Predictable Revenue. Predictable Risk?
SalesTax and Recurring Revenue Models
Slide 2 − Zuora Confidential, not for distribution beyond intended recipient 2
Use promo code Revenue50
and receive 50% off
Clete Werts
Partner Sales Manager
Julia Zhang
Product Manager
Speakers
3
Slide 4 − Zuora Confidential, not for distribution beyond intended recipient
1
2
3
Zuora
A Brief Introduction
Challenges o...
Six+ Years of Incredible Growth
Zuora founded
Series A; First
product launched
Series B, Zuora
featured in WSJ
Series C; Z...
Our customers span 500+ Subscription Economy
businesses from multiple industries
High Tech SaaS
Cloud
Infrastructure
Telec...
Slide 7 − Zuora Confidential, not for distribution beyond intended recipient
Zuora has been building this system for 6 yea...
Slide 8 − Zuora Confidential, not for distribution beyond intended recipient
• Billing & Rating
• Invoice Delivery
• Taxat...
Slide 9 − Zuora Confidential, not for distribution beyond intended recipient
Zuora Tax Engine
Input
• Customer Tax Exempti...
Slide 10 − Zuora Confidential, not for distribution beyond intended recipient
Tax becomes complicated as your business gro...
Slide 11 − Zuora Confidential, not for distribution beyond intended recipient
Solution: Embedded Avalara Integration
What makes Avalara unique?
• Chosen by thousands of businesses to file and remit
sales tax on their behalf
• Processes bil...
A handful of Avalara customers
13
Constantly Changing
Rates, Rules, & Boundaries
Accurate from
Quote-to-Cash
Nexus
(Physical Presence)
Product Taxability
Sa...
15
• What’s taxable, and what’s
not? And where?
• Physical vs. digital goods?
• Calculating and
filing/remittance
• Exempt...
Understanding Nexus
Knowing where you are required to collect
 “Nexus” describes the connection between a state
and a bus...
States finding more sales tax revenue
by broadening definitions of nexus
 Remote sellers can no longer assume that Quill ...
Nexus-creating activities: a growing list
 Multi-state locations
 Maintenance/service/repairs
 Own/lease real property
...
Slide 19 − Zuora Confidential, not for distribution beyond intended recipient
Single Point of Storage/Access
vs. Distribut...
Product Taxability of Digital Goods
 How is a digital good defined?
 How is a digital good taxed?
 When is a digital go...
Download Adobe Acrobat 9 Pro
Extended
https://www.adobe.com/downloads/
Packaged Software Digital Download
Product Taxabili...
Washington Georgia
Product Taxability Confusion
RINGTONES
22
Product Taxability of Tangible Goods
Purchased by subscription…
 Is it any different than a one-time purchase?
 When is ...
<6 months, sent
second class mail
>=6 months, sent
second class mail
Product Taxability Confusion
TEXAS
24
Understanding product & service taxability
exceptions
 Rules and rates vary between states
 The following industries hav...
Constantly Changing Sales Tax Compliance
 11,000+ taxing jurisdictions
 Thousands of changes to tax laws, including:
̶ J...
ZIP Codes: wrong tool for the job
 Taxing jurisdictions don’t always follow ZIP Codes!
 Individual counties and municipa...
Slide 28 − Zuora Confidential, not for distribution beyond intended recipientSlide 28 − Zuora Confidential, not for distri...
The state of our States
 States are still recovering from the Recession
 In 2013, 31 states projected budget deficits to...
States finding more sales tax revenue
by hiring auditors
 California announces hiring 100 auditors over the next
three ye...
End-to-End compliance for Zuora
31
Zuora & Avalara Partnership
 Pre-Built Connector by Zuora
‒ No development work required
 One Sales Tax Engine
̶ Constan...
Embedded Avalara Integration
33
34
Billing engine supports multiple
taxengines
Get Subscriptions Reads Usage
Data
Processes
Charges
Processes
Taxes
Genera...
Slide 35 − Zuora Confidential, not for distribution beyond intended recipient
Setup 1: Create company and nexus in Avalara
Slide 36 − Zuora Confidential, not for distribution beyond intended recipient
Setup 2: Set up Avalara tax engine in Zuora
Slide 37 − Zuora Confidential, not for distribution beyond intended recipient
Setup 3: Create your tax codes
Slide 38 − Zuora Confidential, not for distribution beyond intended recipient
Setup 4: Assign a tax code to rate plan char...
Slide 39 − Zuora Confidential, not for distribution beyond intended recipient
Calculate tax on invoices – via Bill Run or ...
Slide 40 − Zuora Confidential, not for distribution beyond intended recipient
Display tax on quotes
Slide 41 − Zuora Confidential, not for distribution beyond intended recipient
Display and collect the tax for online order...
Slide 42 − Zuora Confidential, not for distribution beyond intended recipient
Collect the right tax when order is submitted
Slide 43 − Zuora Confidential, not for distribution beyond intended recipient
Tax Docs created in Avalara ready for remitt...
Slide 44 − Zuora Confidential, not for distribution beyond intended recipient
Delivered in May Release
If you’re intereste...
Questions?
45
Slide 46 − Zuora Confidential, not for distribution beyond intended recipient 46
Use promo code Revenue50
and receive 50% ...
Thank You
47
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Predictable Revenue. Predictable Risk? Sales Tax & Recurring Revenue

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As more commerce has moved to the web, the subscription-based model has encompassed emerging technology as well. See how Avalara and Zuora outline what every company needs to know about avoiding sales tax compliance risk when dealing with recurring billing.

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Predictable Revenue. Predictable Risk? Sales Tax & Recurring Revenue

  1. 1. Predictable Revenue. Predictable Risk? SalesTax and Recurring Revenue Models
  2. 2. Slide 2 − Zuora Confidential, not for distribution beyond intended recipient 2 Use promo code Revenue50 and receive 50% off
  3. 3. Clete Werts Partner Sales Manager Julia Zhang Product Manager Speakers 3
  4. 4. Slide 4 − Zuora Confidential, not for distribution beyond intended recipient 1 2 3 Zuora A Brief Introduction Challenges of Sales Tax in Subscription Economy Avalara Solution Zuora Tax Solution Avalara Integration Agenda
  5. 5. Six+ Years of Incredible Growth Zuora founded Series A; First product launched Series B, Zuora featured in WSJ Series C; Zuora announces 1B in contracted revenue Series D, Trademarks Subscription Economy; EMEA expansion Zuora wins AlwaysOn Company of the Year Award; expands to Asia TheLeaderinCommerce,BillingandFinance SolutionsfortheSubscriptionEconomy $20Bn contracted invoice volume; Series E funding; 50th product release 2013201220112010200920082007 Offices: Silicon Valley, London, Sydney, Beijing, Chicago, Atlanta 500+ Customers 300+ Employees 95% Customer Sat 5
  6. 6. Our customers span 500+ Subscription Economy businesses from multiple industries High Tech SaaS Cloud Infrastructure TelecomDevices Media Education Healthcare 6
  7. 7. Slide 7 − Zuora Confidential, not for distribution beyond intended recipient Zuora has been building this system for 6 years 7
  8. 8. Slide 8 − Zuora Confidential, not for distribution beyond intended recipient • Billing & Rating • Invoice Delivery • Taxation • Payment Automation • 14+ Gateways/Processors 8
  9. 9. Slide 9 − Zuora Confidential, not for distribution beyond intended recipient Zuora Tax Engine Input • Customer Tax Exemption Status • Customer Sold-To Address • Product Tax Code • Charge Amount Output • Tax rates and tax amount for each line item/ jurisdiction Zuora Tax Engine Our customers upload and maintain tax tables for each product/service type.
  10. 10. Slide 10 − Zuora Confidential, not for distribution beyond intended recipient Tax becomes complicated as your business grows • Keep up with complicated Tax Rules • Maintain Tax rates that change frequently • Remittance the correct tax payment to multiple jurisdictions using proper forms and procedures
  11. 11. Slide 11 − Zuora Confidential, not for distribution beyond intended recipient Solution: Embedded Avalara Integration
  12. 12. What makes Avalara unique? • Chosen by thousands of businesses to file and remit sales tax on their behalf • Processes billions of transactions annually • Recommended by software application resellers, CPAs, and business consultants • SSAE16 Certified and a SST service provider 12
  13. 13. A handful of Avalara customers 13
  14. 14. Constantly Changing Rates, Rules, & Boundaries Accurate from Quote-to-Cash Nexus (Physical Presence) Product Taxability Sales Tax Challenges for Recurring Revenue Models Sourcing Rules 14
  15. 15. 15 • What’s taxable, and what’s not? And where? • Physical vs. digital goods? • Calculating and filing/remittance • Exempt purchases • Web-based services can change the nexus dynamic Sales Tax: Different for subscription models?
  16. 16. Understanding Nexus Knowing where you are required to collect  “Nexus” describes the connection between a state and a business that permits a taxing authority to require a seller to register, collect and remit sales and use taxes  Nexus allows a state to compel an out-of-state company to register and collect sales or use tax 16
  17. 17. States finding more sales tax revenue by broadening definitions of nexus  Remote sellers can no longer assume that Quill v. North Dakota means they don’t have to collect sales tax  Nexus in a digital world Where is the item sourced? What is the method of delivery?  “Amazon Laws” ̶ Cyber Monday, 2013: SCOTUS leaves NY click-through affiliate law in place ̶ 11 States have already passed Amazon Laws 17
  18. 18. Nexus-creating activities: a growing list  Multi-state locations  Maintenance/service/repairs  Own/lease real property  Hosted Data Centers  Field sales/service staff  Charge Licenses/royalty/fees  Direct and/or online sales  Maintains inventory  Affiliates  Tradeshows  Commissions to resellers (1099s)  Investors/board members  Marketing/Web advertising  Drop shipments 18
  19. 19. Slide 19 − Zuora Confidential, not for distribution beyond intended recipient Single Point of Storage/Access vs. Distributed Storage (ASP Model) In the Cloud (No Delivery) Off-the-Shelf Canned Software vs. Custom Evolution of Technology Taxation Tangible vs. Electronic Delivery
  20. 20. Product Taxability of Digital Goods  How is a digital good defined?  How is a digital good taxed?  When is a digital good exempt from tax?  How is taxability different if it’s a one-time purchase vs. by subscription? 20
  21. 21. Download Adobe Acrobat 9 Pro Extended https://www.adobe.com/downloads/ Packaged Software Digital Download Product Taxability Confusion CALIFORNIA 21
  22. 22. Washington Georgia Product Taxability Confusion RINGTONES 22
  23. 23. Product Taxability of Tangible Goods Purchased by subscription…  Is it any different than a one-time purchase?  When is it exempt from tax? – $$ threshold – Sales tax holidays – Length/type of subscription? 23
  24. 24. <6 months, sent second class mail >=6 months, sent second class mail Product Taxability Confusion TEXAS 24
  25. 25. Understanding product & service taxability exceptions  Rules and rates vary between states  The following industries have varying taxability rules: ̶ Software / hardware ̶ Digital goods ̶ Services ̶ Medical device / equipment ̶ Food / beverage ̶ Clothing / apparel ̶ Dietary supplements ̶ And many other industries / products 25
  26. 26. Constantly Changing Sales Tax Compliance  11,000+ taxing jurisdictions  Thousands of changes to tax laws, including: ̶ Jurisdictional rate changes ̶ Tax holidays ̶ Jurisdictions that levy new taxes or eliminate taxes ̶ Jurisdictions that expand geographic boundaries  Accuracy is everything! ̶ For customers, auditors, your business 26
  27. 27. ZIP Codes: wrong tool for the job  Taxing jurisdictions don’t always follow ZIP Codes!  Individual counties and municipalities levy sales taxes in addition to state rates  Tax rates can vary significantly within a ZIP code 27
  28. 28. Slide 28 − Zuora Confidential, not for distribution beyond intended recipientSlide 28 − Zuora Confidential, not for distribution beyond intended recipient 7450 Leyden Street Total Sales Tax: 0.0925 COLORADO: 0.0290 ADAMS: 0.0075 COMMERCE CITY: 0.0450 SCIENTIFIC & CULTURAL: 0.0010 DENVER AREA TR: 0.0100 7495 Locust Street Total Sales Tax: 0.0475 COLORADO: 0.0290 ADAMS: 0.0075 SCIENTIFIC & CULTURAL: 0.0010 DENVER AREA TR: 0.0100
  29. 29. The state of our States  States are still recovering from the Recession  In 2013, 31 states projected budget deficits totaling $55 billion  NRF estimates $24 billion in sales taxes goes uncollected on the Internet Therefore  As tax-collecting agents of the State(s), they are looking to your business to find more money  This increased focus creates compliance risk for you 29
  30. 30. States finding more sales tax revenue by hiring auditors  California announces hiring 100 auditors over the next three years  Idaho hires 48 auditors that stay on as full time staff 30
  31. 31. End-to-End compliance for Zuora 31
  32. 32. Zuora & Avalara Partnership  Pre-Built Connector by Zuora ‒ No development work required  One Sales Tax Engine ̶ Constantly updates sales tax rate ̶ Product Taxability support ̶ Up-to-date reporting ̶ Automated Filing 32
  33. 33. Embedded Avalara Integration 33
  34. 34. 34 Billing engine supports multiple taxengines Get Subscriptions Reads Usage Data Processes Charges Processes Taxes Generates Invoices Billing Engine Zuora Tax Engine Avalara Tax Engine Each Rate Plan Charge can use a different Tax Engine
  35. 35. Slide 35 − Zuora Confidential, not for distribution beyond intended recipient Setup 1: Create company and nexus in Avalara
  36. 36. Slide 36 − Zuora Confidential, not for distribution beyond intended recipient Setup 2: Set up Avalara tax engine in Zuora
  37. 37. Slide 37 − Zuora Confidential, not for distribution beyond intended recipient Setup 3: Create your tax codes
  38. 38. Slide 38 − Zuora Confidential, not for distribution beyond intended recipient Setup 4: Assign a tax code to rate plan charge
  39. 39. Slide 39 − Zuora Confidential, not for distribution beyond intended recipient Calculate tax on invoices – via Bill Run or API
  40. 40. Slide 40 − Zuora Confidential, not for distribution beyond intended recipient Display tax on quotes
  41. 41. Slide 41 − Zuora Confidential, not for distribution beyond intended recipient Display and collect the tax for online orders {"previewAccountInfo": "currency": "USD", "billCycleDay": 1, "billToContact": { "city": "Foster City", "country": "United States", "county": "San Mateo", "zipCode": "94044", "state": "CA", "taxRegion": "CA" } }, "invoiceTargetDate": "2014-05-01", "contractEffectiveDate": "2014-05-01", "subscribeToRatePlans": [ { "productRatePlanId": "2c92c8f......" } Subscribe () RequestSubscribe () Response ….. { "success": true, "contractedMrr": 100, "totalContractedValue": 1200, "amount": 91.23, "amountWithoutTax": 79.99, "taxAmount": 11.24, "invoiceTargetDate": "2014-05-01", ….. }
  42. 42. Slide 42 − Zuora Confidential, not for distribution beyond intended recipient Collect the right tax when order is submitted
  43. 43. Slide 43 − Zuora Confidential, not for distribution beyond intended recipient Tax Docs created in Avalara ready for remittance
  44. 44. Slide 44 − Zuora Confidential, not for distribution beyond intended recipient Delivered in May Release If you’re interested, please contact Zuora Support
  45. 45. Questions? 45
  46. 46. Slide 46 − Zuora Confidential, not for distribution beyond intended recipient 46 Use promo code Revenue50 and receive 50% off
  47. 47. Thank You 47
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