Avalara Chief Financial Officer Bill Ingram to Join Board of Directors and Ross Tennenbaum to Become Chief Financial Officer on March 31, 2020

SEATTLE, WA — December 4, 2019 Avalara, Inc. (NYSE: AVLR), a leading provider of cloud-based tax compliance automation for businesses of all sizes, today announced that its chief financial officer (CFO), Bill Ingram, will retire March 31, 2020, and he will join the Board of Directors. Ingram will be succeeded as CFO by Ross Tennenbaum, Avalara’s executive vice president of strategic initiatives.

Ingram joined Avalara in December 2015 as chief financial officer, and built a finance team ready to manage a public company and lead the team through Avalara’s IPO. “I’m proud of our world-class team and strong financial operations, which enabled us to complete a successful IPO and follow-on offering,” Ingram said. “Avalara continues to deliver strong revenue and core customer growth, and the company is well positioned for the future.”

In his current role as executive vice president of strategic initiatives, Tennenbaum leads several business units grown from Avalara’s investments and acquisitions, representing many of the company’s primary growth initiatives. Tennenbaum’s experience was built over a 10-year investment banking career at Goldman Sachs and Credit Suisse, including working with Avalara for more than five years and leading its IPO in 2018. “Having been a part of the Avalara story both from the outside and on the inside, I understand what a great company Avalara is and what a strong team Bill has built,” said Tennenbaum. “I’m excited to have the opportunity to lead Avalara’s financial operations as we continue to support the company’s growth.”

“Bill has been an invaluable contributor to Avalara’s success during his four years with us,” said Scott McFarlane, Avalara’s chief executive officer. “We are fortunate to have benefited from Bill’s expertise and leadership, and we look forward to Bill’s continued support when he joins our Board. At the same time, we’re thrilled to have Ross already in place to lead our finance team and we expect a seamless transition between he and Bill. As demonstrated by this intended CFO transition, the Board and I are focused on building the next generation of leaders, which is critical in our pursuit of Avalara’s vision to be the leading global cloud compliance platform.”

Taxing Santa Claus – Wacky Tax Wednesday

Everyone knows Santa lives in the North Pole. Not everyone knows he pays sales tax on most items when he shops in town, or that he can avoid sales tax by staying home and shopping online. Word is he’s a bit of a recluse, so I have him for an Amazon Prime member.

But Santa’s tax-free days may be numbered. The City of North Pole, Alaska, is looking to tax online sales.

Currently, only businesses with a physical presence in North Pole are required to collect and remit tax — mail order and internet sales are exempt.

That could soon change.

States won the right to tax remote sales on June 21, 2018, when the Supreme Court of the United States ruled in favor of the state in South Dakota v. Wayfair, Inc. The Wayfair decision overruled the physical presence rule; while having a physical presence in a state still establishes a sales tax collection obligation, physical presence is no longer requisite.

In the year and a half since the decision, 43 of the 45 states with a general sales tax (plus Washington, D.C.) have adopted economic nexus: They now require sellers with no physical presence but a certain amount of sales and/or transactions in the state to register with the tax department and collect and remit sales tax.

The Alaska Municipal League (AML) is looking to do something similar at the local level. To that end, it’s created the Alaska Intergovernmental Remote Seller Sales Tax Agreement, which will “implement single-level, statewide administration of remote sales tax collection and remittance.” It will be overseen by the newly formed Alaska Remote Seller Sales Tax Commission.

To date, 15 cities and boroughs have signed the agreement. North Pole hasn’t, but North Pole Mayor Mike Welch did attend an AML workshop on remote sales tax in June. And during the December 2, 2019, North Pole City Council meeting, Welch said “an online sales tax is something we have to do.”

Still, he thinks North Pole won’t be taxing remote sales any time soon, likely not until late 2021. For now, most online sales remain tax free for residents of North Pole, Alaska, including Santa Claus. And I’m talking about the real Santa Claus — member of the North Pole City Council — as well as the mythical Saint Nick.

Other cities and boroughs in Alaska could require certain out-of-state sellers to collect and remit sales tax much sooner, as early as February or March 2020. Learn more about the local jurisdictions preparing to tax remote sales.

Trump Administration Proposes Retaliatory Tariffs against France’s Digital Services Tax

This past summer France approved a digital services tax (DST) which taxes the revenues of certain digital companies at a 3 percent rate. Because the tax was expected to mainly impact U.S. companies, the U.S. Trade Representative (USTR) opened a Section 301 investigation into whether the tax was discriminatory against the U.S. The investigation report was released yesterday along with a notice regarding proposed retaliatory tariffs.

The investigation report closely analyzes the policy and finds it is particularly discriminatory against U.S. companies and that the rationales rely on “incorrect or unproven” assumptions related to value creation by users of free digital services and the under-taxation of digital companies. The report references the work of the OECD by pointing out that the proliferation of digital technology makes it impossible to treat the digital economy as a separate entity.

The report has five specific conclusions that are the basis for the proposed retaliatory tariffs:

  1. The French DST is intended to, and by its structure and operation does, discriminate against U.S. digital companies, including by the selection of services covered and the revenue thresholds.
  2. The French DST’s retroactive application is unusual and inconsistent with prevailing tax principles and renders the tax particularly burdensome for covered U.S. companies.
  3. The French DST’s application to revenue rather than income contravenes prevailing tax principles and is particularly burdensome for covered U.S. companies.
  4. The French DST’s application to revenues unconnected to a physical presence in France contravenes prevailing international tax principles and is particularly burdensome for covered U.S. companies.
  5. The French DST’s application to a small group of digital companies contravenes international tax principles counseling against targeting the digital economy for special, unfavorable tax treatment.

Ambassador Robert Lighthizer, the USTR, says that the proposed retaliatory tariffs would cover approximately $2.4 billion in trade value. The targeted items include various types of cheeses, make-up products, handbags, and porcelain. Sparkling wine is another on the list. The notice states that tariff rates of up to 100 percent could be used.

The USTR is clearly aware of other DSTs that are in the process of being adopted or implemented. Ambassador Lighthizer specifically identified policies in Austria, Italy, and Turkey as potential candidates for future Section 301 investigations.

The proposed tariffs show that the U.S. is significantly concerned about the discriminatory and extraterritorial aspects of DSTs. It also shows that the U.S. is concerned about how unilateral actions like this will impact the multilateral tax negotiations that are ongoing at the OECD. In that vein, the report is skeptical of promises from the French government that the DST will be repealed once the OECD reaches an agreement by noting that a sunset or termination clause was not included in the final DST legislation.

The U.S. recognizes that a proliferation of unilateral measures like DSTs would increase barriers to trade. However, tariffs also create serious negative economic consequences, and the U.S. should focus on resolving its dispute with France in the context of the OECD. While the opportunity remains, policymakers should work towards a solution that does not result in harmful double taxation. Without such a solution, the chaotic nature of unilateral tax policy will continue to create uncertainty and harm prospects for growth.

It’s time to renew your Arizona TPT license

All businesses that have an Arizona Transaction Privilege Tax* (TPT) license must renew it by the end of the year because TPT licenses are valid for one calendar year only. Failure to renew the license by January 1, 2020, will lead to penalties, late fees, or both.

The renewal requirement even applies to licenses that were renewed or obtained sometime after January 1, 2019, as all TPT licenses set to expire on December 31.

It’s best for businesses to renew their TPT license online through AZTaxes.gov, and online license renewal is required for businesses with more than one location. Paper renewals are still available for companies with only one location in Arizona, though the Arizona Department of Revenue “strongly encourages taxpayers to enroll, file, and pay online.”

There’s no fee to renew a license at the state level, although first-time TPT licenses cost $12 plus applicable city fees. Local jurisdictions cannot charge more than $50 for a license.

In addition to in-state companies, businesses with no physical presence in Arizona may also need to obtain or renew an Arizona TPT license by January 1, 2020.

Arizona has enforced economic nexus since October 1, 2019: Remote retailers that have a certain volume in sales in Arizona are required to register with the Arizona Department of Revenue and obtain a TPT license.

To ease remote sellers into collection, Arizona’s economic nexus threshold is being reduced over a three-year period. Remote sellers must obtain a TPT license if the following thresholds were met in the previous or current calendar year:

  • $200,000 (2019)
  • $150,000 (2020)
  • $100,000 (2021 and beyond)

Having multiple thresholds could be confusing. It works as follows:

  • A remote seller must register in 2019 if it has more than $200,000 in direct Arizona sales during 2018 or 2019.
  • A remote seller must register in 2020 if it has more than $150,000 in direct Arizona sales during 2019 or 2020.
  • A remote seller must register in 2021 if it has more than $100,000 in direct Arizona sales during 2020 or 2021. The same is true in subsequent years.

Thus, a remote retailer with $175,000 in gross sales in Arizona wouldn’t have to register in 2019 but would have to register and comply with TPT requirements starting January 1, 2020. Additional details are available from the Arizona Department of Revenue.

Remote marketplace facilitators don’t get the same decreasing threshold. As of October 1, 2019, marketplace facilitators with at least $100,000 in direct or third-party sales in Arizona in the current or previous calendar year are required to collect and remit TPT on behalf of their third-party sellers.

The marketplace facilitator registration requirement can impact the registration requirements of remote marketplace sellers. Those that sell only through a registered marketplace that collects and remits TPT on their behalf are not required to register with the Arizona Department of Revenue. Sellers must register only if their direct sales into Arizona exceed the economic nexus threshold.

For additional details about Arizona’s requirements for remote sellers and marketplaces, check out Avalara’s state-by-state guide to economic nexus laws, state-by-state guide to marketplace facilitator laws, and state-by-state registration requirements for marketplace sellers.

To learn about registration requirements in other states, read Sales tax permits, a state-by-state guide.

*Arizona Transaction Privilege Tax functions much like a sales tax but is actually a tax on vendors for the privilege of doing business in the state.