>> Hey welcome back everybody. Jeff Frick here with The Cube. We're in downtown San Francisco, at Zuora Subscribe 2017, about fifteen-hundred people according to David Gee, talking about the subscription economy. And a big part of that when you collect money, you got to collect the taxes. And we're excited to have Simon Geach with us. He's a VP of Sales Billing in Commerce Platforms from Avalara. Did I repeat that right? How do you pronounce it? >> Geach. >> Geach. No, Avalara. Did I get that? >> Avalara. >> Avalara. Alright, so welcome. (laughs) >> Thank you. >> Collecting taxes: everybody's got to do it, everybody's got to pay 'em. >> Not fun though. >> It's not fun, and not simple, right? And usually with sales tax especially, you got the state, you got the county, you got special assessments, you got this, you got that. So that's what you guys do. >> That's right. So, if you think about the subscription economy, one of the most important things in that is making sure that what's on the invoice is accurate for the customer, because of course, the subscription economy is built around that engagement through an invoice, and that can be the important document that a customer gets, as you're building that long-term relationship. So, ensuring what's on that document is accurate, including the taxes, is really important. And for some companies it can be actually fairly simple. But for a lot of companies, particularly as they're growing and expanding their business requirements, it becomes ever more complex, and the costs of dealing with it manually can really sneak up on you and start to increase, and before you know it you're investing a lot of time and resource in trying to manage it, with really no guarantee of accuracy, and then of course, there's the longer term risk that comes if you get something wrong, you miss a rate, there's a change in product taxability that you don't capture, you can get hit and penalized really heavily in an audit. >> Right, and then in the subscription economy there's a lot more transactions, right? So the opportunity to mess it up goes up dramatically. >> Exactly. Tax legislation changes really frequently. So if you're billing customers on an ongoing, constant basis, the need to be up to date with the latest changes is really important, because if you're not, and you miss it, it can cost you a lot of money. >> So where's the "they're" there? So if I, buying something on a subscription, which tax do I pay? Do I pay where my residence is? Do I pay where my phone happened to be when I said "go". Do I pay where my phone happened to be when the end of the month hit? I mean, what are some of the jurisdictional rules? >> Right, so if you think about, Colorado's a really good example of this. Think about Colorado's estate, it not only has state-level assessments, it has then county and city level assessments as well. So it very much depends on where you live. We could be neighbors, and you could pay 4 percent less tax than me, literally being next door to each other. Because tax jurisdictions don't correlate with zip codes at all, and people make the assumption that they do. So it's very easy for that tax rate to change, even across the street. So then you have to factor in origin rules, and destination rules. So some states have origin rules, and some states have destination rules, and some states, like California, have a combination of both. So you really have to have a way of capturing all of that and managing all of that, and as I said, as it gets bigger, and revenue for states is more of an issue, because they're looking to generate more and more revenue to deal with budget deficits, sales tax is a really easy way for them to do that, so the states are paying more and more attention to how accurate you are in doing that. >> And you got to have it right at the invoice, you can't go back and fix it after the fact, right? >> Well, you could, but then >> It's coming out of your, it's coming out of your pocket. >> Right, and if you get it wrong and you get assessed for the difference, it's coming out of your pocket potentially, or you're overcharging the customer, which the state doesn't care about, they just want what you've charged the customer. So being accurate with it not only optimizes the efficiency within your business, it also means your resources can actually be used for other activities, because sales tax compliance is just a cost of doing business. It's not going to help your business grow, it's not going to make your business more profitable. >> So, so, what's the smallest granularity that you look at then, when you're trying to figure out which of the many rules impacts the decision that I'm making? Is it zip code? You're saying it's even smaller than zip code? >> Yes, so we actually determine the tax rate, using a latitude and longitude coordinate, overlaid by a tax jurisdictional boundary of the US. And that's proprietary technology that we maintain. Then we overlay that with product taxability content. So, for example, in Kansas if you buy a Kit-kat, or you buy a Snickers, the Kit-Kat has a lower, or zero tax rate, because it has flour in it, the Snickers doesn't. So (laughs) if I'm in New York, and I sell-- >> More benefits to gluten-free, less tax! >> If I sell you a bagel in New York, and I don't cut it, it's tax free. If I slice it, it's taxable, because I rendered you a service. >> 'Cause one's a grocery item, and now it's like a restaurant item. >> So, the different tax rates apply just based on what you do with the product. >> And how do you capture that in your rules? >> So we have a content team of over 100 people who are managing state compliance legislation, and are working to ensure that our tax engine is always up to date, and we actually guarantee the accuracy of our calculations. >> Is it easier just to put a 20 percent flat rate and then you figure it out on the back end? (laughter) I mean, it's got to be amazingly complex, so you got people by jurisdiction, you've got it by state, you've got it by content type. >> You've got also special taxing jurisdictions, so if they build a new stadium, or a new transit system, the tax may apply for a period, and then go away again, so really having someone who universally can supply you with an engine that's going to take care of all that and update all of that, it not only helps your profitability, it also helps your customer experience, because you don't have customers ringing you, going: "Why have you charged me this?" >> Right, right. >> We automate everything about the returns and remittance process, and the exemption process on the back end as well, so it isn't just the way that we calculate, it's a full end-to-end process of remitting and filing those taxes, responding to tax notices, and then managing exemptions. So universally we can help people outsource this burden. >> So you guys do that for transactions regardless of whether it's subscription or not subscription, correct? >> Right, correct. >> So from your point of view, what's different now with the growth of the subscription economy? How does that impact your business, or does it, or does it just make more transactions, more complexity? >> Well, I think to your point earlier, about the fact that because rules change, and they're not uniform necessarily in the way they change, sure, if a state decides to change a rule, they'll publish a date when they're going to change the rule by, they're not always uniform. There's not always just one time a year when those rules change. And of course if you're a national company or a growing company, trying to stay abreast of that across the 45 states that charge sales tax can be really challenging and time-consuming and costly, long term or short term. So what we're doing, whether it's a subscription customer or not, is making that really easy for them to scale. So you think about a subscription customer, they want a scale, they want to a scale fast, the last thing they want to have to do is worry about how are they going to implement their tax policy. We take that away, so they can concentrate on growing their subscription base. >> Simon, I think you got great job security. (laughter) >> Death and taxes, right? >> Alright, well thanks for taking a few minutes out of your busy day, appreciate it. >> Thank you. >> Alright, he's Simon, I'm Jeff. You're watching The Cube, from Zuora Subscribe. Thanks for watching.