By Rachel Pritchett
rpritchett@kitsapsun.com
BAINBRIDGE ISLAND
Nothing’s certain except death and taxes, Ben Franklin said.
Perhaps that is one reason Avalara, the Web-based business tax management company, is defying the recession.
Here’s proof:
n Customer commitments rose 100 percent last year.
n Its number of employees rose from 60 in 2007 to 150 now. That places Avalara among Kitsap’s 40 biggest employers. It plans to hire more in 2009.
n In the past two years, Alavara has acquired two tax software firms; opened two offices in California and Virginia; and made a major debut on the global stage by opening an India office.
“The bottom line is we know that this industry is going to explode because of the complexities and the pressure on businesses,” said Bryan Wiggins, marketing vice president.
Avalara uses software systems to help companies compute and pay sales taxes.
Its typical client might be a retailer that sells products in a number of states. Most are small to mid-sized, but some are very big, like Bharti, a telecom company in India, and the Borders online book business.
Retail companies like Borders have to pay taxes in the many tax jurisdictions they do business. Since there are about 12,500 different taxing districts just in the United States, to calculate what is owed and then pay it can be a monumental task.
Companies like Avalara offer to do the calculations, pay the various taxes and charge the companies a fee of up to $6,000 a year for the service.
Sometimes, Avalara does its tax calculating when an online customer is shopping. Say a customer is shopping for books at Borders.com, and a prompt asks for a mailing address. Alavara’s software tests the address to see if its correct. If it is, the tax is calculated and shows up at the end of the order.
When asked why Avalara is growing, Wiggins gave several reasons, among them his company’s belief of an enormous potential in companies outsourcing their tax work.
“We feel we’re really only beginning to scrape the surface of this,” he said.
Companies that sell on the Internet will increasingly be required to collect sales tax, he said. Now, some do and some don’t.
“Actually, e-commerce is a major growth area for us,” he said.
Wiggins also attributed Avalara’s growth to changes in states’ sales-tax laws. Bewildered business people in Washington state needed lots of help earlier this year when this state switched from an origin-based sales-tax system to a destination-based system. While companies used to have to deal only one sales-tax rate, they can have hundreds now.
“We definitely had some growth from the state of Washington this year because of the new complexities they were up against,” he said.
He also said that since most states are facing big budget deficits, they’ll likely become more aggressive in requiring companies to collect sales tax.
As for so many more employees, Wiggins said that the more sales people the company hires, the more its services get sold.
The company’s growth was helped along be two acquisitions. Last year, it acquired TrustFile, a similar company active in the East. In 2008, it acquired Illinois-based Independent Systems and Programming Inc., maker of tax-rate tables.
Avalara is looking offshore for future growth. It began in 2007 in India, were it opened a development office with a staff of 35.
“Global tax calculation is were our next growth will come from,” Wiggins said.
Alavara was started in 2004 by Scott McFarlane, Rory Rawlings and Jared Vogt. McFarlane serves as president of the privately held company.
Avalara at a Glance
What: A Web-based automated business tax management company
Headquarters: Bainbridge Island
Years in Business: Four
Founders: Scott McFarlane, Rory Rawlings and Jared Vogt, all Bainbridge residents
Employees: 150, half on Bainbridge
Offices: Bainbridge Island, Wash.; Irvine, Calif.; Falls Church, Va.; Batavia, Ill.; and Pune, India
Competitors: Sabrix, Speedtax
Number of clients: Core of 1,100; total of 8,000
