TaxJar, a subscription software company that helps businesses automate their sales tax calculations and filing, today announced that it has raised a $60 million round of growth equity capital from Insight Venture Partners.
It’s the company’s first round of funding since 2014. CEO Mark Faggiano says the raise was partly prompted by increased VC interest after a recent Supreme Court ruling in South Dakota v. Wayfair, Inc.
“Because we’ve been so capital-efficient, raising money has not been on the radar at all,” Faggiano told VentureBeat, noting that TaxJar first turned a profit in 2016 and had last raised a $2 million seed round. “But the [Wayfair decision] put the sales tax space on the map [for venture capital and private equity].”
The ruling in the summer 2018 case overturned a precedent outlining companies’ liability regarding collection of the state’s sales tax. Previously, a company had to have a physical presence, like an employee on payroll or property in that state, to be liable. Now, out-of-state retailers can be required to collect sales tax if they sell and ship goods to buyers in the state, even with no physical presence on the part of the company. In South Dakota, any entity that conducts a minimum of $100,000 in sales or 200 individual transactions is required to collect sales tax.
This ruling opened the door for other states to pass their own laws subjecting ecommerce business to new sales taxes. But each new law passed means a new set of calculations that an ecommerce company has to be aware of in order to figure out how much sales tax a buyer might owe in that state.
Insight Venture Partners managing director Ross Devor told VentureBeat in an email that it was this — coupled with surges in ecommerce sales — that prompted the firm’s investment in TaxJar. Insight Venture Partners, based in New York City, recently closed its tenth fund at $6.3 billion.
“Consumers have continued to shift dollars into online channels, and online vendors are increasingly looking for a way to automate the collection and filing of their tax liabilities across multiple states,” Devor told VentureBeat.
TaxJar’s basic offering helps companies calculate how much sales tax they need to collect at the point of sale, and it pulls reports on how much they’ve collected in sales tax from all the channels they sell through — from Amazon to Shopify to eBay. TaxJar also has an AutoFile feature that helps ecommerce businesses file sales tax returns in various states. TaxJar Basic can cost companies anywhere from a reasonable $19 per month to a hefty price of nearly $1,000 per month, depending upon how many orders they import.
Fueled by this new round of capital, TaxJar is also launching a “plus” offering, which will essentially be a custom solution developed for bigger companies with more complex needs. Faggiano says that plan will start at $299 per month and is launching today after eight to 10 months of testing.
In total, TaxJar has close to 17,000 paying customers, including Dell, DoorDash, and Eventbrite. Its main competitor is Avalara, a publicly traded company based in Seattle.
Founded in 2013, TaxJar has an all-remote workforce of about 60 employees — a structure Faggiano says investors were skeptical of when the company was first raising money but have grown more receptive to as more companies in Silicon Valley add remote workers.
“Four years ago, when we raised the seed round, nine out of 10 people we met with were very opposed to [remote working], didn’t understand how it worked, didn’t think it had any sort of future,” Faggiano told VentureBeat. “One of the reasons why we’re super excited about working with Insight is they were so supportive of this [all-remote] model — they saw this as one of our core values.”