What you'll learn:
- How Squire conquered sales tax compliance
- Fitting technology to the client compliance journey
- Challenges with technology and unexpected wins
Speaker 1 (00:11):
Hello everyone. Welcome to today's case study session with Avalara, finding the Right Technology to fit your sales tax practice. We have John Sallese and Shara Sumnall. I will turn over to you to introduce yourselves and launch into your case study.
John Sallese (00:30):
Hey, thanks a lot. I really appreciate it. Hi, and welcome everyone. We're all here to talk about the wonders of tax technology and taxation. Hold on, let's, let's work this again. Taxation and technology, right. All right. My name's John Sallese. I actually work here at Avalara. You can probably tell by the orange that I'm wearing on my shirt. I've been doing taxation for a little over 30 years, focusing in on the tax automation piece for about the past 20 and I'm actually here today with Sarah.
Shara Sumnall (01:05):
Hi John. Thank you. I'm Sarah Sumnall, I'm a Manager at Squire. I've focused on sales tax for the last six years and I'm a long-term staff person at Squire with more than 20 years experience.
John Sallese (01:18):
Awesome. You're excited to talk about taxes today and your case study.
Shara Sumnall (01:22):
It's what I do.
John Sallese (01:23):
Awesome. I'm trying to get the rest of the room wrapped up and excited about it. Yeah, so we just went through our introduction. We're going to do a little bit about how Squire, how Squire, Squire conquered sales tax compliance. So we're going to talk a little bit of background around her department and what she's built up there and then we're going to talk a little bit about the technology aspect of that. A lot of transaction taxes is kind of wrapped around technology for efficiencies and we're going to talk about that a little bit in a second and then we're going to go into some of the challenges both positive and negative you had with the technology as we continue the discussion.
Shara Sumnall (02:06):
A little bit about Squire. Our firm started 50 years ago. It's our 50 year anniversary this year. The firm was founded in Orem, Utah. We've grown to be one of the largest firms in the state. We've got around 25 partners and 250 employees at this point.
John Sallese (02:22):
And a dedicated.
Shara Sumnall (02:24):
Dedicated sales tax.
John Sallese (02:25):
Sales tax practice.
Shara Sumnall (02:25):
Automation practice.
John Sallese (02:27):
I should say it's dedicated sales tax compliance practice is probably the best way to say it. Right. So how Squire conquered sales tax compliance.
Shara Sumnall (02:37):
We started, I started personally in 2016. There was a entrepreneurial partner who wanted to take on this new service and I raised my hand to help him do that. So I started learning from scratch with pen in hand and some forms and reading instructions and starting to get my hands on client and.
John Sallese (03:00):
I've been there. Yep.
Shara Sumnall (03:01):
Yeah, I had 10 years in the income tax department with that in my background, so was able to help build processes and procedures as we brought on more and more clients and more and more staff people.
John Sallese (03:12):
Probably a lot of manual processes associated with that. As you were growing, I'm going to assume
Shara Sumnall (03:17):
Early on. Absolutely. And then a year or two in, we started using a sales tax automation software that had a calculation engine, so got my feet wet with helping clients manage tax determination at that point and then the filings that flow from that point on
John Sallese (03:36):
Flow from that little process there. I got you. It's also good to note too that right now you do have an advisory sales tax group that focuses in on filing. So a separate group from everyone else, which is the group that you're running. I guess that's good for everyone to know out in the audience there as we're talking through this.
Shara Sumnall (03:54):
Yeah, if that's helpful. I can just share a little bit about our firm structure. We have a tax income tax practice area, audit practice area, an advisory which houses ERP systems, implementations, payroll, sales tax, bookkeeping, outsource, CFO can, the miscellaneous, miscellaneous stuff. We catch all. Yep. Plans and advisory.
John Sallese (04:15):
Awesome. Well that's a little bit of the background now let's just to go in a little bit, let's talk a little bit about the challenges you've had with technology over the years.
Shara Sumnall (04:26):
But before we go there, John, I want to talk about the aspect of having started with one particular industry and my group, my personal experience was growing and focusing on sales tax clients for one particular industry and then we'd already talked about the growth of the clients and the staff, but Wayfair happened almost five years ago and that was a tsunami of client needs coming at us to help so many more clients with sales tax.
John Sallese (04:56):
Wayfair was a wake up call for a lot of both customers and firms because I talked to a lot of firms as, and a lot of firms, they didn't want to address state and local taxation. Usually they had a federal practice and they generally didn't directly challenge or tackle the state and local part of it, but a lot of clients were pulling them into that practice. That's what we saw from our side on the Avalara side, which is kind of why we have the accounting practice over what we have today.
Shara Sumnall (05:27):
I encounter many misperceptions not only from our income tax partners, but clients also thinking that e economic nexus rules apply in some cases where they don't. Yeah, it's interesting and it's nice to feel like I can help add value with this, which area.
John Sallese (05:45):
Wayfair happened and all of a sudden we had a situation where a lot of people had to start dealing with the issue obviously, and then Covid hits and then once Covid, which I'm sure probably a lot of you probably knew the, from a e-commerce point of view or from a retail point of view, they had to start a lot of companies that never had to worry about calculating taxes. Actually a lot of companies didn't have an e-commerce practice and now all of a sudden they were shipping stuff across the US and they actually had to start filing all those returns that they weren't going to have to worry about originally.
Shara Sumnall (06:19):
That's right. And they also have to consider their own websites and the marketplaces that they might be selling on such as Shopify, Amazon, eBay, and they need to be looking at every marketplace they're selling on and be aware of how tax is being treated, but also again, aggregating everything into that returns filing process for accuracy.
John Sallese (06:41):
And I'm actually curious, we actually had a little internal conversation about this. We use the term marketplace a lot in our business and what we do, but does everyone know what a marketplace is? If I said a marketplace you, do you think Amazon, do you think Shopify, do you think there's a lot of websites that sort of consolidate other products that can be sold? Does anyone familiar with that term? If we use it and I've got two people raising their and everyone else staring at me. Alright, no, no worries. Well the people that Avalara should know what a marketplace is, so all good. But there's a typical example. A lot of people want to sell their products on Amazon. There's taxes that get calculated on Amazon. There might be taxes that get calculated on Shopify or different types of electronic e-commerce platforms, but they're separate from a client or a customer's sales channel. So it's, it's an additional area where taxes can get calculated and now you got to figure out how to consolidate that onto your returns when you're filing them. That's an important thing to note as we talk about sales and use tax automation.
Shara Sumnall (07:59):
So back to challenges, that's one challenge that that companies are facing is the multiple platforms in states. In our practice at Squire, as we grew over the pandemic, we had clients that exploded in their businesses and ones that didn't that dwindled and then had to find new ways to maybe they, to use a direct selling example. People were having parties in their homes to sell a product and then okay, now we're not going to be having parties in person, so let's pivot to selling online or having a hybrid kind of approach. So those things resulted in new tax consultations that we had to do with clients where they'd already been done previously managing growth with clients and we started to take on a lot of manual work, which was not a move that I recommend for any firms to taking on manual sales tax filing work.
John Sallese (08:59):
And that's the key here. It's dealing with consolidating data from your client and everyone thinks that can be a quick process, but when you have a client that has multiple sales channels now when even small companies can have multiple sales channels, we just, if you're anyone you can be selling on Amazon, you can set up your own small website on Shopify. You can also start selling directly through whatever accounting system like QuickBooks that you have. There's lots of different places you can sell things. There's lots of different places that can calculate sales and use taxes and now you're trying to figure out how to take all those things and consolidate it into one set of returns that can be filed. And ultimately that's the challenge. And I don't know how you guys were, what were you just taking in whatever the customer gave you at that point, I should say the client.
Shara Sumnall (09:51):
Yeah, we were just, during the pandemic it was pretty hectic and uncertain for a lot of people with business and also exacerbated by staffing problems, right. And work worker shortages. So I guess I don't want to spend too much time on the reasons why we did that because it's never what we were kind of going for, but
John Sallese (10:13):
It always just happens today.
Shara Sumnall (10:14):
We had that experience. I can share with all of you that you should not do that. The numbers work out to about, you can take on maybe four or five companies and doing manual work before you're maxing out. Yeah, a staff person, one full-time person.
John Sallese (10:27):
Exactly. And then you come to the question.
Shara Sumnall (10:28):
Depending on the company size, but go ahead.
John Sallese (10:29):
No, you're right. And then you come to the discussions, you actually want to hire more people to do more returns and does it make sense to do that and right costs associated with it. Yep. I got you. So that's a little bit about there. Anything else you wanted to add there?
Shara Sumnall (10:44):
I guess just to hit home one more point, clients that are easily able to set up on a platform tend to focus on filing as their need. They kind of come saying, Hey, I really need a filing solution. So I was seeing a lot of that as well.
John Sallese (10:56):
And that's a good point when most people go to a firm when they have to start filing tax returns of some kind, that could be any return when it comes to the sales and use tax area or transaction taxes in general. We'll stay generic here when it comes to transaction taxes, now you've got the situation where they might be not filing correctly and so you can't usually to do it effectively, you can't just look at the return. Now you have to look at are they registered correctly and if they're not registered correctly, how long have they not been registered correctly? And and then you need to start going back and figuring out, well, I could just do this part here, but there might be all these other steps I might need to think about before I actually can get a client to believe or trust in what I'm doing.
Shara Sumnall (11:50):
The same applies not only to how the registration done, which can affect the filing setup and get you in the wrong bad place, but also the tax determination. Yes. Because the data's flowing from the tax determination to the returns. So there're, when you're in the filing seat, there's a lot to kind of have to back into sometimes.
John Sallese (12:10):
Having done returns for a long time. This is one thing I've learned over the years, it's how to configure every tax engine that's out there. I don't know if you've.
Shara Sumnall (12:18):
Well, this is how our practice evolved over time is that the needs became more, hey, help us find the right systems to match our business or our industry. And most firms of a certain size probably have focus in certain industries, which we do at Squire. We have service areas, industry groups. So it is, I don't know what I was going to say about that, but the point is it,
John Sallese (12:43):
It was really good though. I'm
Shara Sumnall (12:44):
Sure it was it, it's nice to get familiar with the maybe taxability rules or certain things you might see in certain industries and know those really well and kind of become an expert in one or two areas. I like that anyway.
John Sallese (12:59):
SaaS was the big one for me.
Shara Sumnall (13:01):
SaaS is a big one. Consumer products for us as well.
John Sallese (13:06):
SaaS was the first one for me only because we had a lot of companies that were in that industry and they started selling across the US and so obviously they hit the thresholds for e-commerce pretty quick. I'm sorry for Economic Nexus pretty quickly. And they actually started having to register in a lot of places.
Shara Sumnall (13:21):
Tech is growing in Utah as well. Yeah.
John Sallese (13:24):
So having said that, talking about the issues you were currently having, what did you actually decide to move to in order to help resolve some of those problems?
Shara Sumnall (13:32):
When I met with an Avalara rep and our F Squire had been a long time partner with Avalara, but I was able to sit down with someone last summer and explained some of the pain points I was having, especially with filing. And I learned about managed returns for accountants I or Avalara managed returns. And I thought it sounded like just what I needed to be able to scale and solve some major pain points.
John Sallese (13:56):
And for the audience here I'll say managed returns for accountants is a, it's a service offering geared towards accounting firms and it's designed to file and pay returns on behalf of the firm and it's designed to remove the liability from the firm making the actual payments. So you're specifically there to help organize the data and I'd like to talk a little bit about that, but we're here, you're there to organize the data, get the data into the system, and then from there you can pass that over to Avalara. And then Avalara was actually doing the filing and paying for you, which is basically, that's the time consuming part of this process. Right.
Shara Sumnall (14:35):
The model we were seeing before that when clients were working with Avalara is the AVA within AvaTax, the returns being filed within that console. And so they would kind of ask us to go oversee their AvaTax account, but I like this so much more because it allows us tools that our clients can't get as a firm. So I really liked that.
John Sallese (14:57):
Yeah. Did you want to go into the data file? I mean, I know data files, when we were initially talking, spoiler alert, I talked to her during the sales cycle, but when we were initially talking, there was a lot of data sources you were dealing with and we had to figure out a way either to go back to the client in order to get better data from them in order to import into the process or we had to take advantage of some tools that were out there in order to suck in the data in an easier way. If anyone's managed compliance processes, half the problem, I guess is probably the best way to say this, but half the problem is getting information that you can use to generate and file a return. Right. Is there anything else you wanted to add?
Shara Sumnall (15:43):
I could just give some illustrations of having received four columns on an Excel spreadsheet to 150. I mean I've seen an everything in between where you just get the bare minimum and not enough or way too much and dealing with either one of those. So two points with how the Avalara managed returns helped in this way. One is the ability, since it is an Avalara software product for our console to link right into AvaTax accounts so that there's no manual data movement, you're not batching in or exporting out, you're just linking very quickly and then the data pulls in automatically to the filing console, which is really handy. And then in instances where you can't get that AvaTax link, the data import set up is much easier month over month a much easier lift. My staff before this product were formatting data files month over month. They'd have to do the same massaging of data to clean it up or get it in the right format to upload it. And this is such time saver in that sense.
John Sallese (16:52):
Saves you from all that time of having to manipulate spreadsheets basically. I would say the risk associated with changing the data too before you actually had to upload it into the system. Yep. Anything else you wanted to add there?
Shara Sumnall (17:07):
No. Nope. Any questions? Any burning questions from anyone yet? Okay.
John Sallese (17:19):
Whoops. Sorry, hitting the wrong button. I'm just wondering what was going on there. The process, just to finish up here, the process we're talking about is it's a returns filings offering that we use and we use it with a lot of accounting firms. And the reason why it's there is it's a returns filing workflow process you can install and everyone's probably a few file income taxes or sales taxes, they all have a workflow process associated with it. But the advantage that we've added to this process of managing the compliance process is to be able to take in data in an automated fashion. So you're seeing up there, and I don't have a little pointer, but you're seeing up there, we have a concept called connectors and a lot of people know Avalara from how we hook up to accounting systems to calculate taxes. If anyone uses QuickBooks, NetSuite, zero, any of those other systems that are out there, we have integrations or what we call connectors with them that obviously help calculate taxes.
(18:23)
A lot of accounting firms like to do that configuration and set up and usually bill for the time associated with setting them up. We have a certification program we'll put you through if you're interested, but they have the process of setting up to make sure they're calculating taxes correctly and then after that's working right when they post transactions in the accounting system, they also post on our side into AvaTax and as long as they're posting those transactions into AvaTax, we have an automated means of pulling that data across and putting it onto the tax return for you. If you're in a situation, which is a lot of the customers that shares talking about clients, I should say, that shares talking about, they might not be using systems that have AvaTax hooked up to it. They could be using an Amazon or a Shopify. Those are the big ones we see a lot.
(19:11)
And they typically may or may not be using a tax engine in the background to calculate taxes, but they have taxes in that system. And we have some automated means to pull that data out and inserted into the system as well in order to find a central spot to consolidate all the tax return information. And then we actually build that workflow process on it so you have some control over what the data looks like before it's filed, the opportunity to make adjustments to that information and then ultimately approve the tax returns to be filed. We try to make taxes as exciting as possible as I can see the eruption in the room as I'm talking about that. But overall, that is how we manage the tax compliance process. We put some tools specifically set aside to manage the tax return process and we also have some research tools you can utilize in order to help do research specific to sales and use tax. I shouldn't say sales and use tax products. I was going to say, but specific to retail items or different types of products and services you're selling so that we can tax them correctly.
Shara Sumnall (20:17):
I promise I'm not an Avalara spokesperson or sales rep, but we also took advantage of the licensed management software with our group.
John Sallese (20:25):
I forgot about that. In addition to what I was just talking about, if you do registrations on behalf of your clients, we have a white label. We have a couple of options for you. Can white label and have Avalara do the registrations for you if you're not comfortable doing them or we do offer some software if you want to use our software to manage the registration process for them.
Shara Sumnall (20:49):
John, I don't know if this is in a later slide, but we talked about data, so we've covered the import from different systems, disparate systems into AvaTax for filing. The firm can pull that data in, set up the filing calendar, reconcile the data and file the funding process. I want to touch on though a very slick, is that, here I'll let
John Sallese (21:11):
You, that's that's there. You got it. You take it from there. So just look at the bottom part of this particular slide. You'll notice that there, there's a calendar set up and I guess I can point, but I just wanted to filing tax returns, as everyone knows is a process. You get data in and you bring it through a process and you file it and all this is showing, one of the main offerings we have is you, the accounting firm can certainly take control of the setup of the tax returns. They can deal with the data imports as I was showing you from the previous slide, which is being the ability to pull in data from different accounting systems or use our native calculation engine to get that data, consolidate it in. We offer a platform to make adjustments to that data. No one's ever happy with data when it first goes into the system. They all have little changes they want to put to it. They make changes. There's an approval process. There's some reports usually you send out to the client to take a look at and make sure they're happy with it. You can approve them at this point. And then after the approval, that's when Avalara takes over in the process, we assume the liability for filing and paying at that point, most firms generally don't want to take on the liability of money. So what we can do is we actually take over, we can pull the funding directly from the client, make the payments to all the state and local jurisdictions, and then do the electronic filing to the state and local jurisdictions for them as well. In a nutshell, that's how the service works.
(22:48)
Did anyone have any questions about that or questions in general? Well, all righty, we're six minutes early thought we'd have some, but it's all good. If anyone has any questions they'd like to talk about. Oh, we got one. I got one. Thanks for saving me.
(23:30)
Yeah, good question. There's actually, depending on how you're using the product and where you are in the product, there's a couple of things in there for that. The Nexus thresholds we call it in the system, but there are some reports you can run that will actually track on the next what the Nexus thresholds are. On the accounting firm side. There's, it's just they're boring reports on the customer, on the client side. There's that inside of their console, they actually have a map in there and they change the color of the states depending on where you are as far as the threshold goes. But yeah, it's definitely in there. I don't think it says congratulations, but yeah, I think it's something cold in calculating like, Hey, you need to register. But yeah, no worries. Any other questions, concerns? Well, awesome. Hey, if anyone has anything else, we're going to hang around here for a few minutes. If anyone has anything they'd like to talk about or anything specific, more than willing to have the conversation about taxes. Thanks everyone.