Avalara lays foundation for the future

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Today, the Seattle skyline is littered with cranes, the city expanding fast to accommodate the stream of incoming new residents and new companies. And while the area grows at breakneck speed, there’s a building with tax compliance solution provider Avalara’s name on it. Literally.

On Monday, Feb. 18, Avalara officially moved into the brand-new Avalara Hawk Tower, named for both the tax automation company and the Seattle Seahawks, the city’s football team. Avalara is the anchor tenant, occupying the top six of 18 floors, and the building overlooks CenturyLink Field, home turf of the Seahawks. Standing on any floor facing south, the tower offers a surprisingly clear and close view of the stadium. It will be easy to watch games.

Moving into 255 South King Street means that for the first time in the 14 years since its founding, Avalara is housing all its Seattle employees, numbering approximately 450, under the same roof. (The company has another U.S. office in Durham, N.C., and that building overlooks the Durham Bulls baseball diamond.) The tower is across the water from Avalara’s first home in a small office on Bainbridge Island — and across the water from Microsoft’s first site in the area, as well. The location is symbolic; it certainly looks like Avalara has arrived, growing in the way local tech giants like Microsoft have before it.

Avalara’s growth, in one way, can be seen as directly proportional to the speed at which tax laws have changed over the past two decades. With increased tax complexity comes an increased need for solutions to handle that complexity.

Really, the tax story that affects the online world began in 1967 when the Supreme Court ruled, in the National Bellas Hess v. Department of Revenue of Illinois case, that a mail-order reseller was not required to collect sales tax unless it had tax nexus — a legal term meaning sufficient physical presence — in the state in which their goods were bought. This question of collecting and remitting sales tax for states in which businesses had no physical location re-entered the Supreme Court in 1992, in Quill Corp. v. North Dakota, essentially re-hashing the same problem but for a different company and state. While the court allowed that major changes in the economy had occurred since 1967, the majority still ruled in favor of the corporation.

Those judges, and, indeed, those corporations and states, could not and did not foresee how the age of the internet would shape markets. Jeff Bezos, the founder and CEO of of Seattle’s own Amazon.com Inc., was recently named the world’s richest person. He founded his company just two years after the Quill decision in 1992, and since then, it has become the world’s largest internet retailer in terms of revenue, and second only to Chinese online retail giant Alibaba in terms of total sales. These two behemoths alone dominate enough of the general consumer marketplace to explain why tax nexus has again become a question of great interest to states, but add in eBay, Etsy, Facebook Marketplace and countless other stores that sell online, and the problem is compounded.

These realities prompted Congress to introduce the Marketplace Fairness Act in 2013, which aimed to allow states to collect that sales tax. The Senate passed the bill that year, but in the House it was blocked at the committee stage.

And just last year, South Dakota v. Wayfair Inc. was brought to the Supreme Court in a second attempt by the state to collect taxes on goods bought online by customers within its borders. Quill is being re-considered, with a ruling expected this June.

The rate of change in tax law has increased exponentially since 1967.

Avalara has its eyes peeled on the Wayfair verdict. The company knows its roots — an excerpt from the 1992 Quill decision is etched on one of its brand new walls in the Avalara Hawk Tower. But it also knows that it doesn’t have to exert any control or share any opinion on lax legislation, because what it provides are solutions to any tax complexity that arises from changes in the law. Avalara doesn’t lobby; it responds, explained vice president of business and corporate development in charge of accountant partners Ray Bigley.

Bigley, whose career in tax has spanned four decades, said evolving tax law has always been billed as tax simplification, but it actually means increased complexity. “Every time there’s a tax change to make the tax code simpler, for an accountant, it just makes it more complex,” he said. “Accountants have to remember the old tax law as well as know the new one, so it’s just a lot of layers.” Bigley sees Avalara’s accountant partners as key to helping their clients, small businesses, understand and adapt to a shifting tax landscape.

Avalara’s vision is to be a part of “every transaction in the world,” and the new milestone of the Avalara Hawk Tower brings the company, in its view, closer to achieving that goal. It has followed a “connector strategy,” said Marshal Kushniruk, one of the original 23 founding members of the company, providing software connectors (i.e., integrations) with all the platforms its customers use day-to-day. According to Kushniruk, Avalara offers more than 600 connectors to the different apps and solutions its customers use; 50 percent of its customers use two or more Avalara connectors, and 30 percent use three or more. Kushniruk said this connector strategy, which centers around technology, has been the key to Avalara’s growth.

Avalara has grown from its 23 founders to more than 1,500 employees worldwide (750+ in the United States). The Avalara Hawk Tower faces a landmark football stadium, but it also faces the future. And the future, in the consensus of Avalara’s tax-enthused employees, is bright.

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