Sales Tax Trends
Sona Akmakjian is the Global Head of Strategic Accounting Partnerships at Avalara. With over 28 years of experience in transaction tax services and consulting, she has a wealth of expertise, with particular strengths in areas such as strategic alliances, relationship management, executive collaboration, and product management in all consulting and software environments.
Over the years, Sona has established herself as a thought leader in the field of transactional tax automation. She has deep industry knowledge, which she gained from her experience working for a state tax agency and administering sales and use taxes. Additionally, Sona has Big Four accounting firm experience, tech software experience, and mid-market consulting experience.
In this episode…
Before the COVID-19 pandemic hit, many companies had started using automation to improve and scale their business processes. When the pandemic struck, it only accelerated this automation process, as more organizations saw the importance of digital solutions.
This is just one of many trends that have emerged due to the current crisis. Others include globalization and a significant boost in the eCommerce industry. All of these changes have—and will continue to have—an impact on the collection, accounting, and remittance of sales tax in the country.
Sona Akmakjian, Global Head of Strategic Accounting Partnerships at Avalara, joins Michael J. Fleming and Ellie Moffat in this week's episode of Sales Tax and More to discuss the current sales tax trends in the country. Sona talks about the impacts of the COVID-19 pandemic on automation, taxation, and the eCommerce industry. She also shares the results from the recent Avalara survey about the effects of the Wayfair case on retailers and businesses. Stay tuned.
Here’s a glimpse of what you’ll learn:
Sona Akmakjian's thoughts on the impacts of the Wayfair case on retailers and businesses
Sona talks about the results of the Avalara survey about the attitudes and effects of the Wayfair case
Why people should stop waiting for Congress to step in on the case
How COVID-19 has impacted automation and the eCommerce industry
Are more accountants and CPAs getting involved in state and local taxes (SALT) in light of the Wayfair case?
How to get in touch with Sona Akmakjian
Resources Mentioned in This Episode
Ellie Moffat's email: emoffat@salestaxandmore.com
Sona Akmakjian's email: sona.akmakjian@avalara.com
Connect with Michael
Sponsor for This Episode
Sales Tax and More assists companies and their trusted advisors like CPAs with sales tax needs. They offer consulting and research, registrations, returns, and so much more. Over the years they have assisted thousands of sellers both foreign and domestic with their tax issues in the United States and in Canada.
To learn more about their services, visit https://www.salestaxandmore.com/.
Make sure to register and join the Sales Tax and More Webinar to get access to complex materials on tax in an easy-to-understand format.
Episode Transcript - Audio Version
[0:10] Intro: Welcome to Sales Tax and More, your go-to resource for all things state tax-related. Now here is your host Michael Fleming.
[0:26] Mike: Hi Mike Fleming here, founder of Sales Tax and More and today's co-host of the Sales Tax and More podcast where we talk about everybody's favorite topic, which is of course sales tax. Today we're going to be discussing sales tax trends with Sona Akmakjian. And sorry if I butchered that. Okay, um, but we're going to be discussing you know, current sales tax trends, you know, we're two years out from the, the Wayfair case and you know, before We get into all of this, you know, I'd like to introduce you to my co-host, Ellie Moffatt.
[1:06] Ellie: Hey, everyone. It's really great to be here. I'm excited to have Sona on today. And before we roll in to get into the meat of this, I'm going to do a quick introduction for Sales Tax and More. Sales Tax and More is a full service consulting and solutions firm. We have a really great team here of experienced tax professionals. We're very dedicated to fulfilling your state tax and related needs. So we do a lot of returns registrations consultations research and like our namesake it's more so if you have questions about our services, or have questions for Sona, we will give you plenty of ways to reach out to us in this podcast episode and in the show notes as well. So I'm gonna give it back to you Mike and we can keep going.
[1:47] Mike: Yeah, great. So Sona's very accomplished. Let me tell you a little bit about her. Right now she's with Avalara. But she's got over 28 years of experience in transaction tax. services and consulting. She brings a wealth of expertise with particular strengths in areas such as strategic alliances, relationship management, executive collaboration, M & A due diligence, project management, professional services, and product management in all, consulting and software environments. Sona promotes cross-functional collaboration and team building while driving maximum value satisfaction to an organization. Over the years, Sona has established herself as a thought leader in the field of transactional tax automation. She's got great deep industry information. She has experience working for a state tax agency, administering sales and use taxes, Big Four accounting firm experience, tech software experience, and mid-market consulting experience. She's got a Bachelor's of Business Administration from the University of Southern California. She's also a California-certified public accountant. So, Sona, we appreciate you sharing your knowledge with us today. Before we jump in, you want to say a quick hi.
[3:12] Sona: Hello, everyone, Ellie and my thank you so much for giving me the opportunity to be here. I'm excited to talk to you about everyone's favorite topic today. So thank you for allowing me to be here.
[3:24] Mike: Thank you. So, you know, as I mentioned earlier, you know, we're two years past Wayfair and Wayfair is the US Supreme Court case, of course, that did away with the need for physical presence when determining nexus which simply means that now just having sales into a state can trigger a requirement to collect taxes and I know you know, all this I just for our audience on giving a little bit of background. So you know, Avalara has a whole bunch of customers. They have a whole bunch of interaction with the sales tax world, what do you see? What does Avalara see?
[4:05] Sona: Yeah, you know, it's definitely changed the dynamics of what we're all dealing with. You know, it's interesting, Mike. The states were fairly quick and adopting their rules, but we're finding that retailers not so much, right. And anytime they change, the authorities change rules to simplify things almost seems like they make it more complicated, right. So it's not easy for our clients to really adopt this. I mean, there are so many components, you know, every jurisdiction has specific rules and thresholds. And registration can be a bear collection. It's so labor-intensive. So what we're seeing is that states were quick to adopt, but not so much the organizations and they're, you know, partially aware, partially the complexity, but I will say there were a lot of people who comply. We've been very busy, but I think we're not there yet. And I don't know if that's consistent with what you're seeing with your client base.
[5:18] Mike: Yeah, absolutely. We're seeing some of the same Sona and, you know, it's really a little bit frustrating sometimes, because when they first imposed this, they were doing it prospectively only, and no one had any past exposure because of this, but now two years past some of these, you know, thresholds are getting old, you know, states like Maine and some of the other early adaptors, you know, have a July 1, 2018, start date. So we're literally, you know, two years out, and they're starting to get aggressive and pursue people.
[6:00] Sona: So it's an interesting point because I think that aggressiveness multiplies, you know, and in the current environment we live in places where the states aren't going to need more money because of the financial situation. I think they're going to come down harder on these companies. So that's not going to help us at all.
[6:20] Mike: Yeah, absolutely. It's like a perfect storm. I mean, the states from our point of view, we're gearing up to come after sellers because not everyone's compliant just for economic nexus. But now we have these pandemic closures and the recessions and the shortage of funds and, you know, historically, when states come out of a recession, they step up their enforcement, they step up their discovery. So we've already had them coming in now. This just intensifies the need for them to be coming.
[7:00] Ellie: Yeah, Sona. You were just talking a little bit about what Avalara was seeing. And I know we all saw a survey come out about that. Can you share the findings of the survey Avalara did and on that and just kind of what it was about and what you found?
[7:18] Sona: Yeah, absolutely. It was actually, the results were interesting, but not overly surprising, right. And when Avalara did this survey, we were basically trying to gauge the impacts of Wayfair. And on attitudes and behaviors related to selling and what organizations were doing. And we surveyed, really the three market segments, you know, the ESP, the SMB, and the Enterprise. And across these market segments, we had about 750 respondents and the timeline of this was anywhere from December 2019 to April 2020 and the findings were interesting, Ellie, I'll throw some of the facts out there, what we learned is that the smaller market segment, the ESP, they were the most unaware but the greatest impact, which really doesn't surprise us, right? Thus, these market segments can go over the threshold. They don't know what the thresholds are, even if they do they don't know how to track and monitor it. They don't have as much automation. So that was kind of interesting. What we also learned was approximately 50% were aware of Wayfair-related laws, but many retailers were still unaware of the rulings and the impacts on them. So there's still a lot of companies there that we need to educate and get them on board, get them compliant. And finally, the other thing I want to say is that almost 60% said they understood, only 45% said that they were registered to collect. So in a nutshell, if you summarize our findings, it's very obvious that there's still a good percentage of retailers out there that are not compliant because they don't know or they don't have the automation in place. So I still think as software companies and consultants, we still think we still have a lot of work, despite the fact that two plus years into this.
[9:36] Mike: Yeah, I think that we are seeing the same type of thing out there. Sona, but one thing that surprises me is that we still have people, you know, that tell us well, we're waiting for Congress to step in and save everyone or we're waiting for another case at the Supreme Court. Well, while they're waiting for these things, the exposure, their liability is just growing on a daily basis. And, you know, we're waiting for Congress. I tell everybody, you know, we're probably not going to see the benefit of that, you know, for some things, Congress's always been, do nothing like we go back to 1959. And Public Law 86-272. That was the last time Congress weighed in or the only time Congress weighed in on a nexus case. It was an income tax nexus case. But they said that nexus was so confusing, that you know, they had to form committees, do studies in order to come out with a permanent solution. So this was a temporary solution. That was 61 years ago, we still have this temporary solution. You know, so maybe our great-grandchildren may benefit from something that Congress does, but I don't think that waiting for fixes from Congress is going to happen anytime soon. And likewise, you know The Supreme Court may or may not hear another case.
[11:03] Sona: So, yeah, I agree with you look at how long it's kind of taken for us to get here. Right. And while they're waiting, exposure is increasing, right? So it's audit risks are increasing. So, you know, it's gonna be challenging times for some of these companies.
[11:23] Mike: Absolutely.
[11:25] Ellie: Yeah. So we talked about, we kind of briefly mentioned automation in there when you were talking and the impacts that Wayfair has had, let's talk about the impact COVID is having on the need for automation. So can you tell us a little bit about that?
[11:42] Sona: Wow, covid changed everything right, personally, professionally, and you know, do any of us ever think we would be in this situation? I would have never thought I'd be homeschooling two kids, that's for sure. But it changed the whole supply chain business operations, buying habits, travel, we're all stuck here and we can't travel anymore. But at the end of the day, it forced a lot of companies to shut their doors, right? And people have to do something. So they started looking for alternatives. And they turned to eCommerce, right, which really magnified the Wayfair impact. Overnight, they were selling into regions that they didn't before. Creating more reporting responsibility, compliance with responsibility for them. And in a lot of cases, these organizations were ambitious and they went global. Right. And that just introduced another set of exposures was probably a topic for a separate discussion. So overnight, I think it magnified the Wayfair exposure and what we're seeing is that it even justifies more than the need for automation, right? They need to register in more jurisdictions they need to calculate, they need to compute the to file and all of that is now magnified. Is that consistent? What you got what you're seeing out there, Mike?
[13:22] Mike: Yeah, it really is. You know, not only people who are starting new businesses but companies that may have been, you know, purely wholesale in the past. If the brick and mortar stores aren't buying, then you know, the wholesalers have no business. So, we've seen a number of them going directly to the consumer through the internet. So all sorts of you know, we've seen a major explosion in eCommerce and it's coming from all different areas, you know, some of them you can expect and some of them I find a little bit you know, surprising yeah, but what, what types of other trends are you seeing in the marketplace right now?
[14:07] Sona: You know, it hasn't changed too much right? Automation, everyone's trying to scale. And you know with Wayfair, I think a lot of clients, we're trying to do more with less. And you do that by automating streamlining and improving your processes. So that's definitely been a trend and continues to be a bigger trend. Organizations are moving to cloud-based solutions, right? That was already the trend when you looked at it. But I think in the COVID situation, it magnified I know companies who couldn't do compliance because they weren't in their offices. So I think right now, organizations that really like the premise version are saying, Well, you know, we need to improve and be prepared for everything. So I think that what we're seeing is that the whole cloud solution is even more of a trend. Now, globalization, and, you know, that was again a trend, but I think it's accelerated. So easy to go global, right, through eCommerce. Globalization is another trend we're seeing. But an interesting another trend. I've read a lot, Mike about SALT consulting, right. I think with everything going on in the marketplace and the impacts of COVID. I think a lot of companies are looking to consultants like yourselves for a lot of advisories, whether it's exposure analysis, VDAs nexus studies, that's also you know, I think accounting firms are growing, but the SALT practices are growing more because of everything we're dealing with.
[15:58] Mike: Yes, absolutely. And that touches on one of my follow-up questions for you. You know, obviously firms like ourselves that specialize in state and local taxes, SALT. This is, you know, a lot of people need these services. But what about, you know, just, you know, CPAs and other accounting professionals? Are you seeing any trends where they're starting to talk to their clients about sales tax because of how big an impact Wayfair is, you know, traditionally or historically, a lot of these firms, you know, they didn't really concentrate too much on sales tax because a lot of them didn't have the client base to justify talking to, you know, multi-state sales tax issues? You know, a lot of their clients just had, you know, single state or regional issues, but now because of Wayfair they could have issues all over the country. So are you seeing more accountants and CPAs get involved? And if so, how can Avalara help them?
[17:09] Sona: Yeah, so I lead the accounting channel here at Avalara, Mike and I've been reading a lot about accounting trends and what accounting and talking to a lot of people, and the biggest trend I see is specialization, right? Accounting firms want to be the one-stop-shop for their clients, which means they're growing in areas they didn't before. And with all the dynamics in the marketplace, clearly SALT and automation is top on their list. So what we're seeing is, you know, clients in firms are trying to expand in areas they didn't to be that one-stop-shop for their clients. So what Avalara has been doing is launching. We're in the process of launching a product offering specifically for the accounting community. So we're going to take solutions that we use today and enable our partners, such as yourself to use it to provide your services. So we see that trend, we're in front of it. You'll be hearing a lot more about those in the future.
[18:22] Mike: That's absolutely wonderful. I think there's a big place in the market right now for these types of tools and programs. So when you do roll it out, perhaps we could have you back on and talk about some of the specifics.
[18:37] Sona: Absolutely. I'd love to come back for that.
[18:40] Mike: Okay. Well, we really appreciate you coming on today and sharing your thoughts and ideas and whatever Avalara is seeing out there so thank you.
[18:51] Sona: Thank you. Thank you for allowing me to be here.
[18:54] Ellie: Thank you so much, Sona. How can people reach out to you if they want to get in touch with you or work with you?
[19:00] Sona: We have this way to reach out to me through email. And my email address is sona.akmakjian@avalara.com and I will spell that for you, sona.akmakjian@avalara.com.
[19:18] Ellie: Thank you so much and we will link that in the notes as well. If you have questions about sales tax and our services that Sales Tax and More, you can also reach out directly to me. That's emoffat@salestaxandmore.com. You can also visit our website at www.salestaxandmore.com. I know we have a lot of services and resources on our website. So does Avalara so please check those out. And thank you so much for listening today.
[19:53] Mike: Thank you, everyone, for joining us on today's episode of the Sales Tax and More podcast and We hope to see you on the next one. Bye-bye.
[20:02] Sona: Thank you. Bye Bye.
[20:04] Outro: Thanks for listening. Be sure to click subscribe and check out all of the resources we have out on the web.