The Global Sales Tax Challenge for SaaS Companies - with Michelle Valentine, Founder and CEO Anrok

Michelle Valentine, Founder and CEO of Anrok is taking on the Sales Tax compliance challenges for B2B SaaS companies. Global Sales Tax compliance is a critical obstacle to successfully deploying a global Product-Led Growth strategy.

Michelle's conversation with our host, Ray Rike covers a wide array of topics including:

• Evolution of Sales Tax and Compliance in SaaS
• Challenges of Global Sales Tax Compliance
• Dynamic Nature of SaaS Sales Tax
• Evolution from Investment Banking to Venture Capital to B2B SaaS Founder/CEO

What was the catalyst for Michelle to found Anrok? Michelle's experience as a SaaS investor was on a run with a founder along the Embarcadero in San Francisco, and she was sharing their company's challenge with tax compliance which sparked the idea. Thinking back to the early days of Amazon, most states did not initially tax e-commerce sales - but that has changed dramatically over the last 10+ years and Michelle saw the same change to B2B SaaS in the future!

Michelle provided the history of State sales tax in the 1920s, which was introduced on physical retail store sales as a revenue source for States. In 2018, a similar concept began to be deployed by States on cloud-delivered software (SaaS) - though it is to be noted that California never charged for software sold in the state. Stimulated by COVID-19, a new reality was introduced - if you had an employee, even a remote employee in a state, you had to charge Sales Tax in that state. Based upon a Supreme Court case in 2018 (South Dakota vs Wayfair), there is also a "revenue threshold" that requires companies to collect sales taxes in the state of the customer that bought software/SaaS from the company. Think about the challenge of staying on top of each state's Sales Tax laws, and then how much more difficult that becomes when expanding globally.

Many countries worldwide will require sales tax on even the first sales in that country.  VAT ID validation is one approach to determine if a specific transaction requires sales tax collection - but each country does have different local thresholds.

Why is now the time for next-generation sales tax compliance software? The majority of sales tax compliance software was built for consumer companies, and was not developed to understand global sales tax compliance, was not built with recurring revenue in mind and thus did not have the data model flexibility to expand and adapt to a rapidly changing regulatory environment. Even cities like Chicago are now requiring software purchased and/or used in their jurisdiction to be taxed.

If you lead a B2B SaaS company that is selling your solution to companies in states outside of where your company is headquartered, and especially if you are considering selling to companies around the globe, this conversation with Michelle is full of amazing Sales Tax compliance insights that make for an insightful listen!

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