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all right good morning thank you for joining the netsuite partner spotlight presented by meridian business today we're featuring uh avalera and george padilla is going to take us through the concept of tax compliance done right this is a series of partner events that meridian is hosting next month we will be covering uh mineral tree and uh accounts payable automation as well but uh today we will be uh working with avalera and i'll let george introduce himself in just a moment but you might be asking yourself who is meridian we're a netsuite based certified partner full service professional services organization focused exclusively on netsuite helping folks understand how netsuite can impact and assist their business from a pre-sales angle of solution configuration consulting business needs assessment full service implementation and after go live support training and system optimization services across a variety of business processes from accounting and finance to crm to full operations and supply chain management up to and including e-commerce capabilities uh with that i will turn it over to our partner and uh uh esteemed guest george padilla strategic alliance manager with avalera to take us through the wonderful world of uh sales tax automation so george take it away thanks doug i appreciate it exciting times uh thank you so much uh to you doug uh jenny and meridian for allowing me to present today um my job is to just manage the relationship between meridian and avalera so if any of meridian's clients ever have an issue with avalera just go ahead and reach out to doug he'll reach out to me and then i will just interject and try to get things resolved as quickly as possible so that's a little bit about me what i'm going to talk about today is the current state of sales tax and managing it uh industries with the highest compliance risk you know the five w's of automation what is sales tax automation who needs it why automate who should automate and how to choose the right automation software and then where to start uh if you have any questions feel free to put them in the comments section uh in the box and i'll be more than happy to answer them at the very end so let's start with why sales tax is so complicated reason why is because there's so many things that trigger that requirement to collect sales tax and that's what nexus means for those of you don't know nexus is just the obligation to collect sales tax within a certain location so if you have affiliates that work for your company or if you're attending a trade show if you're doing commissions to resellers if you have remote employees uh if you're doing direct online sales or if you have inventory in a certain location just to name a few those are things that can trigger that nexus so for example if you're going to vegas to a trade show and you're there for a certain amount of time you are required to collect sales tax because they assume that you're there doing business um in the times of covid you know if you're in a place that has um let's say you're in birmingham and all of a sudden you have someone that lives in florida which is not not birmingham but like mobile alabama it's about half an hour to florida but that person lives in florida and your office is in birmingham because of cobit you are now required to collect sales tax because that person is now a remote employee so any remote employees that live in a certain state if they're working full-time may be required to now collect sales tax for your company so there's so many different ways of requiring sales tax you know you have to figure out what is the correct sales tax rate so a lot of people think that just using zip codes is accurate in itself i'm going to show you why that's not so take denver for example there's a place in denver called greenwood village now if you look here you have eight zero one one one which is the area code but you would think okay let me just collect the sales tax in that area even if you do a zip plus 4 i'm going to show you why that's not effective because of this and it's because of gerrymandering or redistricting depending on what side of the political fence you're on you look at all these different sales tax rates and sales tax rates are based on conventional districts and because of those districts you have this little sliver of orange that is in a completely different area than what the main area is and because of that you'll see that these are all the taxes associated to it so if you just use a zip code you would not have the correct sales tax for this particular city so filing the remaining sales tax you know you have to figure out the state and local jurisdictions you have to identify the sales tax return and filing dates so some states are quarterly some states are monthly some are annually and then you also have to collect the proper amount of sales tax and if you don't you have to collect those exemption certificates because even if one of your clients is not taxable it doesn't mean you don't have to collect that exemption certificate to show why you didn't collect those taxes and that's one of the first things that auditors look at when they're conducting their their audits for your companies and then you have to submit the correct forms you know and in texas it's a really easy form to file sales tax however in california it's a 15 page return and everything's broken down to the city level so adding to the confusion in 2018 there was a supreme court case called south dakota versus wayfarer now to talk about this properly you have to look at a supreme court case back in 2001 called north dakota versus the quill corporation so north dakota versus the quill corporation was a supreme court case to where the state of north dakota told the quill corporation hey you're selling sales tax you're selling products into our state you have to collect sales tax well supreme court looked at that assessment they're like no you don't have to collect sales tax because you don't have physical presence but fast forward to 2018 the same type of case except this time it was south dakota and instead of the cool corp it was way fair but essentially it was the same exact case and the state of south dakota said you have to collect sales tax because you're selling to our state wayfarer said hey no we don't we don't have physical presence they even cited that 2001 supreme court case but this time in a bipartisan fashion the supreme court sided with the state of south dakota the main reason is because of the internet the internet has literally changed the landscape of how companies are doing business so if you purchase online you're getting a 10 to 12 advantage to brick and mortar type of stores and because of that then these states aren't collecting that sales tax there's 32 states right now operating at a deficit i'm sorry now it's 41 operating at a deficit they need to make up that money somehow so right now uh it's their different levels of thresholds for this economic nexus and it's not just it adds on to what is the existing nexus activity so if you're doing a trade show that is still a triggering activity or if you have that click through nexus if you you know have a banner ad on a website that can trigger nexus but this is just economic nexus it's an extra layer so this is what's made sales tax even more confusing over the last few years so take for example georgia in the state of georgia you need to have a hundred thousand in sales or 200 retail transactions which means if you sell a widget for a dollar a piece that means after 200 transactions regardless if you have 200 dollars in sales you have to file in the state of georgia however in the state of connecticut it's 250 000 in sales and 200 retail transactions so that means if you're selling turbine engines for a million dollars a piece and you've only sold 150 of them which totals 150 million dollars in sales you do not have to file in the state of connecticut in california they don't care about the number of transactions it's just 500 000 in sales but in kansas if you sell even a dollar in the state of kansas you have to collect sales tax so it can get kind of confusing and every state has different laws with different amount of thresholds and with online sales especially in the covet era a lot of people are purchasing online and remotely so now if you sell into these states if you hit a certain threshold you may now be required to collect sales tax in that state so this is another example of how sales tax can be really confusing so we've talked about the zip codes and how they're inaccurate and how every state has different levels of economic nexus trigger and again that nexus is just a requirement to collect sales tax and everyone every state has a different definition of what that is for economic sales but look at products so take for example a bagel in new york a bagel is considered a food so it's exempt however if you slice that bagel in half now all of a sudden there's a tax associated to it why because it's prepared food and prepared food is taxable in the state of new york take a candy bar in the state of indiana a candy bar you know a hershey bar is you know taxable because it's candy however a cookies and cream hershey bar or a kitkat or twix are exempt why do you ask because there's wheat flour in those candy bars and wheat is a subsidized item in the state of indiana since it's subsidized is now considered tax-free donuts in texas i don't understand the justification for this one but if you buy five donuts or less in the state of texas that's taxable however if you buy six donuts or more that's exempt but it's not limited to just products or foods as these are just the most fun examples but there's literally hundreds of examples these are just the most fun that i've found tree trimming in california well if you use lights that's taxable but just the labor alone is exempt snow removal in in the midwest it's taxable in ohio but exempt in illinois so imagine being a cfo or a director of finance or an accounting manager in kansas trying to figure out what these sales tax rates are in two three states well that could be daunting in itself but imagine multiplying that by feasibly 30 40 50 states it really does become time consuming so industries with the most compliance risk or retail obviously you know because if you're selling directly consumer technology companies because there's 250 different ways of selling software and taxing software in the united states it's easily the most confusing part of it and then manufacturing and distribution and again if even if you're selling b2b you do have to manage those exemption certificates to show exactly why you didn't collect that sales tax and i'll give you an example you know and those of you who have been in sales before let's say it's the end of the quarter and you're coming up you're really close to your quota and all of a sudden you get a purchase order for a hundred thousand and that will make your quarter it's a friday afternoon after a long holiday weekend and you are excited that this just came in well you call the person who issued the po and you're like thank you so much for this order i just need your exemption certificate well the guy says sure i'll give you exam certificate no problem i'm leaving right now for the long holiday weekend with my family i'll get it back to you when i come back well what happens after that holiday weekend it's easy to forget you can't get a hold of that person anymore and the sales rep most likely is moving on to the next sale it is really easy to fall through and no sales person is ever going to turn down a sale just because they didn't have that exam certificate like oh we'll get it on tuesday a lot of times it is forgotten not every time but it happens more often than you think so what is sales automation it's a process to just improve efficiency and accurate we determine where your business has that requirement to collect sales tax well we can file and manage your business registrations we can apply current sales tax rates in real time via the cloud because we were built in the cloud so automatic updates are done in real time you don't have to upload anything you don't have to download and update we manage documents from end to end we're the only company that does an end-to-end solution between filing sales tax creating those returns and managing those exempt student certificates and we also have that cloud-based software that tracks relates and automatically update another fun thing that we do is we could also tell you when you're approaching that requirement to collect sales tax within a new state that'll show a heat map which is a game changer for a lot of people so almost any business can require can benefit from having sales tax um automation businesses of all industries unless you're working with the government or something in the medical field not medical devices but anything else you know generally speaking that's not taxable and you don't need uh automation software for that but mostly any other industry especially manufacturing distribution especially technology and especially retail could definitely benefit um so we're accurate we're the only company that does guarantee our sales tax rates uh we're efficient you know we do reduce those costs uh managing compliance and i'll say you know that we equate our sales tax automation to payroll you know 30 years ago payroll was something that was you know in-house but now try to find a company that has payroll in-house most of it's outsourced you know the adps the paychecks and so on and why is that because it's a non-revenue generating activity and i think it's safe to say that everyone would agree that sales tax is a lot more complicated than payroll ever does you know one of the benefits of what your employees can do instead of figuring out what sales tax rates are or filing those manual sales tax returns is trying to figure out you know streamlining accounts payable department or maybe they can streamline the accounts receivable department or looking at the feasibility of bringing a new product to market within a certain demographic and location that's more of a revenue generating activity that your finance leaders can do instead of calculating these boring sales tax rates um and then we do decrease your your risk from audits you know audits as you all know can take up to 90 days six months and it can cost hundreds of thousands of dollars for a company not including the penalties that could be incurred and this is by no means you know a scare tactic and that's the last thing i want you to think but the reality is is that 41 states right now are operating at a deficit and no one's ever gotten elected by saying hey we're going to raise your property taxes or we're going to raise your income taxes the best and most efficient way for these elected leaders to collect taxes without quote-unquote too much blood on their hands is sales tax so this is why um you really should consider automating it um and then we also it you know focus on growth we have over 700 connectors that can connect your systems with avalara whether you're using a pos system like a sales force or a crm or a e-commerce store and netsuite as well so top tax challenges that companies face is basically a lot of people are unable to keep up with the laws that are constantly changing there were 32 000 sales tax changes in the last two years alone and because of that they're getting inaccurate tax calculations another big thing is difficulty managing exemption certificates and the integration with existing system technologies can be time consuming as well so those are just a few but the benefit is that you're increasing accuracy in which case you don't have to worry about those audits uh we do have you do have improved tax compliance reporting uh and minimize resources dedicated to tax filings and there's a few others and feel free to look at this at meridian's blog as well so you don't have to write notes necessarily you can if you want but it'll be on meridian's website on their blog section if you want to look at this afterwards and then once you do pursue automation i would say now you know i mean the best time is always now but i mean ahead of financial events or some other you know whether you're pre-ipo or whether you have a an investment company um looking to purchase you that's something that they'd be looking at and a lot of times it's a condition of if you're uh if you're being acquired by a private equity company or looking to be acquired by a private equity company it's something that they have as a condition because they don't want the liability you know so if you're launching in a new area a new city new state that's something to consider automation and to be honest with you if you're if you're in three states you don't need avalara you don't need any automation for that matter however if you're in more than three states that you're doing it it's really something to consider now one thing i'll say is a lot of people say oh i'm only in three states make sure you know you're in three states because a lot of times you may think you're only in three states but you're really in 10 or 11. and we have a product that'll actually assess how many states you should be filing in um so again a lot of leadership shifts could also be a trigger you know a lot of cfos have come from a place where automation has been uh and then obviously you don't want to wait after a sales tax audit but that's and that's another trigger of companies to where they may want to look at automating one thing i will say is if you know you have a liability and you know you have to file an estate and you've just been putting it off because you know let's be honest out of sight out of mind and if you don't want to if you're just rolling the dice on getting audited one service we do have is and it's one of our fastest growing services to where let's say you know you have liability in a certain state we could represent you anonymously and talk to the states and say hey we have a client that is looking to pay their back taxes they realized after the fact they want to make things right what can you do a lot of times we can wave we can waive your penalties and reduce those charges to where we can take care of that for you now it's on a case-by-case basis and we don't disclose your name until after we've come to an agreement so if that's something that you've had a problem with or you're thinking about how do you take care of we can help you with that so why pursue automation well cobin 19 a lot of people are working from home and if you're working from home looking up these sales tax rates is not the most effective way it was hard enough in the office it's even harder working from home and sales tax rules as i mentioned you know 32 000 sales tax changes in the last two years alone and states are experiencing as i mentioned significant losses in tax revenue they need to make up that money somehow the state of texas actually just hired 24 auditors to look at companies outside of the state that are doing business in the state of texas because they want to collect that revenue and automation insurance businesses remain compliant through the chaos so we're really proud of this program it's one of the most effective programs that we've had and there's only i believe six companies in the country that offer this so it was a certification program with these states now if you look there's 24 states and the ones in greens are the one that i'm talking about so kansas is one of them we're part of the sst program and the sst is just streamlining sales tax these states right here just wanted to make it easy for you to pay sales tax so what you do is they give you free registration in 24 states they'll give you a single identification number uniform filing and form fees and exemption certificates they'll give you access boundary and rules data um centralized source of updates but the most exciting part and these are for the states that you don't have physical presence in so you can't have a remote employee you can't have an office you can't have a warehouse they will give you free sales tax calculation software avalera free filing and returns and free audit support so if you get audited by any of those states we will represent you you do not have to talk the state at auditors and it's essentially the states subsidizing avalera for you i'm not saying it's completely free but it does take off about 25 to 30 percent of the cost of avalara in those states which is a game changer so let's say you don't know if you have that liability in those states you know we do have something called a sales tax assessment um and basically it's a self-serve questionnaire that analyzes information about a business to help determine if you have that liability uh and it'll go state by state and you'll figure out whether you have that economic nexus or physical nexus now we do have a free assessment but we also have a full assessment from avalara and we are running a promotion with meridian to where normally it is forty five hundred dollars but if you take action before january 31st it would be three thousand dollars so that's one thing that we can offer uh the clients of meridian if you choose to take advantage of that and it'll actually tell you exactly where your liabilities are you can't see from here but it'll show you you know the yellows and the and the oranges to where it'll show you varying degrees of okay you don't have any presence you're do have presence or you're approaching that economic nexus level and then you just have to complete that self-service guide questionnaire uh it'll have an assessment within three business days of the analysis and then we'll give you that full report as well uh to do as you like with no further obligation so as i mentioned avalara is the only company that has that end-to-end solution so managing your exemption certificates from end to end filing your returns and calculating those sales tax rates uh we also do have a cross-border solution to where if you're doing things internationally and you need those harmony codes and those landing costs we have something that is a solution as well so we have a vp of um at avalara and he was in canada toronto and he bought a gopro online well the gopro listed as 199 so he went and hadn't purchased it problem is is that when he got it delivered in the mail the postman said you owe me a hundred dollars because of the landing cost tariff well he sent it back because he's like that's a bait and switch and even if you do settle that cost and even if you go to that company he's really hesitant as to using that company again why because it felt like it was a bait and switch type of situation and in a competitive situation to where you want to make sure that you're the most competitive if you charge too much your competitors are going to win that business but if you charge too little you're going to have a tax liability so it's really important to just have that accurate sales tax rate and additional costs if you are doing international so that's all i have right now thank you so much for your time i really appreciate it and thank meridian for allowing me to speak um does anyone have any questions that i can help answer hey george thank you so much for the presentation really appreciate you presenting uh some clarity on a pretty complex topic um the promotion uh you know is much appreciated if anybody has questions here in a moment i'll share some contact information on where you can locate today's presentation uh see future webinars uh coming forward or you know send questions comments etc to uh to meridian and we'd be uh delighted to uh you know pass those along to uh george and his uh sales team um you know from a meridian overview uh standpoint um you know we present ourselves to the market as experts in all phases of erp solutions and that's inclusive of the netsuite solutions but also partners like avalera there are hundreds of certified solutions that extend the value proposition of netsuite and meridian can help you navigate that we're focused as i said exclusively on the netsuite solution netsuite's the market leader for comprehensive erp in the cloud space and the small medium business space meridian can be your trusted partner in all phases of of the solution from you know kind of kicking the tires to figure out if netsuite's a good fit for you to put to implementing it and long-term ongoing support again if there's interest in taking advantage of a nexus study to assist you you know please let us know you can learn more we'll post today's presentation and synopsis on our website or send any questions that you may have to uh meridian at sales meridianbusiness.com again george thank you so much for the presentation today for those that have participated thank you for joining us and please if there are questions or follow-up please visit the website let us know how to get in touch with you or hit the email site so thank you very much george appreciate it and everyone have a great rest of your day and enjoy the rest of the holiday season take care oh