Sales and use tax technology provider Avalara is going beyond the zip code to find the appropriate tax rates for particular jurisdictions in its AvaTax software, stressing sophisticated geospatial technology like the kind used in car navigation systems.

“In the industry, you’ve got fundamentally two ways to calculate tax,” said chief tax automation officer Rory Rawlings. “We all have to find the jurisdiction, and with those jurisdictions there are tax rates. You have to find the jurisdiction first. There is a fundamental difference between the way we do it and the way everyone else does it. The way we do it is we use a geospatial algorithm, so we take a street address and using nav tech data, which is the same data used in car navigation systems, we use that data and we pinpoint where that address is on the map. We take that latitude-longitude point and we intersect it with all of our boundaries, so we know exactly what boundaries and therefore what jurisdictions are associated with that location. So with those jurisdictions, we know exactly what the rates are.”

The geospatial coordinates can be seen on the map at where users can find the sales taxes for particular jurisdictions. Rawlings noted that the other way sales taxes are handled in the industry is by using zip codes. “Zip codes are designed by the U.S. Postal Service specifically to deliver mail,” he said. “They don’t follow jurisdictional boundaries. They’re designed for mail. So there are inaccuracies all over the place. In order to get a good match, you have to go through an address-cleansing service. We do offer an address-cleansing service, but the only reason why we do it is as an added value to the customer.”

Rawlings worked at BDO Seidman as a CPA, and later at Boeing as a corporate financial planner and Getty Images designing corporate tax systems before he co-founded Avalara with CEO Scott McFarlane seven years ago. 

“What distinguishes Avalara from everybody else is we approach sales tax from a technological perspective,” said McFarlane. “This is about serving up data very quickly and correctly for a statutory requirement.” The company has been expanding into mobile technology that uses the GPS capability in many mobile phones today to find the appropriate sales tax.

McFarlane noted the company expects to handle 1 billion transactions for its customers this year. “Almost 500 queries come into us per second,” he said. “We have approximately 10,000 customers using all of our various services. We connect in with almost every major ecommerce and financial application in the mid-market. We focus on the masses for people who need the technology and can afford it the least. They need an easy and inexpensive way to do sales tax.”

The technology interfaces with various accounting systems such as NetSuite, Intacct, Epicor, Microsoft Dynamics, QuickBooks and Peachtree. Avalara also recently expanded its accountants program to give them greater access to sales and use tax compliance content, tools and educational resources (see Avalara Revamps Accountant Program).