales tax on sales to customers in that state if you had a physical presence there (office/warehouse etc) or you had employees there (e.g. working from an office, or from their home). This was the whole Amazon thing where, years ago, they intentionally weren’t building distribution centers in some states because they didn’t want to have to charge sales tax to customers that lived there. Eventually they knew it was going to be a lost cause (and wanted distribution centers everywhere) so they started charging sales tax everywhere it was required.
It’s called “nexus” when you owe sales tax in a certain state. For example a NY company could have nexus in CA too. Many states have been changing/clarifying their tax laws, claiming more and more that out-of-state companies have nexus there even if no physical presence. I assume the Supreme court decision just makes it ok for states to set whatever rules they want to define nexus. It don’t think it means that a company in NY suddenly has to pay sales tax in all states. It just means they might have to, if their sales to customers in that state fall under that state’s definition of nexus (those definitions have become more and more broad in more and more states in recent years). Some states still don’t, and probably never will have any sales tax.
It’s a huge undertaking to comply with sales tax rules when you sell to customers in several (or all) states. If a company is located in one state but sells to customers in lots of states they need to a) register for sales tax in all of those states where required b) track all of the transactions to customers in those states and collect sales tax from them and c) file sales tax returns quarterly or whenever required and remit the sales tax $ collected from the customers to the state and often d) deal with routine audits from various states that want to make sure the company is paying everything they should. If a company doesn’t collect sales tax from a customer but was supposed to, that company will still have to pay that sales tax to the gov’t (plus penalties and interest) but generally can’t recover it from the customer afterwards, so it can be a very expensive problem if you screw this up.
Small companies sometimes use another third party fulfillment company to take care of all of this sales tax compliance for them, but the fulfillment companies charge an arm and a leg and generally eat up most, if not all, of your margin with their fees.
It’s very common for a company to receive a notice in the mail from another state that basically says “we think you might have nexus here and are supposed to be paying us sales tax. Fill out this questionnaire and send it back to us”. And for the most part, if you check yes to anything on that long questionnaire, they are going to write you back and say you have nexus and you need to register and start paying sales tax…and they are probably going to audit your last 5 to 7 years and see how much you were supposed to pay them previously and charge you interest on penalties.
This is still in the very early stages. Most states only have limited resources to do this so many companies at a time, so even tho this Supreme court thing happened a year ago, many companies are only getting their first few notice/letters, or have not received any at all, and aren’t doing anything to comply with sales tax requirements out of state and probably won’t even be looking for a company like Avalara for another couple of years. I’m not saying this to imply that the need isn’t robust, I’m saying this to make it clear that there will be lots and lots of new customers and business, just in this area alone, for many years, at least over the next decade.
“Use” tax in the USA
Use tax is another one for most states where it applies are only starting to reach out to companies that they think aren’t paying their use taxes.
Use tax actually applies to individuals too, not just companies, although nobody pays it individually (maybe some high net worth people?). I remember an old news story about NJ having a tax holiday for a week where there was no sales tax, and the news reporters claimed that tax authorities were checking the NJ mall parking lots for out of state license plate cars that were purchasing in NJ to bring back to NY to own/use. Technically this would fall under NY tax law as those people needing to pay use tax to NY for the tax they didn’t have to pay in NJ, but I doubt they truly cracked down on anyone in that mall parking lot (how would they know how much the spent that day? etc). But regardless, Avalara won’t be selling to individuals for this situation.
Where it would apply, if your company is in a state that has “use” tax requirements and you are not filing quarterly use tax returns already (they assume everyone is probably purchasing at least something from an out of state vendor to use in their home state), that state is almost certainly going to send you a notice that says something like “Unless you’re sure you don’t owe anything for use tax, you should start filing them or we’ll send an auditor to you to double check”. A few states even forgave penalties if you owned up to what you owed and caught up with anything that was owed for the past 5,6,7 years or whatever the statute of limitations was.
Having been through a use tax audit where the state looked back at all of your purchases from the past 5+ years, I can tell you that they are going to squeeze you for everything they can. For example if you show records in your accounting system from five years ago, of having purchased widget A in 2014 for $210, you need to show them a copy of the receipt to prove that you paid the full amount of sales tax already to prove that no use tax should have been paid. If you no longer have that receipt, they will assume you didn’t pay sales tax and will make you pay them use tax now. Even worse they will assume that they need to charge (let’s say 8% is the sales/use tax amount for that state) you that full 8%, $16.80, on the total $210 you paid as shown in your accounting records. It’s very possible that the actual base price of that widget was $195 and you already paid $15 sales tax to get to $210, but now you are paying it again, and actually paying even more than it originally was because your accounting system just showed one total amount. If you don’t have the receipt to show them, they will assume the worst case scenario (most expensive for you) regardless of how much you plead). And they’ll charge you penalties and interest on that too. And they’ll extrapolate any underpayments across all of your other purchases from that year and assume you underpaid tax on those other items too.
For companies that don’t keep great records and don’t have copies of all receipts that are easy to locate from 5 years ago, it can cost a huge amount. Go through that once and you will ensure that you are going to track all of your purchases correctly and pay everything properly and file your quarterly use tax filings correctly in the future so you don’t have to go through it again.
Certainly a large company that sources lots of purchases from different states would absolutely need software like Avalara’s to manage their Use tax compliance. They probably already have something built into their accounting system, but again, if Avalara has a better mousetrap, I could see this being a good time to make a change as companies continue to migrate to the cloud.
In Closing
I actually wish I had paid more attention when this company was first suggested on this board, or by Bert as I admittedly didn’t realize what they did and hadn’t read through any of the writeups. I tend to think the opportunity here is pretty huge and there are going to be many many more companies needing this type of product in the future that either a) don’t realize it yet or b) know they need something but are putting it off and eventually they are going to get enough pressure from several states that they can’t avoid it any longer.
I haven’t actually looked at any of Avalara’s filings or don’t any analysis of what I think might be a good price for them, but I hope this provided some background on what their software is used for and why that need is going to grow and grow and grow in future years, just for the U.S. sales and use taxes, before even considering how successful they can be internationally with VAT/GST etc. They might not be growing at 70-80% like some SaaS companies, but, especially if the economy stays good, I think they can grow at their current rate, potentially for longer than some of our other favorite companies. State and local governments are always looking for where they can find more tax revenue, and will keep turning over stones related to sales & use tax to find some, which will lead to more and more new customers for Avalara. One initial concern might be, if they are charging on a “transaction” basis (and I admittedly haven’t looked into how that works yet), then I wonder if a recession would hit them harder than others. Another concern might be how much this is really suited to large “big win” customers, as the biggest customers will almost always have a very customized, built in house, tax compliance setup. So will it get harder and harder for Avalara to sign more and more customers that make an impact as they grow, if they can’t win really huge Fortune 500 clients (again, I don’t know if they can or not, maybe they are already are, I need to research).
I started off trying to keep things simple in plain english and realize I might have made a few heads spin as I got into some of the details, but feel free to let me know if I can provide any further clarifications. AVLR is now firmly on my radar, although I need to examine the financials a bit before I take the plunge, especially given the stock’s big run so far in 2019 already.
-mekong
57 Likes
Mekong, to answer your two final questions: 1) Much if what Avalara does is by transaction but more than 90% is subscription (which I be transaction pricing also falls under); 2) they are focused on the mid-market, not Fortune 500. They have a tax filing product that is suited for larger companies, but also a newer product focused for mid and small market.
They don’t count a customer until they hit $3k in annual spend. So they are not a big ticket item, but they are a mass business market item with tens of thousands if not more customers in the US alone that can and should use their services.
One would think in a recession that not only are transactions hit, but churn will increase as more customers go out of business. Nevertheless, creative destruction leads to renewal and subsequent upswings.
Tinker
6 Likes
Thanks Tinker, that’s very helpful
Also, for those of you that are not already very familiar with these taxes, I should have mentioned this up front in my last post above, which might have made it easier to follow what I described later:
Sales tax - relates to tax on something your company sells, where they have to collect the tax from their customer and remit the tax money to the state
Use tax - relates to tax on something your company buys, where you didn’t pay sufficient tax to the state where you are going to use that product, so you need to cough up some tax money to pay the state
-mekong
4 Likes
One thing I’m a bit weary about is their potential to really scale internationally. One advantage of most of our companies is that their software basically works the same in any market. Okta logins work the same everywhere, there is no need to adjust; same for MongoDB, Zscaler, Alteryx etc…
The problem is, that Avalara‘s business opportunity internationally is not only a technological challenge but also a legal challenge in EVERY new market they enter. Yes, Europe has tried to harmonize VAT law but still you are basically dealing with 27 different VAT laws and interpretations in the EU alone. Trust me, VAT law can seem simple on the surface but below the surface it can be very complicated, to the point that there is such legal uncertainty that an automation simply doesn’t really work.
Also, VAT errors can be very costly since tax offices like to take a very strict viewpoint on them. So it’s highly sensitive and individual. I’m not sure how easy it is to dominate this market in multiple geographies. Of course, many companies can thrive here; but still I would like to see a clearer picture for international expansion and TAM-capture.
Best
Niki
7 Likes
One thing I’m a bit weary about is their potential to really scale internationally.
I see this on the boards almost every day, so allow me to play the grammar police just once.
You’re wary or leery about it.
Weary means you’re sleepy.
Bear
24 Likes
I would think that a maze of complex VAT laws, while it obviously would be more difficult to implement, would provide strong motivation for automation. If it is hard for the computer, wouldn’t be harder still for the average clerk?
3 Likes
One thing I’m a bit weary about is their potential to really scale internationally. One advantage of most of our companies is that their software basically works the same in any market. Okta logins work the same everywhere, there is no need to adjust; same for MongoDB, Zscaler, Alteryx etc…
Niki, they posted this yesterday on their IR site:
https://investor.avalara.com/press-releases/press-releases/p…
"SEATTLE–(BUSINESS WIRE)-- Avalara, Inc. (NYSE: AVLR), a leading provider of cloud-based tax compliance automation for businesses of all sizes, today announced the appointment of marketing veteran Jay Lee as its new chief marketing officer. His responsibilities include shaping the company’s global demand generation and communication strategies to drive commercial growth across markets and customer segments.
[…]
Jay will lead Avalara’s marketing team to expand the company’s presence and reach prospective customers around the globe.”.
This was probably why we saw a 5% pop in the share price yesterday. Point is: They seem to have a clear focus on global expansion.
1 Like
To follow up on my messages above that I had written before really looking at the company and it’s financials, itself…I spent a little time on Avalara last night and the impression that I came away with is that the valuation is too high for me to be interested even if I plug in an assumption that they will maintain close to 40% growth for the next three years. Given that they can’t really go after giant companies, the law of large numbers will make it harder and harder for them to accelerate growth much faster than that.
They raised a lot of cash in the IPO which still sits on their, pretty pristine balance sheet, so one or two well timed acquisitions could change this all pretty quickly and suddenly propel them, but I don’t invest in small companies on the bet/guess that they’ll make a significant acquisition, and get it right. Avalara, themself, would also make an interesting acquisition target for a number of companies, but again, I’m not going to bet on the timing of when that could/will happen.
They’re operating cash flows have been consistently negative (granted, not by much) each of the past few years so they aren’t exactly generating gobs of cash either, although they are in a good growth mode so that probably isn’t their primary goal right now. Again, a couple more years of 40% growth and good cost controls and CFFO could improve quickly as well, depending how aggressively they feel they need to continue investing for more growth.
By my calculations, which largely revolve around estimating/guessing how much revenue, and more importantly, gross margin, I think they can generate three years from now and comparing it to their valuation, I would categorize AVLR nearly as expensive as ZM, CRWD, and DDOG (tho not as expensive as SHOP, OKTA, or COUP), relative to my third year GM projections.
For me at least, at today’s valuations, I would be a lot more interested in adding new funds to my (already large) TTD or AYX stakes before opening a position in AVLR. I would put more money into MDB, ZS, SMAR, ESTC, or DDOG before AVLR as well.
If Avalara came down about 25% or so, I would be a lot more likely to open a position.
-mekong
6 Likes
Thanks, mekong, for the great education on sales and use tax. Really helpful.
Regarding avlr valuation, I don’t understand why you think it’s more over-valued than some other highly valued SaaS stocks? I looked at the quarterly earning.
Net loss only $0.6 M.
Net loss per share is only $0.01.
Free cash flow is positive $3.6 M. Compared with negative $3.6 M last year quarter.
DRR is trending higher.
of customers grow sequentially from 19Q2 to 19Q3: 10430 to 11240.
P/S is 16.9. Revenue growth 41% and accelerating. Profitable. Big tam and long run-way. I think this will be an incredible long term winner.
2 Likes
"The problem is, that Avalara‘s business opportunity internationally is not only a technological challenge but also a legal challenge in EVERY new market they enter. Yes, Europe has tried to harmonize VAT law but still you are basically dealing with 27 different VAT laws and interpretations in the EU alone. Trust me, VAT law can seem simple on the surface but below the surface it can be very complicated, to the point that there is such legal uncertainty that an automation simply doesn’t really work.
Also, VAT errors can be very costly since tax offices like to take a very strict viewpoint on them. So it’s highly sensitive and individual. I’m not sure how easy it is to dominate this market in multiple geographies. Of course, many companies can thrive here; but still I would like to see a clearer picture for international expansion and TAM-capture."
This is the opportunity and the moat.
Figure out VAT once for one company and it costs some R&D, sell to ALL their competitor and incremental costs are low while revenue continues to climb. This is how they get their leverage. Unlike land and expand, the revenue growth is dependent on new customers and transaction growth. Within customers as their transactions increase they pay more until they want to switch to a tiered subscription.
Like many other software companies followed here, there is a land grab. AVLR needs to cover as many verticals as possible, what they call content, in order to expand the SAM.
5 Likes
Thanks, mekong, for the great education on sales and use tax. Really helpful.
Regarding avlr valuation, I don’t understand why you think it’s more over-valued than some other highly valued SaaS stocks? I looked at the quarterly earning.
Kevin
Here’s a quick summary of my thinking
AVLR - past 12 months reported includes Q4 2018 and first nine months of 2019 (10/1/18-9/30/19), compared to the respective previous 12 months (10/1/17-9/30/19)
$352k revenue
$247k gross margin
At today’s $5.9B market cap, that’s a 16.7 P/S and 23.8 P/GM
Even just looking at the trailing numbers (without forecasting ahead), AVLR’s 23.8 price/gross margin is in-line or more expensive than the P/GM for:
19.2 AYX (despite AYX is growing 20% faster than AVLR)
19.9 SMAR (despite SMAR growing about 15% faster)
and even
23.5 ZS (despite ZS growing 20% faster)
If I assume the following growth rates for the next three years:
AYX - past 12 months grew 101%, next three years estimated at 63%, 58%, and 53%
SMAR - past 12 months grew at 56%, next three years estimated at 51%, 46%, 41%
ZS - past 12 months grew at 59%, next three years estimated at 54%, 49%, 44%
AVLR - past 12 months grew at 39%, next three years estimated at 39%, 39%, 39% (no deceleration)
Then three years from now, their price/gross margin (assuming GM % holds steady for each company) compared to day’s price would be:
4.9 AYX
6.4 SMAR
7.1 ZS
8.9 AVLR
which shows AVLR as much more expensive, and that assumes that AVLR’s growth doesn’t decelerate for the next three years while the other companies do. If I was being realistic, the other three companies have a better chance of holding their growth rates, or even accelerating over the next few years than Avalara does.
Now, the P/S and P/GM for AVLR is much lower than ZM, DDOG etc today (based on trailing 12 months), but if I make some assumptions:
ZM - 105% rev growth past 12 months, 93%, 81%, 69% next three years
DDOG - 113% past 12 months, 98%, 83%, 68% next three years
Then the P/GM in three years will be
8.4 ZM
8.4 DDOG
8.9 AVLR
I didn’t say in my last post that AVLR was more expensive than ZM, DDOG, I said it was nearly as expensive (although, to me, it is a lot more expensive than AYX, etc), which is what my calculations and estimates tell me. Now yes, those are aggressive assumptions for ZM and DDOG for the next few years, but that’s also a very aggressive assumption for AVLR (which is why although I own a small amount of ZM and DDOG already, I would be more likely to put new money on AYX).
The three year assumptions above for AYX would get it to $1.2 B of gross margin three years from now, while the AVLR assumptions, again without any growth decelleration, would only generate $662k of gross margin in three years (half as much). Consider that AVLR’s market cap today is $6.6 billion, while AVLR’s is nearly as much at $5.9 billion, and it’s really no contest where I would put my money.
Obviously revenue and gross margins are only part of the story. If AVLR somehow held their operating expenses in check a lot better than these other companies, their profitability and cash flow could improve more. But I don’t have any reason to believe they will be able to do that, and I frankly believe the sales effort for each new Avalara customer, will probably be more expensive relative to the future revenue and margin it generates for them than for any of the other companies above.
-mekong
15 Likes
Consider that AVLR’s market cap today is $6.6 billion, while AVLR’s is nearly as much at $5.9 billion, and it’s really no contest where I would put my money.
Sorry that should say:
Consider that AYX’s market cap today is $6.6 billion, while AVLR’s is nearly as much at $5.9 billion, and it’s really no contest where I would put my money.
Mekong,
Sales and marketing %of revenue has decreased from ~60% to ~40%. (about half of which due to accounting changes from 605 → 606) but the better half due to management focus. They stated in Q4 2018 call they would focus on sales execution and leveraging the sales process… and they did.
This management team seems like a rare combination of strategy + execution + focus.
They have followed a very strategic path as outlined in the earnings calls. Show revenue generation, leverage sales process, path to profit. This is the type of management I like to invest with.
2 Likes
Torque
Yes, I am not trying to be negative on AVLR, itself, as I think they are in a great position, with a product that will continue to be needed, and an investment in their stock probably will beat the market averages for the next few years, especially when you consider that cash on their balance sheet waiting to be deployed. I mentioned above that if the price came down 25%, I might open a position.
I just think there are better places for my money at today’s prices where I believe I can get outsized returns
-mekong
2 Likes
I’ve been talking to some sharp buysiders for a while who have a position in AVLR, and decided to buy some about a month ago.
Wins are increasing. GM is over 70%. Revs grew over 41%. FCF positive.
They have $440m cash or so to make more tuck-in acquisitions, something they have been great at historically. Do not underestimate this.
In short, there earnings report far exceeded both guidance and analyst expectations. I think this is the very early innings of a several-year runway as a category leader with massive growth prospects and a wide moat - similar in many ways to how I felt about BKNG/PCLN some years ago.
Sure, BKNG wasn’t the fastest growing stock 10 years ago compared to Google or Amazon or Netflix, but it was under $70 at the time. Look at what consistently good execution has done for their stock price even with a P/E drop to 18x incl cash: a 25x bagger.
Leader + TAM + Moat + long runway + good mgmt = long-tailed compounding growth.
Long AVLR, BKNG.
13 Likes
Greetings!
Probably a goofy question…but I’ll ask anyway. Would a seller on Shopify, Etsy or 3rd party on Amazon use Avalara’s services?
This is from the Shopify website.
As a merchant, you might need to charge taxes on your sales, and then report and remit those taxes to your government. Although tax laws and regulations are complex and can change often, you can set up Shopify to automatically handle most common sales tax calculations. You can also set up tax overrides to address unique tax laws and situations.
Shopify uses many default sales tax rates, which are updated regularly. If you use the default rates, then you need to confirm that they are current and correct for your particular circumstances. You can override them whenever necessary.
Shopify doesn’t file or remit your sales taxes for you. You might need to register your business with your local or federal tax authority to handle your sales tax. The calculations and reports that Shopify provides should help make things easier when it’s time to file and pay your taxes.
You should always check with a local tax authority or a tax accountant to make sure that you charge your customers the correct sales tax rates, and to make sure you file and remit the taxes correctly.
Thanks for any clarification.
WillyMoe
2 Likes
Avalara works with Shopify and with Amazon and probably Etsy. I don’t know if it is by default, but it clearly is used more often than any other system. But yes, these companies are not using their own internal products to provide this service for merchants on their systems.
Tinker
3 Likes