Sales Tax Limitations in QuickBooks Online - When to Turn to Avalara

Avalara joins us to discuss when adding Avalara to your QuickBooks Online and how that helps stay in Sales Tax Compliance.

QB Power Hour is a free, biweekly webinar series for accountants, ProAdvisors, CPAs, bookkeepers and QuickBooks consultants presented by Michelle Long, CPA and Dan DeLong who are very passionate about the industry, QuickBooks and apps that integrate with QuickBooks.

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00:43 Meet the Hosts: Michelle and Dan
01:04 Sales Tax Discussion Kickoff
01:22 Introducing Avalara Experts
02:44 Challenges with Sales Tax Setup
04:30 Avalara's Role in Simplifying Sales Tax
06:07 Panel Introductions from Avalara
12:42 Davo by Avalara: Automating Sales Tax
23:37 Avalara's Suite of Services
30:38 Address Validation and Tax Jurisdictions
31:47 Integrating Avalara with Business Systems
33:01 Avalara's Partnerships and Integrations
34:13 Handling Complex Tax Scenarios
38:08 Automating 1099 Processing
40:05 Economic Nexus Tracking
43:02 Sales and Use Tax Calculations
46:07 Voluntary Disclosure Agreements
47:18 Davo vs. Avalara for Tax Filing
56:26 Bundling Services and Sales Tax Implications
59:39 Conclusion and Next Steps

Transcript

Dan DeLong: 0:30

Hi, Michelle. How are you?

Michelle Long: 0:32

Hey, Dan. I'm great. How are you doing? Hope you had a good Thanksgiving.

Dan DeLong: 0:37

Yes. We hope everybody did have a great Thanksgiving. Matthew, always good to see you as well.

Matthew Fulton: 0:44

Hello, everybody. Thanks for having me back on. I'm excited to talk about sales tax. I

Dan DeLong: 0:49

don't believe you. Based on your conversation of what you said the last time about how you don't like sales tax. I don't think you're being truthful. we have a star studded panel of, of folks from Avalara joining us here today. And, if we could have those that are presenting from Avalara joining come off, put their, put the camera on, we do have some others that are just helping with the, the Q& A and such, but our topic today is Like we talked last time about the sales setting up sales tax inside of QuickBooks online with Alicia did a great presentation. He has a great course on her website about, setting up sales tax inside of QuickBooks online. But as she mentioned at the end of that, there was there, it's. It's the shallow end of the pool when it comes to some more complicated setup of sales tech. So we wanted to have the, our friends at Avalar joining us here today, to talk about some of those situations when. You're butting up against the top of what QuickBooks Online will do with regards to sales tax calculation and set up. So we wanted to have them come on and talk about some of those things that, that they can, help with. Now, Matthew, last time you talked about, The fact that you don't care for sales tax at all and and so I wanted to start the and kind of frame the conversation about As an accounting professional, when you have those engagements with your clients, and there are things that you don't like to do, because I know Michelle hates payroll and taxes, right? Like how do you frame that and set that expectation up with with your clients so that Especially it's a core functionality of a business of how to do things in sales tax is such a core functionality. How do you keep that separate?

Matthew Fulton: 3:10

It's a really difficult thing to try to get out of is the best way I can say it. So usually when we're like first meeting with a client, we're trying to figure out what services they need and if they're going to have more complex sales tax, it's something we let them know right away. That we have referral partners that we would involve or bring in that they would help handle the sales tax. When you start getting stuff, that's really, complicated and they're adding different products and services all the time, it just becomes so much extra work. And we explained to him, it's not a part of the normal pricing. So it's an add on is how we handle it. I have not been successful at really getting away from doing sales tax. We just try to find the best way to make it as easy as possible.

Dan DeLong: 3:57

Michael Corleone in Godfather, right? They keep pulling you back in.

Matthew Fulton: 4:02

Pretty

Michelle Long: 4:02

much, yeah. One of

Dan DeLong: 4:03

those things. Michelle what do you suggest?

Michelle Long: 4:07

I was going to say one of the things about sales taxes is you don't know what you don't know. And that's why I love Avalara and AviTax is because they made me realize like I always thought a Hershey bar is a Hershey bar is a Hershey bar until they educated me that a Hershey bar with almonds is food and it's taxed one way and a Hershey bar without almonds is taxed a different way. I had no idea. Same thing with things like Toothpaste. Does it have fluoride or does it not have fluoride? They're taxed different. Who knew? And that's where I realized, Oh my God you can have three houses together and the middle house is taxed differently than the houses next door to them. I had no idea. And that's where With having Avalara be on previously, and that's why when I saw them at the conference, I think it was last year at Scaling New Heights or something, I said we need to have you all back on again because this is an area of so much vulnerability. Because if you get it wrong, the penalties and interest can cost a lot. And again, there's so much that you don't know, and it's gotten more complex than ever with the economic nexus and everything. And this is an area I think we need help in because a lot of us. Don't specialize in sales tax. And it's easy with everybody doing online sales now to get yourself in trouble. And so I'm very glad to have him back on today to help us learn more about what we don't know. And I like to just outsource this stuff to somebody smarter than me, because I don't want to know it because I don't like taxes. So I would rather just have somebody else be responsible because there's too many details and too much stuff. Absolutely.

Dan DeLong: 5:49

So I want to let's go around the horn here and and introduce the panel from Avalara. So I'm going to go from my right to left or left to right or bottom. I don't know who the Brady bunch zoom session that we have here. But Chris, if you want to introduce yourself and say where your, what your specialty is over at Avalara.

Kris Pupilli: 6:14

Yeah, absolutely. And we did so funny enough, Dan and Michelle, we did a trivia at our booth and Michelle, I think you would have won the sales tax trivia with that intro there. That was fan, the candy bars and the toothpaste and everything. But my, name's Christopher. I. I've been with Avalara since 2014. In Care2Venture, I've probably forgotten more about sales tax than I ever thought I would know. And my specialty is Dan, Michelle, Matthew, the, you folks on the call today, I lead a QuickBooks team, that we sell almost exclusively to companies using QuickBooks. Hopefully that is, that will suffice, Dan.

Dan DeLong: 7:06

Yes, it will. It will. And Chris, Christina.

Cristine Vickery: 7:10

Hi, everyone. I am a strategic partner manager at Avalara, focusing on our point of sale partners mostly, but I came from the Davo side of Avalara, Davo by Avalara, and I've been with Avalara since January 2022. Almost three years. And I actually was a franchise owner myself for 12 years. And I can't express to you how much I wish Davo existed for my business back then. I hated filing sales tax. And I remember a couple of times choosing to pay it late so that I could leverage those sales tax dollars for my own. And that is definitely a bad habit for business owners. So I'm very passionate. About Avitax, Avalara, and Davo by Avalara. And thank you for letting me be here today. Awesome.

Dan DeLong: 8:01

And Beth?

Beth Raymond: 8:03

Hi, everyone. Nice to meet you. My name is Beth, and I am with Davo by Avalara one of the products. And I handle all of the compliance for Davo merchants. Davo does integrate with, QuickBooks Online as a, for people using it as a POS system. So we have a direct integration. And then I also have been helping out lately with all the other inbound customer, support and merchant facing areas for Dabo.

Dan DeLong: 8:41

And before we get to Heather here, I'm going to launch the 1st poll because yes, there is CPE for this for this session. Our friends at MakerTub are are helping out with that. So we want to be able to, Prove that you were here and the poll questions are a way that the way that you can do that. So Heather late entry into the into the Brady Bunch here. What what do you do over at Avalara?

Heather Lopez: 9:08

Hi so nice to see everyone and thank you guys for attending. My name's Heather Lopez. I'm out of Seattle and I'm with Avalara and I actually am on the Avalara for Accountants channel. So my role here is to support on how and. Manage how we work with our accounting partners. I've been with Avalara for four years now. I actually first started in our strategic initiatives group. So I was more focused on exercise side of things. And so we recently launched the Avalara for accounts channel, which I transitioned to a little over 2 years ago to help launch this channel. And as we grow our relationships with our partners.

Dan DeLong: 9:44

Excellent. Thank you. Thank you all for, joining us. So we'll, as you have, as you might have guessed we're gonna try to keep this conversational as, opposed to being presentational as we have done in the past because there's just so much to, know and to talk about with regards to the sales tax in general. So we're, gonna dovetail off of our last our last webinar where Alicia talked about the, setting up a QuickBooks online sales pack, and then where you're pushing the envelope of, things that you might want to do. And I think David over at Davo David Joseph, who graded Davo said it best, I think when he was on a prior webinars with us that there's no value. To doing sales tax to a business owner, right? It's, a compliance thing. It, there is they have to do it. But there, there really is no value. And I'm always remember my my experience with the Arizona department of revenue. Not that I had a directed integration with them, but I had a friend who worked at the Arizona department of revenue and they managed the collection of sales tax as well as the income tax in in local Tucson office. And it was like clockwork where they would always have someone come in and say, I can't afford to pay sales tax. And then, of course, their question to them is, what are you doing spending the state's money? And that, that kind of leads into this whole thing about how business owners perceive sales tax as it. From an accounting perspective, everybody probably on the call is of course you're you don't do that, but they're looking at the money in the bank, and spending based off of what's in the bank and not realizing that some of that is to be earmarked or separated or segregated from The regular cash flow activities that they are normally doing they can certainly get in, get themselves into trouble with payroll liabilities as well. But sales tax in an accounting beat is a liability that they'll have to pay, there'll be holding that for on behalf of the state. And so 15, I wanted to ask you how that kind of, how that's solved by something like Davo because of how it, actually works between, saving, the company from themselves, with, regards to sales tax.

Cristine Vickery: 12:46

Sure, absolutely. Let's face it. Managing sales tax is doing a job for free for the state. You don't get paid to do it. It's basically you're risk averse. I'm going to go ahead and share a screen, not to be over presentation like, but just so we have the visual learners as well as the auditory learners covered. But when you think about it, can everyone see my screen okay? Okay, beautiful. I think we all know the problem is that the sales tax dollars mingle, they co mingle with the business working capital. And because they're mingled, it's, it's, it, people, they can spend it, it can, payroll can come up on the same day that your sales tax is due and, Davo helps this by moving the cash dollars out daily. And because if you don't do that and you miss it, you're looking at anywhere between 20 and 30 percent in penalties and late fees for your customers. And that's good. That's awful. So what Delva will do is it'll go into QuickBooks and it will pull down the previous day's sales and sales tax transactions. Now, there is a stipulation in QuickBooks that you have to be using it for your invoices and you have to have the status of paid for the invoice and payment status has to be closed. Otherwise, Davo will not see it yet, but we'll go in and look at QuickBooks from the previous day, pull down those sales tax dollars and take them out so they're not commingling. And then Davo has the the sales tax dollars to go ahead and file and pay on time guaranteed. And we do look for the proper sales tax ability to be correct in QuickBooks, of course. And this is really great for 54. 99 per month. I will tell you that. Effective February 1st, that price will be moving to 57. 99 or 58 almost, and it gives you a lot. You get support for all of that, but also to keep in mind there for when you file and pay on time, you do get a rebate and over more than half the states in the U. S. And this is important because it can make Davo either free or substantially discounted. And so those, are really the, the main nuggets really is why spend A, your time on it, B it's, you're doing a free job for the state. And just like Dan said, it's not going to give you more inventory. It's not going to give you more employees. And it's really there's no value to you except for not wanting to pay late fees. I'll stop sharing just so we can keep this conversational.

Dan DeLong: 15:22

And what, they, what I really liked about cause when we had Alicia on last time about if you set up, QuickBooks online with regards to collecting the sales tax properly, This is the, this is a great add on or addition to it because that's really where Navo excels, right? It's. If you're setting it up properly, then, Davo will, intercede by impounding the, liability so that it doesn't show on their, money that's available to to spend. And then, everything that happens after the sales tax collection is then automated, right? Is that, right? Really a nutshell of what Davo, how Davo works

Cristine Vickery: 16:16

in this. It is, it's mostly automated, but we do have Beth could attest to, we do have professional filers on staff and that's another reason why your customers can feel great relief and trust and giving that. That task to Davo, because you can know that it's going to be done properly and that we understand it as well as on time. So it's really, yes, we do a great job of moving the sales tax dollars out. So we don't get you in trouble and keep you out of that risk. And you have a truer sense of the value and profitability of your business. And it's certainly at least looking at your checking account to that extent, but also it's going to be done right. Yes,

Matthew Fulton: 16:59

real quick. There's a question inside the chat, which we just want to draw attention to. They were asking the pricing that showed was the 55 per location. Just for a bit of clarification. I believe that's discussing either per state is what you're that you have to do filing. And is that correct? Or what do you mean?

Cristine Vickery: 17:17

That is per location. So if you have four restaurants, for example, or for retail locations, then it is per location per month. And that covers up to three filings. And it's funny too, when you talk about sales tax, a lot of business owners don't realize that if they leave their business and they owe sales tax, that it follows them personally. So it's a really good tidbit too, to help them. Keep that risk away from, their financial livelihood.

Michelle Long: 17:49

So I just wanted to clarify we talk about if it's set up properly and stuff. So do you all do that? And we talked about the Hershey bar and the toothpaste how is that something that you all make sure it is set up properly?

Cristine Vickery: 18:05

Davo does not do that. We are a service that we trust. It's correct in QuickBooks. So how do

Michelle Long: 18:11

we get, how do we as the accounting professional get help with that? Don't you all have a service that helps us with that as well?

Cristine Vickery: 18:17

That's going to be the Avalara side, I believe not the Davo is the sort of, you have all of the merchant journey that they go through. And part of that journey is Setting up their business properly with the proper tax codes and categories, right? And Davo comes later. So the Davo that we're just talking about now, that's really that, Hey, let's finish that last step. So you don't have to ever be late and know that it's done right based on what we're seeing. So that would be before that journey. Okay. Yeah.

Dan DeLong: 18:46

Would that be more of a Heather question or a Chris question?

Cristine Vickery: 18:52

That is a great question.

Dan DeLong: 18:54

Pick

Kris Pupilli: 18:55

your poison, right? I can start and then Heather can certainly add some color. Yeah, so as far as, That initial setup goes we do have implementation specialists and we do have customer support and I can actually, I have a few screens pulled up. I think this was Particularly discussing tax codes. Is that fair?

Dan DeLong: 19:25

Yeah. What do I, how do I know that I've set up my, my my sales tax correctly in, inside of quick, because as we talked about last time, it, lists all of the categories, but how do I know I'm choosing the right one? And, I think you guys have a pretty good resource to help with that. Of course, it's. focused on setting this up inside of Avalara or AvaTax as your flagship tax calculation product, but it would still be available or they would be able to help help determine what these sales tax categories or classifications are.

Kris Pupilli: 20:03

Yeah, absolutely. I guess we could take this a couple different ways. The first, you is, this is a publicly facing resource here and it's our Avalara tax codes. And so we just, we have, I'll just type in shipping because any company that sells products they're going to have to ship and we have different definitions. Of the types of shipping so you can come in you find the one that most closely relates to your business typically this fr is what's most frequently used and then You'll associate that with the shipping line item and i'm gonna what i'm gonna do here is i'll just for fun We'll build a tax matrix just so you can see Normally, you

Dan DeLong: 20:58

don't say fun and sales tax in the same sentence, but

Kris Pupilli: 21:02

Yeah I'm really doing this for Michelle. So next time she sees this, she can brag about Hey, how is shipping taxed differently? So we have all the US armed forces, but you'll see that shipping is taxed very differently. across the country. Most of it, it's going to be taxable, but then there's also a number of states where it's tax exempt. And this is to Michelle's point about fluoride and almonds and all that, it's almost impossible. To keep up with all of this, right? Like how would, one business know, Hey I'm selling to Michigan and Minnesota, the Minnesota stuff, the shipping is going to be taxable. The Michigan stuff, the shipping is going to be tax exempt.

Matthew Fulton: 21:50

I'm quickly remembering my. pain points from the last one. This becomes somewhat challenging with this example and keeping us on topic of the question. In the past, I worked with a precious metals company and we helped them actually set up Avalare for a full website, like API wise. And during the process, I learned if you sell more than 1, 500 worth of precious metals at one time, They're non taxable. If it's less than 1500, it is taxable. So in that kind of scenario, this, I think this is where trying to determine whether it's a DAVO or an AvaTax, as your liability increases for that stuff, it makes more sense to be stepping up to the higher platform where you can really map each individual item and have those special rules. Is that fair to say?

Kris Pupilli: 22:40

Yeah, absolutely. And I think a more. Precious metals, it's a, it's an industry we run into. But I think something that might be a little more applicable would be clothing and apparel because there's a couple of states that have taxability thresholds for clothing and apparel, and they're right around the a hundred dollar mark. So if you're selling into the state of New York and you're over 110, that clothing and apparel is going to be taxable. If somehow you're finding clothes from New York that are less than 110, you're going to get those tax exempt. So

Dan DeLong: 23:22

Heather or Chris, if, I think one of the, one of the aha moments that I had when, orbiting the booth around at some of the conferences and not necessarily wanting to, or do I want to step into this, whole nature of, sales tax, could you that the set the stage, because one of the, one of the webinars that, that we had you guys on was where you just laid out the framework of the suite of services that that you guys offer, because I think a lot of. Folks in the accounting community are timid to to, to cross into that threshold of okay, what am I getting myself into by interfacing with Avalar, but there are pick and choose your own adventure types of ways to, work with. And we just talked about that with Christine about you could just do Davo, and that if I'm comfortable setting it up properly and I have that confidence that I have done that, Oh I can just. Add on this Davo add on to the QuickBooks Online to pretty much do the crockpot method of sales tax, where I put all my ingredients in and then everything else is then handled for me. What other let's talk about that about what other sweets and services or services that you guys offer? Because I saw in the chat do you guys offer? Sales tax certificates and things like that.

Heather Lopez: 25:03

Yeah, great. Great point, Dan. There we go. This is it. We can, so what's nice is that there's so many different ways that you can work with Avalara. And we've been around for so long 20 years now and every anytime someone sees orange, they usually associate Avalara. And so we try to make sales tax. Fun as possible. And what's nice is that we actually created an entire channel. Dedicated for our accounting partners 4 years ago, so still relatively new. And to avalare and how we work with accounting partners. There's actually 3 different ways. And Chris, if we could go ahead and look at that slide. How we 3 different ways we can work with our accounting partners. If we can. I think it's the 1 or 2 before this. Oh, I'm so I'm a visual person. So it's just easier for us. Everyone to see, how we work with our partners here. And so traditionally, oh, go ahead, Matthew.

Matthew Fulton: 26:13

I was just gonna say, as he was pulling it up there, there was a question and let's say it a little bit. I'm going to throw you off a bit of maybe at some point touching base on if you're using a stripe or square for certain things. If you have different channels in different ways, tax has to be collected and then reported how that comes into play with this as well.

Heather Lopez: 26:33

We, can definitely get into that here. Let's bring it up here. But it's a great point. So here is the different ways that we work with our accounting partners. Traditionally, how we've always worked with our accounting partners and how we still do is through this first motion here, which is our referral motion. And so if your client has a need maybe they need to collect exemption certificate management or automate that process. Maybe they have an issue with they're doing some kind of communication or excise tax some sort. You can refer that over to Avalara and either you can, we actually redid this entire program this year and which is, an awesome about this program is traditionally if you refer something over to us it's a great way to add a revenue stream to your firm. You can earn commissions on anything you refer over to us or you can pass on automatic discounts. Within that referral program, there's. Marketing materials if you want to work closer with us, there's different levels and way you can work with us. The more we work together, think of it as an airline program. The more you fly, the more points you get, the more you work together with us. And as helping your clients the higher incentives you can earn. So there's, an entire package with our partner program and it's totally free to join. So if your clients have some kind of sales tax or if they're selling online, or if they're selling or however they're transacting, they're most likely gonna come up with sales tax. That's a great way to work with us in our partner program, and it's free to join. Now, the next motion here is this implement motion, and so you can actually become certified to implement Avalara solutions for your clients. Now, if your end client, they, honestly, it's. Sales taxes can be very difficult. To navigate. And so that's also another area or another opportunity for you to make additional revenue at your client. Instead of Avalara doing the onboarding, that'd be an opportunity for you to do the onboarding for your client. So you can become certified to do that. I think that was maybe one of the questions here. And then the last motion here is the tools motion. So what tools can Avalare provide you as an accounting partner to maybe do some of these functions? Maybe, you're not a sales tax expert, but your clients come to you often asking to help with returns, maybe. And so we've we also have built a tool. It's actually the same tool that we use internally to file returns on behalf of our clients. We file over 7 million a year. We actually are the largest sales and use tax filer in the U. S. Same tool that we use to file our returns. We put a user interface on it specifically for our accounting partners. That way you can file returns for your clients by leveraging Avalara's team.

Dan DeLong: 29:30

So it's not it's not just one size fits all when it comes to how, you can come work with Avalar. And I see a lot of questions coming in does it work with Stripe or does it work with this? That's, another option. But when it comes to QuickBooks online, Chris, I think maybe you would be the best person to answer this about what is Ava tax? And how does that differ from Avalara in general?

Kris Pupilli: 30:02

Yeah, that's a fantastic question. So what Avitax is, that's our flagship product. So that is our sales tax calculation engine. With that, we're able to do a couple of really cool things. The first part is we validate your address. So when that comes through we're going to do an address validation. That helps with bad shipping charges or anything like that. I don't know if anyone's ever ran into those. But I did work for a TMS company and part of our discovery was, hey, do you use Avalara? Because they wanted to know if your shipping address was going to be correct. So that's one piece. Then what we do is we actually drill down Into the latitude and longitude. So when Michelle was saying next door neighbors having different tax rates it's a true thing. Shopping malls can potentially we have a couple of examples of shopping malls that have different tax rates. So we drill into that. So we find the correct jurisdictions and then we find what those tax rates are. And we look for any special sourcing rules. Some states are origin, some states are destination, some states are a hybrid. And then we make that tax determination and pack it, pass it back to your business system. And yeah, go ahead.

Dan DeLong: 31:30

now when like when, things get complicated which is, a great use case for Avalara. When they're selling online and they're using Stripe or Square or some other kind of point of sale system and QuickBooks is somewhat involved, in the, whole situation, I think it's important to understand What I will have a tax would interface with, or can it interface with all of them and just be that single source of truth for for sales tax. But like the example of, Hey, I'm doing some sales inside of QuickBooks online. And I'm also, I also have an e commerce channel. That, I might need to, collect sales tax on, but that data is not coming into QuickBooks in a, format that will. Cool. Utilize the sales tax engine inside of QuickBooks where would that best be? How would that work with that type of situation?

Kris Pupilli: 32:37

Yeah. So Dan that's a really cool question. just because of the way that Avalara was built, we were built on these partnerships and we have over 1, 400 different business systems that trust Avalara to integrate into and be part of their system. So when you have, and I'm just thinking, I'm just using this as an example, partially because you and partially because of Susan in the chat. So you have a company that's using a Shopify or that's using a QuoteWorks or a Jobber, and you have QuickBooks on the back end. Avalara has the ability to integrate into all of these platforms. Kind of like a wheel with spokes. So Avalara is going to be that centralized point of truth. And then we have these pre built integrations into all these different platforms so that you have your centralized point of tax truth. And then we can ping out and send those tax determinations into whatever business system you need.

Dan DeLong: 33:40

And then if you don't have, if you don't want to integrate them directly, You can just, you can also just import those transactions into, Avitax to make sure that it's, calculated properly, right?

Kris Pupilli: 33:52

Absolutely. Absolutely.

Michelle Long: 33:55

while we're talking about these complex kind of things or whatever, we did have somebody that asked can we connect Avitax for a company that invoices in QBE inside RightWorks? So in a host enterprise,

Heather Lopez: 34:10

absolutely. Yes.

Kris Pupilli: 34:13

Okay, so I think I heard your question. And I don't know what happened. I keep getting kicked. Keep getting booted out of here. Yeah, so if you're so we, we have a great partnership with right works. They're one of our, one of our larger QuickBooks partners and we have an integration for QuickBooks Enterprise. So we have that configuration is, no, that configuration is quite common for us.

Dan DeLong: 34:49

So the so the, in just in general, like how does Avitax interface with these integrations? Does it sit in between the sales and the collection of the sales tax? And then what does it do as far as If you were to use this with with QBO to make sure say, you don't, say you don't trust QuickBooks online. I don't know why you would do that. It always worked. But if you have some of these complicated setup and you are integrating with Avitac with, QuickBooks online, how does that work? How does it, is it a, I hate to use the word seamless integration, but that is the term that people will use, how does it, how does that work when you're integrating with some of these with something that is the sales and then calculating the sales tax.

Kris Pupilli: 35:45

Yeah, I'll do my best to not use that word, Dan. But we are, so we, are integrated in a way that looks and acts just standard functionality. So go ahead, Matt. I saw you come off mute.

Matthew Fulton: 36:06

I think the key to this right workflow wise would be You want your avatars your avalara program to integrate directly to whatever third party application that's going to be responsible for creating the invoicing And this figuring out the sales tax there, that way, whatever it's going to calculate appropriately there, and then their sink of that third party app, which goes to QuickBooks online would be pushing into QBO the correct amount, the invoice with the proper sales tax amount, because the Avalara product would be handling that calculation. Based on whatever third party app that you're doing it with. And then if it also would connect to QuickBooks online, if you do your sales from there for those ones to then combine everything together to give you single reporting with totals for everything.

Kris Pupilli: 36:55

Yeah. Yeah, you seem like you've done this before.

Matthew Fulton: 37:00

A couple times.

Dan DeLong: 37:03

So I launched the second poll question because I realized we're just chatting away and we're not taking the poll questions and those that need CPE we need to do that. Prior to this webinar, this is the question. What. What did you think Appalara specialized in, which the, this is a multi choice question because as we're discovering Appalara does more than than what we had thought, like even the 1099 processing is is, something that that you guys can handle. Is that more of a question for Heather or, Chris or both?

Kris Pupilli: 37:41

I'd say that's more of a, that's more of, Heather is more, much more familiar with the 1099 process. Okay. So how does that work?

Heather Lopez: 37:50

So we acquired a company called Track 1099. I think it's about 2 years ago now to now offer a way to automate and streamline the 1099 collection and filing process. Additionally, we can collect W9s all year round. And also it's a very easy way to gain consent. For electronic delivery instead of mail, because I know that's a huge thing, trying to reduce mailing costs as post, I think, when our postage went up to almost 90 cents this year. If you're trying to reduce that, is a great way to handle that. And so you can either for accounting partners that are maybe filing 1099 on behalf of their client. Very easy way to streamline and automate that process as we can file all the do all the e filing, state filings, mail and the W 9s, or if you have a client that maybe handles it on their own, they can also sign up with us directly for account to, to also streamline and automate that process, and then 1099 season is coming up. Before you know it, it'll be January and it's crunch time. If you haven't already, definitely check us out. It's still tracked 10 99. But we now it's gonna be rebranded to Avalara 10 99, but our website is track 10 nine.com

Dan DeLong: 39:06

and there will be orange somewhere included in that

Heather Lopez: 39:09

Sure. Yes,

Dan DeLong: 39:12

Lucky. Guess question, question that that popped up there as soon as you started talking about 10 90, can you do amended. 1099s with with Track 1099.

Heather Lopez: 39:23

So we can do corrected 1099. It's free to do if, as long as the 1099 was originally filed in Track 1099, we can file the correction. So say if you're using a different provider before and started using Track 1099, you wouldn't be able to file the corrected form if it was done outside a different software before. It's a great question.

Dan DeLong: 39:47

All right. so who wants to talk about Nexus tracking? Because you have a really cool thing. Like we, we talked about it last week about. Inside of QuickBooks Online, you do have this economic nexus tracking ability but it's more of a report and and that sort of thing. Can you, are you able to demonstrate what it looks like and how the economic nexus tracking works in Avitax?

Kris Pupilli: 40:16

Dan, I sure hope so, but we'll see every time I've gotten called on, I got kicked out. Okay.

Dan DeLong: 40:23

We'll try to hold on to you here.

Kris Pupilli: 40:26

I, what I'm showing right here, this is the home screen for an Avalara account. So the first thing you're going to see when you log in or at least I see my eyes go to this map over here on the right. And what this is showing is this is essentially a showing you a snapshot of where you or your client has created economic nexus. So when I click into the details, you can see. That we have a number of states that are orange. And if you look over here, you'll see your sales threshold. So these are the states where the thresholds have been met. It shows your threshold, as well as what your sales were. And it lets you know that you've crossed, essentially you've crossed that threshold, and it's time to get registered.

Dan DeLong: 41:21

And then, that is a service that, that Avalar can handle as well. It's okay, I've. Now that I've crossed that threshold, now what? I can lean into Avalara to be able to set that up. Properly, right?

Kris Pupilli: 41:38

Yeah. And yeah, that's and that's perfect because we have an ability to do that right here from the screen. It will take you to where you can buy registrations right here online or a lot of the accounting firms that we're working with, or pro advisors that we're working with will do those registrations. And then it's very simple. You'll check the box for the new state once you're registered. So it's just a check box of all the different states. And then something else, Dan, that Avalara offers is a sales tax risk assessment. And this is something that we always recommend when we're first talking with businesses, especially businesses that have been established for a little while. And there we find out for some reason or another tax wasn't collected properly. Hey let's do a risk analysis and take a look back and see if you've created a lot of uncollected liability.

Matthew Fulton: 42:41

So I want to get a little nerdy on one part of the question. The calculation of the sales tax. When you have companies that if you're buying and you're paying sales tax on certain products, interior design is what I think of right off the bat, they're buying this stuff. They've already paid the sales tax. So now within their calculations, they need to reduce the amount of sales tax that they're actually liable for. So it starts to be coming, tracking the expenses on the. I'm sorry. The tax on the expense side. Is there a way within avalare to handle that? Or is there a form where we can add that number in to make sure the tax is correct?

Kris Pupilli: 43:20

Yeah. Yeah, absolutely. So it's too I think where you're going, Matt, is that sometimes there is going to be, there's sales and use. And yeah that's, absolutely something we can do. We are currently working on an integration into the AP side of, for, with Intuit but right now it is a, it's a manual upload and what you'll do is you'll just upload those purchases into Avalara. It's an Excel sheet, an Excel file. You just throw your purchases in or your or your services. And then we can take whatever tax you populated, or we can just calculate that use tax on your behalf.

Michelle Long: 44:05

So Chris, I had a question for something you said right before Matt's question. You said the risk assessment, you can help to determine something Back liability for basically they had sales where they didn't charge sales taxes. So there's liability where they didn't collect it, but they may have that liability if they get caught or audited or whatever. Do we as the client recommend they go back and file amended and fix it? Fess up to, Oh, wait, we did it wrong and pay it out of their own pocket. Or do you help advise when you do that risk assessment or when we come and say, Hey, this client has been doing it wrong. How do you help us to decide what's the right course of action in that? Do you help in that determination after you do that risk assessment and stuff?

Kris Pupilli: 44:58

Yeah. Yeah. Michelle, I will give you the proper answer. And then I

Michelle Long: 45:06

will

Kris Pupilli: 45:07

tell you what I tell. I tell the companies that I work with. We always initially the right thing to do is you should come clean. But that's not always going to make the most sense for the companies. So just, for example, we'll just use this Alaska, example they're going to have about 284, 000 worth of sales that they did not collect sales tax on, right? If we take the national, I'm just going to use round numbers. So 10 percent sales tax plus 25%, penalties and interest. They're going to somewhere in the ballpark of 40, 45, 000 in uncollected tax and penalties. If they were to get caught, Michelle would 40, if you were to get caught with 45, 000, would that be a big detriment to your business? Oh yeah. And so that's the conversations that we have. And then we have special agreements with the various states where we have we can limit that liability look back period so that, hey, maybe you don't owe tax for the last seven or eight years. Maybe you only owe tax for the last four years or the last three years. So we can limit that, historical liability. And then we also have an agreement for penalty abatement. As well. So we have that 25. I think Christine said 25 to 30 percent penalty. It's very state by state, but we have agreements with the state to help with that penalty abatement as well.

Dan DeLong: 46:58

Okay. Great. Now, I guess the biggest, thing that I want to make sure that people understand, especially when it comes to something like Davo and Avitax, you guys Avitax or Avalara has its own filing and remitting service, that's part of, that's part of Avitax, and then, There's Davo that has a file and remitting service where is the line between the two if you're working with habitats or avalara in that capacity. Do you go with Davo or do you go with the file and remittance? I can probably have a text.

Cristine Vickery: 47:38

Yeah, I can probably speak to a little bit of that demo is meant to be completely automated. There is no you get to review the returns and then they're done there. We will automatically take care of it. And if you are looking for reviewing the process and we cover up to three filings, I don't know if someone from the Avalara returns would like for managed services would like to, or MRA would like to address that more deeply on their side.

Kris Pupilli: 48:07

So I think where we see Davo as a great play is if you have a physical location, like a restaurant or a retail shop. You have the POS platforms. That's where we see Davo as a fantastic fit. And Christine, feel free to jump in if I'm misspeaking. But that's typically you have a physical location and that's about the extent of. Your business. Is that fair?

Cristine Vickery: 48:43

It really depends. If they are if everything is tracked, for example, if we were to use Lightspeed as an example, if someone is doing some e commerce and it's actually properly represented with the correct tax category and description. And that then Davo has no problem doing that. They just have to set up their tax profiles. However, traditionally I would agree with you, Chris. I think it's really point of sales, a lot of them are not doing e comm still like Square doesn't have a lot of e comm. They integrate with other e comm. So I would say bar far and wide, Avalara is really core competence and fantastic at taking care of your e commerce customers for sure.

Kris Pupilli: 49:26

Could

Beth Raymond: 49:28

I just add that I would especially for the clientele perspective that Davo is definitely if we're able to work with your clients that need the cash management aspect of our service. And coming from a lot of small businesses, coming up with the funds to pay just on a monthly basis can be hard because as Christine mentioned at the beginning that's just in a lot of people's same bank account and they're using it as capital towards buying the broken refrigerator that they need to replace. So the fact that Davo is able to set those funds aside daily and then pay from. Our bank account so that is really the headache that's gone. So, I would say cash management is, really the top, the daily cash management for those clients that need it. Those merchants that definitely spend the sales tax before it's due.

Cristine Vickery: 50:32

Which definitely segues into, you've got high, you tend to be a localized business and you've got a high number of transactions. They might be low in value, but if you've got a lot of transactions, people don't realize how much sales tax they start to collect. That's a great point, Beth. Thank you.

Matthew Fulton: 50:50

Yeah, I used, Ted, I used car dealership. I was doing all their sales tax form, and it was the biggest pain in the rear. Their monthly sales tax was 30, 000 a month. And you'd have to report to different states at different times because of where the person actually lived. So what I, believe I'm hearing, if I was to summarize, This whole scenario if you start off with QuickBooks online and their sales tax set up onto it, as long as you've got everything set up appropriately within there, the product services, everything else, which is fundamental to be able to use a Davo anyways, right? You need all that stuff set up, their thing can give you the numbers, but they're not doing any of the filing for you. You're taking that and you still have to go and do all the filing. You have to actually register for different nexus for different places, everything else. where Davo becomes an automated advanced improved version of this. You can use, especially with point of sale systems. So it's tracking everything still reporting back to QBO. So your books are correct, but thanks to Davo, you're going to, Davo is going to do the filing of the different places that needs to be done. And then Avalara, as you step up above become the more complicated sales tax requirements where maybe you have different sales channels, You need to be able to combine things in all uniquely or there's unique scenarios. Like I said about the precious metals or different things of that nature, you can fully customize it, make it extremely unique and still get the reporting back into QuickBooks, but get the full calculation from the different places all into one. Is that kind of the tiered approach in a sense?

Kris Pupilli: 52:23

I think that's fair. I think that, yeah, I think so Avalara typically comes in if you're not selling POS. So if you have additional channels outside of a point of sale system, so e commerce is big, software, trying to think medical devices comes up, dietary supplements, health supplements, things like that are pretty complex state by state, right? Those things. Can

Dan DeLong: 52:55

you speak a little bit, Chris, about the differences between QBO sales tax and in Avitax? On how, a little bit more granular Avitax might be helpful in the, The, calculation aspect of that.

Kris Pupilli: 53:15

Yeah. Yeah. And I try to touch on it a little bit earlier. One of the big things is going to be that that initial. So we do that latitude and longitude assignment. So we have that address validation. We're going to actually look at the exact pinpoint on the map because there's going to be some instances where you can have 789 different tax jurisdictions. That you're tracking for a single location on a map. And that's just not possible through zip codes. The other piece is going to be around the tax codes and product taxability. So if you're selling anything other than just stuff. I try like they call it tangible personal property in the tax world. I use the scientific term of stuff. So if you're you're selling more than just stuff on Amazon it probably makes sense to, to look at Avalara. And then there's, certain states and we, like to say if you're selling in more than three states. You've created that nexus in more than three states. It's probably a good idea to start to look at automation because that's when that time to value play really comes in.

Dan DeLong: 54:35

That makes sense. The, I had a question. Did, anybody Matthew or Michelle, did you see any that, that What flashed by?

Michelle Long: 54:48

We had a couple of questions from Bill. The nexus tracking that we talked about earlier, that is sales tax only, not income tax. Is that correct?

Kris Pupilli: 54:58

Correct, Okay, going to

Michelle Long: 54:59

make

Kris Pupilli: 55:00

the various departments inside of the state do talk to each other though. Okay. So if you have triggered income tax nexus in a state and you're not paying sales tax in the state, there's a good chance that you could be getting a letter. From that state. Okay. Okay.

Michelle Long: 55:19

And then another one before what we talked about if they have the uncollected sales tax and that you're negotiating 3 or 4 years versus 7 years are the voluntary disclosures done through a legal team. So those conversations are protected pre finalization.

Kris Pupilli: 55:38

They are. Yep. Yep. So we don't even, and we won't even disclose the business name or identifiable information until that's all been determined. And it all hinges on just as long as the state hasn't reached out once the name has been disclosed. But yeah, we do. I think last year we did over 2000 voluntary disclosure agreements. Throughout the various states, and that number just continues to rise.

Michelle Long: 56:04

And one more question that's pertinent to us accounting professionals. In some states, if I remember correctly, Ohio might have been one. If we bundle our services along with apps let's say we've got Davo and QBO, and we're bundling these apps so that our services are 2, 000 a month, which includes the apps. So if we bundle our services and apps together, that could trigger sales taxes on our services as well in some states, but not in all states. Is that true? And is that something, is there a chart or anything anywhere or resource anywhere where we can find out so we don't get ourselves in trouble as we now work with people in multiple states?

Kris Pupilli: 56:53

So that is a fantastic question and Michelle, I'd love to have an opportunity to walk through. This a little bit more, but we do have what we call it. It's Avalara tax research, and this is our tax research tool. And one of the things that we look at is within this tool, we have taxes of doing business, application of tax, all these different categories. And then we also are able to find, specific tax laws. And I, I don't I'm not going to jump into it cause I just don't have enough time, but we do have that. And then to answer your question in a shorthand, the answer is yes. The, if you're selling bundled products or services, if some part of that is taxable, the state will tax the whole thing in certain states. Okay.

Michelle Long: 57:48

Cause yeah, I thought in Ohio you had to invoice separately, your services on one invoice and the apps on another invoice. Okay. To make sure you didn't do that. So be careful out there, people.

Kris Pupilli: 58:03

And then also know for the accounting professionals on the calls, we do have those services specific for accounting professionals as well.

Dan DeLong: 58:13

Yeah, cause it, it definitely could. I know that's, a common answer or question I'll just avoid sales tax altogether by, by just doing a bundle. That's not always the. Easiest answer because eventually they tend to find these things out. Like Chris alluded to they do government agencies do talk to each other, especially when one gets triggered. And another one is just sitting there twiddling their thumbs, waiting for you to file a return, whatever that might be.

Michelle Long: 58:49

The states are looking for more and more money and sometimes sales taxes is a good area for them to go collect money and stuff too.

Dan DeLong: 58:58

Yeah, there's a great story, there's a great story with David Joseph about how he discovered that he was do, some taxes by an auditor just sitting there counting customers going in and out of his restaurant, right? That, that is that's that's, not the kind of conversation that you want to have with me. In, that regard. So I did ask the last question, would you like to learn more about Avalara? Because as we have determined, it's more than time than one hour is gonna allot for us You can reach out and talk to them about their, suite of services. We appreciate everyone from the Avalara team joining us here today, even Jamie as her voice.

Beth Raymond: 59:49

I got very excited about WriteWorks and QuickBooks Enterprise.

Dan DeLong: 59:54

That's okay. So we appreciate all the orange folks joining us today. And we will see you next time on the QB Power Hour. And the CPE for today will be following up by the end of the week. If you answer all the poll questions. So we appreciate you joining us today. And we'll see you next time on the QB Power Hour.