Predictable Revenue. Predictable Risk? Sales Tax & Recurring Revenue
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As more commerce has moved to the web, the subscription-based model has encompassed emerging technology as well. See how Avalara and Zuora outline what every company needs to know about avoiding sales tax compliance risk when dealing with recurring billing.
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Predictable Revenue. Predictable Risk? Sales Tax & Recurring Revenue
- 1. Predictable Revenue. Predictable Risk? SalesTax and Recurring Revenue Models
- 2. Slide 2 − Zuora Confidential, not for distribution beyond intended recipient 2 Use promo code Revenue50 and receive 50% off
- 3. Clete Werts Partner Sales Manager Julia Zhang Product Manager Speakers 3
- 4. Slide 4 − Zuora Confidential, not for distribution beyond intended recipient 1 2 3 Zuora A Brief Introduction Challenges of Sales Tax in Subscription Economy Avalara Solution Zuora Tax Solution Avalara Integration Agenda
- 5. Six+ Years of Incredible Growth Zuora founded Series A; First product launched Series B, Zuora featured in WSJ Series C; Zuora announces 1B in contracted revenue Series D, Trademarks Subscription Economy; EMEA expansion Zuora wins AlwaysOn Company of the Year Award; expands to Asia TheLeaderinCommerce,BillingandFinance SolutionsfortheSubscriptionEconomy $20Bn contracted invoice volume; Series E funding; 50th product release 2013201220112010200920082007 Offices: Silicon Valley, London, Sydney, Beijing, Chicago, Atlanta 500+ Customers 300+ Employees 95% Customer Sat 5
- 6. Our customers span 500+ Subscription Economy businesses from multiple industries High Tech SaaS Cloud Infrastructure TelecomDevices Media Education Healthcare 6
- 7. Slide 7 − Zuora Confidential, not for distribution beyond intended recipient Zuora has been building this system for 6 years 7
- 8. Slide 8 − Zuora Confidential, not for distribution beyond intended recipient • Billing & Rating • Invoice Delivery • Taxation • Payment Automation • 14+ Gateways/Processors 8
- 9. Slide 9 − Zuora Confidential, not for distribution beyond intended recipient Zuora Tax Engine Input • Customer Tax Exemption Status • Customer Sold-To Address • Product Tax Code • Charge Amount Output • Tax rates and tax amount for each line item/ jurisdiction Zuora Tax Engine Our customers upload and maintain tax tables for each product/service type.
- 10. Slide 10 − Zuora Confidential, not for distribution beyond intended recipient Tax becomes complicated as your business grows • Keep up with complicated Tax Rules • Maintain Tax rates that change frequently • Remittance the correct tax payment to multiple jurisdictions using proper forms and procedures
- 11. Slide 11 − Zuora Confidential, not for distribution beyond intended recipient Solution: Embedded Avalara Integration
- 12. What makes Avalara unique? • Chosen by thousands of businesses to file and remit sales tax on their behalf • Processes billions of transactions annually • Recommended by software application resellers, CPAs, and business consultants • SSAE16 Certified and a SST service provider 12
- 13. A handful of Avalara customers 13
- 14. Constantly Changing Rates, Rules, & Boundaries Accurate from Quote-to-Cash Nexus (Physical Presence) Product Taxability Sales Tax Challenges for Recurring Revenue Models Sourcing Rules 14
- 15. 15 • What’s taxable, and what’s not? And where? • Physical vs. digital goods? • Calculating and filing/remittance • Exempt purchases • Web-based services can change the nexus dynamic Sales Tax: Different for subscription models?
- 16. Understanding Nexus Knowing where you are required to collect “Nexus” describes the connection between a state and a business that permits a taxing authority to require a seller to register, collect and remit sales and use taxes Nexus allows a state to compel an out-of-state company to register and collect sales or use tax 16
- 17. States finding more sales tax revenue by broadening definitions of nexus Remote sellers can no longer assume that Quill v. North Dakota means they don’t have to collect sales tax Nexus in a digital world Where is the item sourced? What is the method of delivery? “Amazon Laws” ̶ Cyber Monday, 2013: SCOTUS leaves NY click-through affiliate law in place ̶ 11 States have already passed Amazon Laws 17
- 18. Nexus-creating activities: a growing list Multi-state locations Maintenance/service/repairs Own/lease real property Hosted Data Centers Field sales/service staff Charge Licenses/royalty/fees Direct and/or online sales Maintains inventory Affiliates Tradeshows Commissions to resellers (1099s) Investors/board members Marketing/Web advertising Drop shipments 18
- 19. Slide 19 − Zuora Confidential, not for distribution beyond intended recipient Single Point of Storage/Access vs. Distributed Storage (ASP Model) In the Cloud (No Delivery) Off-the-Shelf Canned Software vs. Custom Evolution of Technology Taxation Tangible vs. Electronic Delivery
- 20. Product Taxability of Digital Goods How is a digital good defined? How is a digital good taxed? When is a digital good exempt from tax? How is taxability different if it’s a one-time purchase vs. by subscription? 20
- 21. Download Adobe Acrobat 9 Pro Extended https://www.adobe.com/downloads/ Packaged Software Digital Download Product Taxability Confusion CALIFORNIA 21
- 22. Washington Georgia Product Taxability Confusion RINGTONES 22
- 23. Product Taxability of Tangible Goods Purchased by subscription… Is it any different than a one-time purchase? When is it exempt from tax? – $$ threshold – Sales tax holidays – Length/type of subscription? 23
- 24. <6 months, sent second class mail >=6 months, sent second class mail Product Taxability Confusion TEXAS 24
- 25. Understanding product & service taxability exceptions Rules and rates vary between states The following industries have varying taxability rules: ̶ Software / hardware ̶ Digital goods ̶ Services ̶ Medical device / equipment ̶ Food / beverage ̶ Clothing / apparel ̶ Dietary supplements ̶ And many other industries / products 25
- 26. Constantly Changing Sales Tax Compliance 11,000+ taxing jurisdictions Thousands of changes to tax laws, including: ̶ Jurisdictional rate changes ̶ Tax holidays ̶ Jurisdictions that levy new taxes or eliminate taxes ̶ Jurisdictions that expand geographic boundaries Accuracy is everything! ̶ For customers, auditors, your business 26
- 27. ZIP Codes: wrong tool for the job Taxing jurisdictions don’t always follow ZIP Codes! Individual counties and municipalities levy sales taxes in addition to state rates Tax rates can vary significantly within a ZIP code 27
- 28. Slide 28 − Zuora Confidential, not for distribution beyond intended recipientSlide 28 − Zuora Confidential, not for distribution beyond intended recipient 7450 Leyden Street Total Sales Tax: 0.0925 COLORADO: 0.0290 ADAMS: 0.0075 COMMERCE CITY: 0.0450 SCIENTIFIC & CULTURAL: 0.0010 DENVER AREA TR: 0.0100 7495 Locust Street Total Sales Tax: 0.0475 COLORADO: 0.0290 ADAMS: 0.0075 SCIENTIFIC & CULTURAL: 0.0010 DENVER AREA TR: 0.0100
- 29. The state of our States States are still recovering from the Recession In 2013, 31 states projected budget deficits totaling $55 billion NRF estimates $24 billion in sales taxes goes uncollected on the Internet Therefore As tax-collecting agents of the State(s), they are looking to your business to find more money This increased focus creates compliance risk for you 29
- 30. States finding more sales tax revenue by hiring auditors California announces hiring 100 auditors over the next three years Idaho hires 48 auditors that stay on as full time staff 30
- 31. End-to-End compliance for Zuora 31
- 32. Zuora & Avalara Partnership Pre-Built Connector by Zuora ‒ No development work required One Sales Tax Engine ̶ Constantly updates sales tax rate ̶ Product Taxability support ̶ Up-to-date reporting ̶ Automated Filing 32
- 34. 34 Billing engine supports multiple taxengines Get Subscriptions Reads Usage Data Processes Charges Processes Taxes Generates Invoices Billing Engine Zuora Tax Engine Avalara Tax Engine Each Rate Plan Charge can use a different Tax Engine
- 35. Slide 35 − Zuora Confidential, not for distribution beyond intended recipient Setup 1: Create company and nexus in Avalara
- 36. Slide 36 − Zuora Confidential, not for distribution beyond intended recipient Setup 2: Set up Avalara tax engine in Zuora
- 37. Slide 37 − Zuora Confidential, not for distribution beyond intended recipient Setup 3: Create your tax codes
- 38. Slide 38 − Zuora Confidential, not for distribution beyond intended recipient Setup 4: Assign a tax code to rate plan charge
- 39. Slide 39 − Zuora Confidential, not for distribution beyond intended recipient Calculate tax on invoices – via Bill Run or API
- 40. Slide 40 − Zuora Confidential, not for distribution beyond intended recipient Display tax on quotes
- 41. Slide 41 − Zuora Confidential, not for distribution beyond intended recipient Display and collect the tax for online orders {"previewAccountInfo": "currency": "USD", "billCycleDay": 1, "billToContact": { "city": "Foster City", "country": "United States", "county": "San Mateo", "zipCode": "94044", "state": "CA", "taxRegion": "CA" } }, "invoiceTargetDate": "2014-05-01", "contractEffectiveDate": "2014-05-01", "subscribeToRatePlans": [ { "productRatePlanId": "2c92c8f......" } Subscribe () RequestSubscribe () Response ….. { "success": true, "contractedMrr": 100, "totalContractedValue": 1200, "amount": 91.23, "amountWithoutTax": 79.99, "taxAmount": 11.24, "invoiceTargetDate": "2014-05-01", ….. }
- 42. Slide 42 − Zuora Confidential, not for distribution beyond intended recipient Collect the right tax when order is submitted
- 43. Slide 43 − Zuora Confidential, not for distribution beyond intended recipient Tax Docs created in Avalara ready for remittance
- 44. Slide 44 − Zuora Confidential, not for distribution beyond intended recipient Delivered in May Release If you’re interested, please contact Zuora Support
- 45. Questions? 45
- 46. Slide 46 − Zuora Confidential, not for distribution beyond intended recipient 46 Use promo code Revenue50 and receive 50% off
- 47. Thank You 47