Shopify Plus Sales Tax Changes & a Deep Dive into Sales Tax Complexity

Mac, thanks for joining us.

0:18 Mac Wright

Stephen, thank you for having me.

0:20 Stephen Brown

Give us a little bit of background about yourself and Avalara, for those who might be hiding under a rock and don't know what Avalara is.

0:28 Mac Wright

Sure. So Avalara has been around for 20 years. We're a global leader in tax technology, anything to do with indirect tax, both domestically and international. We really just want to be the cheapest, easiest, best solution on the market for anyone looking to address indirect tax. Which as you know, Stephen, and probably a lot of the people who are listening to a podcast like this, it's a complex and annoying world. Nobody gives you prizes for doing things right, and there are a lot of consequences for doing things wrong.

Like most people who talk about tax for a living, I didn't go to school for it. My background pre-Avalara, bartending, raft guiding, service industry especially. But I've been here for about six years, both implementing software on our professional services side as well as in our product side developing and testing software. For the last several years I've been in the sales space working with Shopify and ecommerce customers, just helping people solve tax problems.

1:40 Stephen Brown

And for those who are listening, not watching, you have an incredible collection of board games in the background there. That's awesome. You'd fit in with my family, we love board games as well.

All right. Well, let's talk about, there are some changes coming to Shopify Plus in regards to how sales tax is done. Can you summarize how it has been, and where is Avalara in this mix, and what are the changes that are happening?

2:14 What's changing with Shopify Plus, and your options

Mac Wright

Yeah, absolutely. So Avalara and Shopify have a very long standing, very successful commercial agreement, where for years the only solution outside of manually uploading tax tables to your Shopify store was upgrading to Shopify Plus and using Avalara. Shopify used Avalara as kind of a great way to get people to upgrade to their premium subscription plan, and Avalara got access to Shopify's customer base, especially those premium customers. So for years that relationship worked well.

2:45 Mac Wright

The landscape has changed. Shopify built their own tax solution called Shopify Tax, which uses third party content, but Shopify built and maintains and updates their solution, Shopify Tax. And then in 2023 Shopify opened up their partner portal, which is, not just anyone can build a solution to calculate tax at checkout, they vetted and they've only allowed approved partners, but now there are multiple options at any level of Shopify. You no longer have to be on Plus to use a third party integration to calculate tax.

3:30 Mac Wright

So because of these changes to the landscape and to how Shopify operates as a platform, now kind of moving into that platform as a service space with allowing third party vendors to build approved integrations, there was just a mutual decision that the legacy integration doesn't need to be supported anymore. So we gave a six month notice of deprecation, and April 30th, 2025, anyone who uses the integration between Shopify and Avalara on the Plus integration, we'll call it version 1.0 for the sake of this conversation, anyone who uses version 1.0, that will be deprecated and shut off April 30th, 2025.

4:12 Stephen Brown

So that's also the engine that you're referring to, for those that are really sales tax nerdy, that is AvaTax, right? That is the product that is running under the hood of Shopify Plus. Is that correct?

4:20 Mac Wright

That's correct. So it's not so much under the hood. What customers have today, what I'll call 1.0, is an integration to Avalara built by Shopify, owned and maintained by Shopify, and kind of in a different business model that you don't see really anymore and that we're moving away from. It's actually paid for directly to Shopify. A customer who used it would have signed an addendum to their Shopify contract to add that additional service, unlimited tax calculations for a flat monthly fee, using the Avalara engine. So they were effectively white labeling and reselling our tax engine to their customers.

5:07 Stephen Brown

Was that tax engine only for US based customers, or was that being used outside of the US as well?

5:17 Mac Wright

So Avalara right now, and for years, has been a global tax calculation engine. Shopify, the nature of how it's structured, is you can only have one tax engine active at a time. So Avalara was and is capable of calculating both domestic and international taxes. So that was true on version 1.0, and true on the new integration that we're here to talk about today as well.

5:42 Stephen Brown

Got you. So April 30th, 2025, that's coming up here in a few months. Customers will have to make a choice for where they want to go with their sales tax engine.

Tell me a little bit about the options. So option one is to go with a Canadian company who's trying to calculate for, obviously you do global, but talking to a US audience here. Option one is their sales tax engine. Side note, I don't love how Shopify, I feel like Shopify needs more accountants. Case in point, go look at their revenue reports and any accountant will tell you why they don't do it right.

Option two, you could migrate to Avalara. So tell us about the option, if you've had happiness with Avalara, how you would move forward continuing to use Avalara.

6:38 Mac Wright

Yeah, absolutely. So we believe we have the best tax engine on the market.

6:46 Stephen Brown

Let me pause you there. How long has Avalara been doing sales tax? 20 years.

6:52 Mac Wright

20 years, a little over 20 years. So 2004, it started in my hometown, Bainbridge Island, out of a garage, as a lot of great tech companies are. And that original tax engine has been upgraded over the years. We're now fully cloud-based, decentralized, on the web entirely, and we've come a long way since then.

We just recently had what we call our Super Bowl, which is cyber week, where we handle almost billions of tax transactions over the course of a single week, and both did a hundred percent uptime during that. So our engine has certainly grown from those humble beginnings.

7:35 Mac Wright

But we've been doing this a very long time. We have years of content and are always making strides. Our big recent purchase in the content space, we bought TTR, or Tax Research, and rebranded to ATR. But it was the largest tax content platform, basically Google for sales tax. And we're still, because it's so much data, still integrating that content into our engine today. But always just making strides and making sure we have the most up-to-date and largest content library available for indirect tax.

8:15 The migration offer

Stephen Brown

So keep going. I want to come back to the tax calculation and what goes into that, so I kind of pulled you down a tangent. Talk through the process of continuing to work with Avalara if somebody's been working with them as part of Shopify Plus before.

8:32 Mac Wright

Yeah, absolutely. So we would have about 6,300 customers using the legacy integration. We have about a thousand customers on the new integration. Not all of those have migrated. Like I said, the new integration is available to anyone on any level of Shopify, not just Plus. So there's a lot of net new customers using it.

But we understand that the businesses who've been using it would like to keep using it. And if you take price and difficulty of implementation and things like that out of the window, people use our platform because it works. And so what we've done is created a special migration offer to match what Shopify is currently charging their customers, which is $250 a month. So we have a 12 month migration offer. You sign that, you get access to the new app.

9:20 Mac Wright

Most businesses I've talked to, I've helped about a hundred customers so far migrate. About 95% have been able to self migrate without having to raise their hand, which is pretty impressive, coming from my background in implementation and technical support. You don't see stuff like that very often. So it's a pretty smooth process.

And the goal here is to be minimally disruptive to these businesses, because tax is just one of those things you just want it to work. You don't want to think about it, and you would like it to be in the background doing its job. And the goal here is that it's not taking center stage. It's not rebuilding how you do your processes. It's just swapping something that works for something new that should also work, kind of rip and replace.

10:19 Nexus, and registration

Stephen Brown

Awesome. I want to talk a little bit about what goes into sales tax. We're not going to nerd out to the degree that maybe a tax accountant would want, but for a seller, I work with and I talk to a lot of brands, and I'll tell you, I am a part owner of a brand, and my feeling around sales tax is just, make it go away. Just make it as easy as possible. It's not strategic, it's just a pain in the butt.

And I don't think that people fully appreciate how complex sales tax is. So let's just talk through that. This is kind of the magic of ecommerce, is simplifying some very complex processes. And one of those processes is that calculation and collection of sales tax.

Talk to me a little bit about what goes into calculating sales tax on a typical order.

11:16 Mac Wright

Yeah, absolutely. I think calculation is kind of that first piece that drives everything else. Obviously with ecommerce especially, what most people are concerned about is just figuring out where they have a tax obligation. And I'm sure as you're aware, the concept of nexus, I mean, that's a huge rabbit hole.

11:34 Stephen Brown

Well, let's start there. Let's go down nexus just a little bit, because I've seen some crazy stories over the years. I've seen people go in and say they're selling online everywhere, so they just start collecting everywhere. What is nexus, and how is that calculated? Maybe let's start there, and then we'll get into the calculation and collection of sales tax. So what is nexus and what does it mean?

11:50 Mac Wright

Yeah. So from 30,000 feet, nexus is basically just your relationship with the state. So it goes back to when sales tax was introduced after the Great Depression. You had boots on the ground, you were physically located in a state and you were selling physical goods, and that meant you had to collect tax, right?

Obviously the landscape has changed, first with mail order catalogs, and that kind of increasing the scope of what physical nexus might be. Do you have a warehouse? Do you have affiliates? All of those. But it did still for a very long time boil down to, do you have physical presence in a state?

12:30 Mac Wright

There's a Supreme Court case, Quill versus North Dakota, that went for a while. And then eventually we get to 2018 and Wayfair versus South Dakota, which kind of blew the whole thing open, and established rather, and held up a concept called economic nexus. Where South Dakota had put a law into effect that said, yes, you're not physically located here, but you do enough business that we believe you shouldn't be circumventing tax. It went all the way to Supreme Court, was held up, and other laws in other states that were either already on the books or were going into effect kind of all happened. And so we had this big boom of sales tax obligations in 2018, 2019.

13:20 Mac Wright

And we're still feeling a little bit of tailwind, although it slowed down a bit, to this day, where now your nexus, your obligation, your relationship with the state has grown. Because now you have either a total number of orders in a calendar year or 12 month period, might be 200 unique transactions, and even if they're only $10, you now have to collect tax.

And then other states kind of went the other direction and said, we're not going after small businesses, we don't want to make undue burden on interstate commerce, and we're going to set our level based on the dollar amount. So you have this kind of general concept where it's a hundred thousand dollars or 200 transactions in a lot of states. And then you have variations on that where that dollar amount scales up, 200, 500,000, in the case of the larger states. But you still have this complex web of laws, right?

14:28 Stephen Brown

And then there's still, so you have different laws by different states. And then to your earlier point, there's still, if you have a physical presence in a state, like let's say you hire a remote team or a remote employee, does that give you physical nexus where you should be collecting sales tax, even if your sales activity doesn't exceed those thresholds?

14:55 Mac Wright

Yeah, and it can and it does in most states, right? If you're registered for payroll tax. One of the things that we often find, one of the most common reasons you might get an angry letter, or even just a letter in general, from the state, is you hired a remote employee, you registered for payroll tax. Well, sometimes it's the same Department of Revenue, and people talk, and they might walk across or be talking in the lunchroom or in the break room, and, hey, X company. And we've seen that time and time again, where you might have hired an employee, you're doing the right thing, you think you've gone down your list of things to do, and suddenly you get a letter saying you're delinquent on sales tax, or they would like to know more about your company. And nobody wants to get that letter.

16:45 Stephen Brown

So step one is you have to have a nexus, and it's a lot easier to have nexus.

You know what's crazy, Mac, is we still run into online sellers that occasionally, not very often, but we'll still hear them, they're come and find me. And we're like, okay, good luck. And they want to work with us and we're like, we don't really want to work with you, because you're trying to avoid a legal requirement to collect sales tax. That mentality still exists among some sellers. Do you guys run into that as well?

17:05 Mac Wright

Well, all the time. Yeah, absolutely. And I think our stance is, we're a compliance company, but that doesn't mean we're enforcing compliance. Our role is to educate and automate.

My background in new business sales, I ran into that exact scenario a lot. We have a team of tax advisors. We have partners like yourself who we refer business to, to say, hey, if you want to dive deep into this, understand the risks to you, understand everything that can go on so that you can make an informed decision. All of this is available to you in our network, let's tap into it.

17:30 Mac Wright

But yeah, of course, there's going to be some people who are generally a single owner, young company, fast growth kind of creates a more risky profile, that might go, I got this far, come find me. And to those, we're happy to work with you. We're going to provide the technology to automate to your level of desired compliance. But unfortunately, if the state comes knocking at your door, they're not going to come after Avalara. They're going to come after you.

I think our stance in that is, make you absolutely aware of the risks so that you're not going into a situation blind. But if you want to take those risks, our stance kind of differs from yours in that regard.

18:18 Stephen Brown

We have a little bit more exposure as a professional services company.

So one of the other things we see, you have nexus, or we see some people that aren't sure, right? And they'll start collecting sales tax before they register with the states, because they don't understand that just because you have the legal liability to collect sales tax doesn't mean that you should, until you've gone through a registration process. And this causes all sorts of problems, whether they are legally required or not. Sometimes they'll get scared, they'll collect sales tax in all the states, and then they'll come to us and we're like, did you register? What are you talking about?

So tell me, just kind of describe, you have an obligation, now what does registration entail?

19:05 Mac Wright

Yeah, absolutely. So there are a couple different methods of registration. The most common is a future dated or current dated registration, where you've determined you crossed nexus, you go to the state or use a third party. Avalara offers registration as a service, which basically means you tell us where you need to register, where you've established nexus. And as we covered, we can help you figure that part out as well. But once you know that, we can register you.

And generally for most customers it's a pretty straightforward process. You fill out a questionnaire, you say, I crossed nexus, this is my sales in the state, register me. The state sends you notice. As you know, Stephen, and maybe some of the people listening, it's not always that simple. If you've already collected tax, if it's been a year or two since you crossed nexus, they're going to ask you some questions.

20:00 Stephen Brown

Yeah, they'll ask you, how long have you been selling in my state? How much have you sold there? We're seeing, because we do registration services as well, we're seeing when you start going down that path, they're starting to ask more. They're starting to pry and see, hey, is there additional, thanks for being compliant, were you compliant last year when you were supposed to be? So in some cases we're seeing states trying to squeeze out more than you think you're going to have to owe. So something to be aware of.

20:31 Stephen Brown

And one of the things I would say on this point, and I tell people over and over, there are a couple of mistakes you can make when it comes to sales tax, but one that you want to avoid is collecting before you register. Don't collect until you've registered with the state, because that creates all sorts of complications, and it's very expensive for somebody like us, LedgerGurus, to unwind that mess. We can do it, but it's not pretty. So make sure you do those things in order.

21:30 Where, the first gate

Stephen Brown

So you get registered. And this is where, let's take us to where I wanted to go. Now I hook up a sales tax engine like an AvaTax, and when somebody goes to purchase something, that is calculating the sales tax on that order in real time. Tell me about what goes into that. Because again, as I've talked to my team and the Avalara team about the sales tax laws, it's crazy. How is sales tax calculated?

21:45 Mac Wright

Yeah, it boils down to kind of three factors on every sale. Where, who, and what. There's complexity in each of those, of course, but they're kind of gates. Where unlocks who, unlocks what.

And what I mean by that is, where the sale takes place is the first thing we look at. Because if you don't collect tax in a jurisdiction, maybe you have to, maybe you have nexus, but if you're not registered, as we talked about, and you're not collecting tax, we want to make sure that we don't. So the first thing we look at is the ship to, ship from address, and that is what kind of unlocks the other complexity.

22:20 Mac Wright

Now each individual address might have three, four or five different sales tax rates attached to it, because we have state, city, county, multiple special taxing jurisdictions, especially as you get into LA or Denver area. I'm in Seattle, we have some of the highest sales tax rates in the country, but the complexity is not quite as high as a place like Denver.

There's a classic example we point to at Avalara when talking someone through this the first time. We helped Colorado build out their sales tax lookup website, because we had better content than the state did. And there is a specific street in Denver, it's actually Aurora, just south of Denver, but you click on one side of the street, the tax rate is 4%. You click across the street, the tax rate is 7.5%. Same street, just on different sides, because of how those GIS boundaries are drawn. Different jurisdiction.

23:10 Stephen Brown

Holy cow. Same street. And the different jurisdictions, right? When we see a sales tax rate, to come back to your earlier point, it's the city, it's the school district, it's the utility. It can be all sorts of people that are getting their piece of the sales tax transaction.

23:32 Mac Wright

And you need the ability to have it complex and simple at the same time. Because your experience as a customer is, you should see tax, right? You don't necessarily need to know how the sausage is made. Most businesses aren't necessarily displaying a full breakout of the blended tax rate. But you need that as the business. You need that in an internal database saved, so that when you file, when you have someone file for you, if you ever get audited, you can reference the tax rate at that address on that date.

And that's where an Avalara comes in, is the breakout. With Shopify specifically, on your order, on your fulfillment, you will see that breakout. Your customer may not necessarily see it on their invoice, but it's there if you need to provide it to them. And customers in this day and age are savvier than ever.

24:28 Stephen Brown

Let me just ask you one more question. How common is that situation where one side of a street might be taxed different than the other side? Is that a common occurrence?

24:45 Mac Wright

I think the scarcity makes it all the more complex, right? Most situations are going to behave like you expect them to. City boundaries, et cetera.

But to use another example, I was working with a winery in Napa and Sonoma County, and a lot of these wineries are relatively rural. They might be just outside of the city limits. So if you're looking in Google on the map and it has the city name and you're seeing a tax rate that you might not expect, well, if you look into the weeds of it, the GIS, which is kind of the official boundary of the city limits, you might find that that winery is outside of city limits, and they've actually been overcharging by 2% tax, because they had no idea that they were actually outside of where the statute applies.

25:30 Mac Wright

So it's not super common, but all the more important to get it right when it does matter. As well as, even if you're not in one of those corner case scenarios where across the street is a different address, you still might be dealing with five or six different tax rates that apply to you. And even if they also apply to your neighbor, just the act of figuring out your own tax rate is complex enough.

25:44 Stephen Brown

But it exists. It's gnarly.

So that's the where. Talk about the who.

26:09 Who and what, the next two gates

Mac Wright

So who boils down to, not every customer is going to be taxable. In ecommerce we see it all the time, especially more and more these days, as businesses are moving a lot of their wholesale business online. You might have a separate store for your business to business sales. It's different from your direct to consumer. You might have them in the same store.

So being able to identify different customers by whether or not they're a wholesale customer, a religious organization, knowing the difference between which states will exempt a university from sales tax and which states will expect the university to pay sales tax. Those are the kinds of things that will get large differences, depending especially on specific industries where you might sell entirely to that kind of customer, or wholesale makes up 90% of your business.

26:55 Mac Wright

In that case, knowing who's exempt and for what reason, and being able to actually manage those documents and keep them in a centralized database that you know they're up to date and they know who they apply to, and being able to seamlessly actually apply those exemptions at checkout.

My go-to on this one is always drop shipping. Drop shipping is just the most complex, but also the most common business model that you see today, especially new smaller companies just starting up that don't have the funding to purchase inventory. Those drop ship businesses, the suppliers make that so much easier. But what they don't tell you is how complex that web gets, as there are multiple sales taking place. Every time your customer clicks buy, you're buying from your drop shipper, they're shipping it on your behalf. You're making multiple sales.

27:50 Mac Wright

Whose nexus takes place? Whose exemption certificate actually matters in this case? Who has the obligation to remit tax? These kind of complex factors on what seems to be a very simple transaction. Just making sure that you have a strategy for dealing with who your customers are, what's their tax status. It's so necessary in having a functional ecommerce business in today's day and age.

28:34 Stephen Brown

So we got the where, we got the who. Now let's talk about the what.

28:40 Mac Wright

Yeah, the what. Gosh. And again, this is defined by the exceptions, right? Most things, if you look behind me on the shelf, almost everything up there is taxable everywhere at the full rate. Board games, books, it's all just physical goods.

But my shirt, your shirt, glasses. I know you're wearing glasses, I took mine off because of the glare.

29:04 Stephen Brown

Yeah, they're taxed differently.

29:09 Mac Wright

If it's prescription, it's taxed differently than if it's not. You don't need to know all of those laws though in today's day and age. What you need to do is utilize a service like an AvaTax, where you just have to know your product.

And so instead of knowing, okay, clothing is taxed, it's not taxable in Pennsylvania unless it's formal wear, it's taxable in New York unless it's under a certain dollar amount, it's not taxable in Massachusetts or Connecticut unless it's over a thousand dollars and considered a luxury good. You don't need to know those laws. You need to know that what you're selling is clothing. The specific type of clothing can matter. So you just need to be an expert on your product.

29:52 Stephen Brown

Groceries is another good example, right? There's a lot of variability with groceries.

29:56 Mac Wright

Groceries is a great example. Where I'm from, Seattle again, we don't tax grocery items.

30:05 Stephen Brown

But I've seen you guys, you guys have some great articles where you show, like this piece of food is taxable, but this one is not. Just these weird quirks that happen.

I probably should have put a trigger warning at the beginning of the episode, because I know when I talk to people it just frustrates them. They're just like, this is insane. How is it that we have such a complex system here around tax? And it's just like, well, welcome to 50 states with their own set of rules and laws.

30:50 Stephen Brown

And the end result for ecommerce is, it's a big freaking mess. You see this more than anywhere else. I'm selling to multiple locations, potentially multiple products, and different customers. To your point, the where, the who, the what. And it's just a big complex nightmare in terms of calculating what I owe, which is why you really need to be using an engine like an AvaTax.

And so maybe let me ask you, because I know the answer to this, but one more variable is, these things are changing all the time, right? It's not like you build up this database and you're done. The states are constantly tweaking their laws.

31:26 VAT, remittance, and where this is heading

Mac Wright

Absolutely. And it's not just the states. If it was just the states, 50 variables to keep track of, that would be one thing. But tax is global, and we haven't talked about VAT or GST. And for a lot of sellers it's not super relevant, but you're not dealing with 50 jurisdictions. You're dealing with 50 states, you're dealing with sub jurisdictions.

If we talk about Alaska, they don't have state sales tax. They sure do have city and county. And they have a special governing board of basically a coalition of cities that work together to build a tax department that's not actually a state tax department. So do they have a state sales tax? Do they not? It depends who you ask, it depends on the complexity. And then you have other countries. VAT is mostly a simpler system, but it is a complexity.

32:15 Stephen Brown

Let's go down that path. So let's explain VAT. What is VAT? Because if you're an American you may have heard of it, but what is VAT, and where do you run into VAT?

32:28 Mac Wright

Yeah, so as an American, if you're shipping internationally, you may think, I don't have to worry about tax. Well, VAT, value added tax, is a consumer tax on the price of goods, but it's not just charged to the end consumer.

One, customers overseas have different expectations. VAT should be included in the sale price. The difference, if you go to the store in America and it's $9.99, you know you're paying more than that, it's kind of built in. You have that moment when you're a kid, you think, I have a $10 bill, I can go buy this $9.99 stuffed animal, you get to the counter, someone breaks your heart. So we expect that as customers because we've learned that.

33:15 Mac Wright

Internationally your customer expectations are different. The price and the VAT, the tax, is factored in, and it might be as high as 20%, but it's included in the sale price of the good.

And it's not just the final sale price. Your business to business transactions, you charge the VAT at every step. It's value added. You charge VAT, and the VAT is paid on, from what you paid to what you sold it for, and that's the value that you've added. That's the name of the tax itself. You get credits back. It's a complex web, especially for the distribution and manufacturing kind of side of things.

33:53 Mac Wright

But even as an end consumer and the final sale on that chain, you still have to collect and remit tax. And it can be easier in some places. The European Union's made a lot of steps to simplify that process over the years with IOSS, or Import One-Stop Shop, which allows you to have kind of one registration and one filing that covers the whole EU.

But you still need a tool to calculate that, and you still need to meet those customer expectations of including it in the sale price. And you generally want to have a separate storefront or a separate market set up. And that's not even getting into customs and duties and landed costs, which is, there are extra taxes when you're crossing borders. And all of that just adds to this complexity of selling internationally for American companies. And similarly for other countries selling into the US, they're not familiar with our complex system of 13,000 unique jurisdictions, each with their own special tax rate.

35:01 Stephen Brown

So this is the complexity of calculating sales tax real time, is you've got all these factors that you're having to calculate, and ideally not become a friction point on that sale, right? You just want to calculate that number and purchase is done. But behind the scenes all this nonsense is, I call it nonsense because it feels crazy when you kind of pull it apart, it is happening to make that happen.

35:32 Stephen Brown

And then sales tax, maybe we'll take the cycle through. I've registered with the state, I've used the engine, it calculates it, I pull that money out.

This is one of my beefs with Shopify. If you go look at a revenue report, their revenue reports include sales tax. Yeah, it's insane. So people are like, oh, I made $500,000 last year. Well, actually you made about 495. For whatever reason Shopify decided to include the collected sales tax in that number, and that's not accurate. My team will always be like, hey, this is not income. It is a liability. To nerd out on accounting, this goes onto the balance sheet as something that you owe to a state. It's not yours to keep. You're just the intermediary, unfortunate intermediary, to collect.

36:30 Stephen Brown

And then you have to remit that sales tax. Do a filing with the state and send them over the money. And depending on how much you sell, there are different intervals that you have to collect and remit for. It's a nightmare, right? This whole process is a nightmare. And what people like us, our companies and the broader ecosystem is trying to do is, hey, can we simplify this as much as possible so that people can be compliant with the law, but not lose their hair trying to do so.

37:02 Mac Wright

Yeah, I mean, it's one of those things that you can become an expert. People like us have made a career out of learning this stuff and becoming an expert. But for the average person who has to interact with sales tax, it's not a value add. Becoming an expert is not a good use of your time. It's never going to make you money, it simply won't.

37:16 Stephen Brown

It's a necessary evil of business.

37:40 Mac Wright

And you can lose money, right? It can be a cost.

37:44 Stephen Brown

But you can definitely lose money if you don't do it right. We've seen audits where they'll come in and they're like, boom, you owe us this money plus interest plus penalties on sales tax that you never collected. That's the worst part, is when you're getting asked to pay for something that you didn't collect money for.

37:49 Mac Wright

Yeah. So we want to be boring, right, Stephen? We want to be a boring part of your business. We want to work, we want to minimize your risk, and we want to give you time back to focus on things that will make you money, that interest you, that were why you got into whatever the career it is that you were doing, instead of focusing on sales tax. The people I talk to, it's not their first or second job at the company. It's often the third or fourth hat that they're asked to wear.

38:19 Mac Wright

And like we talked about at the beginning, there are no prizes for doing it right. There are a lot of penalties for doing it wrong. And you don't get a lot of attaboys or pats on the head for filing your sales tax return on time without any penalties. It's just what's expected of you.

38:34 Stephen Brown

There's really no upside, but there's a lot of downside to sales tax. You've got to do it. It's not exciting, but if you don't do it, it's penalizing.

One of the things, maybe kind of a wrapping up thought. There's always been that conversation about simplifying things. I don't see sales tax, and I like the term you use, indirect tax, it doesn't seem to be getting simpler. It just seems to be getting ever more complex every year. Is that a fair assessment, or do you see simplifications happening out there?

39:16 Mac Wright

I would say it's getting more complex, maybe in fits and spurts.

One thing Avalara is doing to kind of look around at the landscape, what other countries around the world are doing, we're very focused on e-invoicing, which is the process of the government being involved at the transactional level, and tax being calculated and remitted at the point of sale. Which is going to add a whole nother layer of complexity and governmental oversight, designed to minimize corruption and promote doing things correctly, but with additional technological demands and just a changing of way.

40:00 Mac Wright

I went over to Brazil over the new year, because my wife is from there and I'd always wanted to go to Brazil for New Year's, and had a fantastic time. But part of their system is that the vendors on the beach all have credit card readers. Your phone is a credit card reader. Every invoice can be electronic, because historically there was a corruption problem and a tax evasion problem, and their solution was to move everything electronic and digital and make sure that the government is involved on every sale. And that does appear to be the way the world is trending.

41:00 Mac Wright

So I do only see the system getting more complex. Now the tools to make it simpler are also getting better, and our goal at Avalara is to make sure the tools move faster than the regulations. But it is one of those things that, it's just laws built on top of other laws. And like most situations, I don't see anyone who's going to sweep through a magic wand and simplify the whole thing. Rather, it's just going to be built layer on top of layer. And that's how we got to where we're at today, and I don't see any reason why that would change going forward.

41:26 Stephen Brown

All right, well thank you for enlightening us, Mac. If somebody wanted to connect with you, what's the best way to do so?

41:33 Mac Wright

Yeah, that's a fantastic question. So on our website we have a contact us. If you're a Shopify customer, especially one who's on the legacy Plus integration, if you go to your settings page in Shopify, go to taxes and duties, next to the AvaTax app that you use today there's a bright red box that says upgrade. If you click on that, you will hopefully in the near future see an online buy page that says you could upgrade and buy right there. In the meantime it'll get you a contact form.

42:20 Mac Wright

You can call a number, or you can reach out to us via email, or fill out a contact form and we'll reach out to you. And with Avalara, avalara.com, contact us, we have chat, we have forms, we have a number, there are a lot of ways to get in contact with us. But specifically if you're a Shopify customer, it's right there in Shopify and it'll tell you exactly what you need to do. You just got to go find it under settings, taxes and duties.

42:45 Stephen Brown

Awesome. And if you need help with somebody who's expert working with Avalara, LedgerGurus, we are partners, long time partners with Avalara. We do all the sales tax things so that you don't have to.

All right, thanks for joining us, Mac. We'll call this a wrap.

42:59 Mac Wright

Awesome, thanks Stephen, it's great talking with you.