The Sales Tax “Nexus” Trap Most Brands Miss

[00:00:00] Richard Gaffin: Hey everyone, Richard here. Coming up next is a brief interview with Ryan Pinkham, who's the VP of Go to Market at our partner Tax Cloud. As I'm sure you're all aware, sales tax compliance is an insane headache for e-commerce brands, and Ryan was able to sit down with me to share his insights into how you can make this process just a little less awful.

[00:00:20] Enjoy.

[00:00:21] Richard Gaffin: All right, folks. We got a special segment with a very special guest here. It was Ryan Pinkham, who's The VP of Go-to Market at Tax Cloud, is joining us to talk a little bit about a riveting subject. In fact, we're gonna try to make a riveting here, which is sales tax. Obviously tax can feel boring, but it becomes absolutely, absolutely critical to a growing e-commerce brand.

[00:00:40] So we're gonna dive into that a little bit. But first off, Ryan what's going on, man?

[00:00:44] Not too much excited to be here. You know, sales tax, if you're here listening to an episode on sales tax, like, I, I, I promise, we'll, we'll give you some, some good insight. I know it's not the, the sexiest topic people are always trying to think about when it comes to running their business, but that's kind of the point.

[00:00:58] That's why businesses like Tax Cloud exists to help take that stuff off your plate.

[00:01:02] Ryan Pinkham: it's all right. So tell us, tell us just a, a little bit about Tax Cloud and, and kind of what, what you guys do.

[00:01:07] Richard Gaffin: Yeah. So so Tax Cloud, we're a sales tax automation platform primarily selling to growing e-commerce brands on platforms like Shopify, BigCommerce, or any other. Primary big e-commerce platform. Most of our customers are larger Shopify plus brands that have kind of outgrown some of the existing tools that, that exist out there.

[00:01:29] And need a platform to help them kind of handle all things sales, task compliance, handling their filings, their registrations, and overall just giving them peace of mind that it's one less thing they have to worry about when it comes to sales tax.

[00:01:41] Ryan Pinkham: Cool. And so speaking of that peace of mind, let's, let's dig into a little bit like why this is important. Why is sales tax something that brands need to be worried about?

[00:01:50] Richard Gaffin: Yeah. You know, I think on paper you would think that sales tax should be a pretty easy problem to solve. Like we all, as consumers go and we shop and you see a tax rate, and you, you pay that, whether you're excited to do that or not, and you just figure that that's like a pretty straightforward thing to be done.

[00:02:05] But the reality is, is that like sales tax can be really complex and, living in the us if you're selling primarily in the US you're dealing with 50 different states with different rules, regulations by state different all the way down to the jurisdiction level. Like there can be differences and so it makes it really hard to deal with.

[00:02:24] And as a business, the last thing you want is to ignore it because this is something that's gonna come due eventually. So you can see some, we've worked with a lot of businesses that maybe didn't deal with it, and then, you know, down the road you have to. Deal with an audit or those sort of headaches and things that can be really costly for your business.

[00:02:42] Or the other big part of it is just it becomes a major time drain on your business. And so you're, if you're not getting ahead of it, having a plan for it, ev eventually at some point, you know, sales tax season is a year round thing and it just builds up year after year. And so those are kind of the primary reasons businesses need to care about it.

[00:02:59] Ryan Pinkham: So the idea is like if you're not staying compliant at a certain time, was the IRS is gonna come knocking and you're gonna have a, a problem on your hand,

[00:03:07] Richard Gaffin: Yeah, I mean, even worse than that is that you could have a problem with all these different states, right? So when it comes to sales tax, it's the Department of Revenue of Massachusetts. Of New York. Of California, right? And so now you're dealing with all these different states, all these different rules, and you know, all this time in budget you spent to grow, to attract new customers, you're now spending, you know, money that you've made on.

[00:03:31] Penalties and dealing with audits and these things. So, you know, it's, it's just a, a major thing that particular business of any growth you really are gonna have to have a plan for.

[00:03:40] Ryan Pinkham: Yeah. So what does it look like? So let's say we're looking at a, a larger brand that does not have a service like Tax Cloud. What, what is, what is it exactly does that look like in terms of their attempts to deal with sales tax?

[00:03:52] Richard Gaffin: Yeah. Yeah. So there, there's kind of three primary personas that, that we, we run into. Like one, it's people who. Aren't doing anything and they know they need to do something and they don't even know where to start. Right? And so those are people generally, maybe they've handled sales tax on their own if they're, you know, just selling in like one state where they're located or just seeing growth and they kind of maybe had a handle on it.

[00:04:16] But as they start to. Hit Nexus in a state on the other side of the country, like all that, like they're having to deal with that. And so doing it manually, it just really isn't an option. Then there's a bucket of people who have actually put a solution in place but they're really unhappy with the status quo, and that's, we hear that a lot from like larger Shopify brands.

[00:04:34] 'Cause a lot of the legacy tooling that has existed there are, is now starting to like break and not really built for more modern brands. And so, you know, typically for that, they've outsourced it to a tool like ours, a, a larger legacy provider, but that provider's, you know, not offering great support when there's an issue, they're not resolving it.

[00:04:52] And so that can be a common thing where you thought you offloaded it, but actually it's taking up a ton of your time. And then the third are people who ultimately will say, I know this is a big deal. But I'm not gonna deal with it right now. And they're gonna knowingly put it off, which we certainly wouldn't recommend.

[00:05:06] But if you are like making the, what they're typically doing is putting budget aside. So at one point they're going to deal with it. Again, certainly wouldn't recommend that, but that's kind of the third bucket we sometimes see. But generally, those people aren't coming to us until they're ready to start dealing with

[00:05:19] Ryan Pinkham: Right. So overall then, like obviously the sales tax is what Ben Franklin cda, the only constants or death in taxes, right. But 2026 is coming up, so, or we're already in it, I guess here we're sitting here, it's January the seventh. And talk to me a little bit about like what 2026 is going to be or if any way it's gonna be different than from previous years.

[00:05:40] Richard Gaffin: Yeah, I mean, I would just say that like the, the landscape on the sales tax side has changed a lot, is what I would tell people. And I think if you have. You know, I'll, I'll try not to just like pitch Tax Cloud, although we'd love for you to come check us out. But like, you know, if you haven't looked, if you've kind of had one tool you've had in place, they were the same tools that were in place when sales tax, it's pri primarily like something that's only come up in the last 10 years as a major issue for e-commerce brands and you're using the same tools, like I would really recommend going out there and, and looking at other options that are out there.

[00:06:10] The other thing that a lot of brands aren't aware of is. There's been this growth of this program called the Streamlined Sales Tax, SST and it's actually a collection of 24 states where if you're working with a certified provider in those states, you don't pay for the filings. You don't pay for the orders, you don't pay for the registrations.

[00:06:27] Those are completely handled and free to you. And so if you haven't checked out the SST program, I would definitely recommend people check that out. And then, you know, if you're a large brand that's selling on Shopify, something I always tell people is if you haven't looked at Shopify Tax to handle your checkout to go and do that.

[00:06:44] Definitely like a lot of people don't think the native Shopify tools are powerful enough to handle a lot of their functionality, but we recommend using a Shopify tax at check. And then working with a third party to handle all the other sales tax needs, the filing, the registration. And that's the playbook we see from some really top brands that have come to us that are, you know, doing tens or hundreds of millions in revenue.

[00:07:06] They're using Shopify tax at checkout and they're using a, a provider like us to handle all the other compliance needs. And so I think that's the bigger story. Like sales tax will always be changing, there'll always be tax rules. But just to make sure you're kind of keeping up with using providers and solutions that are gonna.

[00:07:22] Save you money, save you time, and and have your back. I think those are the primary factors.

[00:07:26] Ryan Pinkham: Totally. And well, Ryan, you may not wanna pitch Tax Cloud. I'm happy to do so. And so check out tax cloud.com/thread, I believe is, is the link that we're using right now. Obviously this is a big, nasty, complex sort of system that we have here in terms of how tax goes and tax Cloud is, is something that can really, really help you with that.

[00:07:44] So yeah, we're gonna, we're gonna leave it at that. Ryan, any final thoughts you wanna leave the folks with?

[00:07:49] Richard Gaffin: No just, just to say like you know, is, this is the start of a new year is a great time to, you know, deal with a lot of these like nitty gritty issues you probably didn't have time to deal with during the holidays. Hopefully you just had a great Q4 coming into a new year. You probably hit Nexus in a bunch of states, which means like you have enough orders where now you have tax obligations and it's just a great time to check in, do a review, whether you like, switch the tools you're using or not.

[00:08:14] Spend some time, go and do that at the start of the year. Definitely would recommend it. And yeah, it's great to join. I really appreciate the opportunity.

[00:08:21] Ryan Pinkham: All right, Ryan Pinkham from Tax Cloud. Thanks for joining us. Tax cloud.com/thread. Check it out. Alright, take care.

[00:08:27] Richard Gaffin: Thanks.