Predictable Revenue. Predictable Risk? Sales Tax & Recurring Revenue
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Transcript of Predictable Revenue. Predictable Risk? Sales Tax & Recurring Revenue
Predictable Revenue. Predictable Risk?Sales Tax and Recurring Revenue Models
Slide 2 − Zuora Confidential, not for distribution beyond intended recipient 2
Use promo code Revenue50 and receive 50% off
Clete WertsPartner Sales Manager
Julia ZhangProduct Manager
Speakers
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Slide 4 − Zuora Confidential, not for distribution beyond intended recipient
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ZuoraA Brief Introduction
Challenges of Sales Tax in Subscription EconomyAvalara Solution
Zuora Tax SolutionAvalara Integration
Agenda
Six+ Years of Incredible Growth
Zuora foundedSeries A; First
product launchedSeries B, Zuora featured in WSJ
Series C; Zuora announces 1B in
contracted revenue
Series D, Trademarks Subscription
Economy; EMEA expansion
Zuora wins AlwaysOn Company of the Year Award; expands to Asia
The Leader in Commerce, Billing and Finance Solutions for the Subscription Economy
$20Bn contracted invoice volume;
Series E funding; 50th product release
2013201220112010200920082007
Offices: Silicon Valley, London, Sydney, Beijing, Chicago, Atlanta
500+ Customers
300+Employees
95%Customer Sat
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Our customers span 500+ Subscription Economy businesses from multiple industries
High Tech SaaS Cloud Infrastructure
TelecomDevices
Media
Education Healthcare
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Slide 7 − Zuora Confidential, not for distribution beyond intended recipient
Zuora has been building this system for 6 years
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Slide 8 − Zuora Confidential, not for distribution beyond intended recipient
• Billing & Rating
• Invoice Delivery
• Taxation
• Payment Automation
• 14+ Gateways/Processors
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Slide 9 − Zuora Confidential, not for distribution beyond intended recipient
Zuora Tax Engine
Input• Customer Tax Exemption Status• Customer Sold-To Address• Product Tax Code• Charge Amount
Output• Tax rates and tax amount for
each line item/ jurisdiction
Zuora Tax Engine
Our customers upload and maintain tax tables for each product/service type.
Slide 10 − Zuora Confidential, not for distribution beyond intended recipient
Tax becomes complicated as your business grows
• Keep up with complicated Tax Rules
• Maintain Tax rates that change frequently
• Remittance the correct tax payment to multiple jurisdictions using proper forms and procedures
Slide 11 − Zuora Confidential, not for distribution beyond intended recipient
Solution: Embedded Avalara Integration
What makes Avalara unique?
• Chosen by thousands of businesses to file and remit sales tax on their behalf
• Processes billions of transactions annually• Recommended by software application
resellers, CPAs, and business consultants• SSAE16 Certified and a SST service provider
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A handful of Avalara customers
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Constantly ChangingRates, Rules, & Boundaries
Accurate from Quote-to-Cash
Nexus(Physical Presence)
Product Taxability
Sales Tax Challenges for Recurring Revenue Models
Sourcing Rules
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• What’s taxable, and what’s not? And where?
• Physical vs. digital goods?• Calculating and
filing/remittance• Exempt purchases• Web-based services can
change the nexus dynamic
Sales Tax: Different for subscription models?
Understanding Nexus Knowing where you are required to collect
“Nexus” describes the connection between a state and a business that permits a taxing authority to require a seller to register, collect and remit sales and use taxes
Nexus allows a state to compel an out-of-state company to register and collect sales or use tax
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States finding more sales tax revenue by broadening definitions of nexus
Remote sellers can no longer assume that Quill v. North Dakota means they don’t have to collect sales tax
Nexus in a digital world Where is the item sourced? What is the method of delivery?
“Amazon Laws”̶3 Cyber Monday, 2013: SCOTUS leaves NY click-through
affiliate law in place̶3 11 States have already passed Amazon Laws
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Nexus-creating activities: a growing list
Multi-state locations
Maintenance/service/repairs
Own/lease real property
Hosted Data Centers
Field sales/service staff
Charge Licenses/royalty/fees
Direct and/or online sales
Maintains inventory
Affiliates
Tradeshows
Commissions to resellers (1099s)
Investors/board members
Marketing/Web advertising
Drop shipments
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Slide 19 − Zuora Confidential, not for distribution beyond intended recipient
Single Point of Storage/Access vs. Distributed Storage
(ASP Model)
In the Cloud(No Delivery)
Off-the-Shelf Canned Software vs. Custom
Evolution of Technology Taxation
Tangible vs. Electronic Delivery
Product Taxability of Digital Goods
How is a digital good defined?
How is a digital good taxed?
When is a digital good exempt from tax?
How is taxability different if it’s a one-time
purchase vs. by subscription?
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Download Adobe Acrobat 9 Pro Extended
https://www.adobe.com/downloads/
Packaged Software
NON-
TAXABLE
TAXABLE
Digital Download
Product Taxability Confusion
CALIFORNIA
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Washington
NON-
TAXABLE
TAXABLE
Georgia
Product Taxability Confusion
RINGTONES
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Product Taxability of Tangible Goods Purchased by subscription…
Is it any different than a one-time purchase?
When is it exempt from tax? – $$ threshold– Sales tax holidays– Length/type of subscription?
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NON-
TAXABLE
<6 months, sent second class mail
TAXABLE
>=6 months, sentsecond class mail
Product Taxability Confusion
TEXAS
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Understanding product & service taxability exceptions
Rules and rates vary between states
The following industries have varying taxability rules:̶3 Software / hardware ̶3 Digital goods ̶3 Services̶3 Medical device / equipment ̶3 Food / beverage ̶3 Clothing / apparel̶3 Dietary supplements ̶3 And many other industries / products
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Constantly Changing Sales Tax Compliance
11,000+ taxing jurisdictions
Thousands of changes to tax laws, including:̶3 Jurisdictional rate changes̶3 Tax holidays̶3 Jurisdictions that levy new taxes or eliminate taxes̶3 Jurisdictions that expand geographic boundaries
Accuracy is everything!̶3 For customers, auditors, your business
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ZIP Codes: wrong tool for the job
Taxing jurisdictions don’t always follow ZIP Codes!
Individual counties and municipalities levy sales taxes in addition to state rates
Tax rates can vary significantly within a ZIP code
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Slide 28 − Zuora Confidential, not for distribution beyond intended recipientSlide 28 − Zuora Confidential, not for distribution beyond intended recipient
7450 Leyden StreetTotal Sales Tax:
0.0925
COLORADO: 0.0290 ADAMS: 0.0075
COMMERCE CITY: 0.0450 SCIENTIFIC & CULTURAL:
0.0010 DENVER AREA TR: 0.0100
7495 Locust StreetTotal Sales Tax:
0.0475
COLORADO: 0.0290 ADAMS: 0.0075
SCIENTIFIC & CULTURAL: 0.0010
DENVER AREA TR: 0.0100
The state of our States
States are still recovering from the Recession In 2013, 31 states projected budget deficits totaling $55 billion NRF estimates $24 billion in sales taxes goes uncollected on
the Internet
Therefore As tax-collecting agents of the State(s), they are looking to your
business to find more money This increased focus creates compliance risk for you
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States finding more sales tax revenueby hiring auditors
California announces hiring 100 auditors over the next three years
Idaho hires 48 auditors that stay on as full time staff
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End-to-End compliance for Zuora
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Zuora & Avalara Partnership
Pre-Built Connector by Zuora
‒ No development work required
One Sales Tax Engine̶3 Constantly updates sales tax rate̶3 Product Taxability support̶3 Up-to-date reporting̶3 Automated Filing
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Embedded Avalara Integration
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Billing engine supports multiple tax engines
Get Subscriptions Reads Usage Data
Processes Charges
Processes Taxes
Generates Invoices
Billing Engine
Zuora Tax Engine
AvalaraTax Engine
Each Rate Plan Charge can use a different Tax Engine
Slide 35 − Zuora Confidential, not for distribution beyond intended recipient
Setup 1: Create company and nexus in Avalara
Slide 36 − Zuora Confidential, not for distribution beyond intended recipient
Setup 2: Set up Avalara tax engine in Zuora
Slide 37 − Zuora Confidential, not for distribution beyond intended recipient
Setup 3: Create your tax codes
Slide 38 − Zuora Confidential, not for distribution beyond intended recipient
Setup 4: Assign a tax code to rate plan charge
Slide 39 − Zuora Confidential, not for distribution beyond intended recipient
Calculate tax on invoices – via Bill Run or API
Slide 40 − Zuora Confidential, not for distribution beyond intended recipient
Display tax on quotes
Slide 41 − Zuora Confidential, not for distribution beyond intended recipient
Display and collect the tax for online orders
{"previewAccountInfo": "currency": "USD", "billCycleDay": 1, "billToContact": { "city": "Foster City", "country": "United States", "county": "San Mateo", "zipCode": "94044", "state": "CA", "taxRegion": "CA" }},"invoiceTargetDate": "2014-05-01", "contractEffectiveDate": "2014-05-01", "subscribeToRatePlans": [ { "productRatePlanId": "2c92c8f......" }
Subscribe () RequestSubscribe () Response…..{ "success": true, "contractedMrr": 100, "totalContractedValue": 1200, "amount": 91.23, "amountWithoutTax": 79.99, "taxAmount": 11.24, "invoiceTargetDate": "2014-05-01", ….. }
Slide 42 − Zuora Confidential, not for distribution beyond intended recipient
Collect the right tax when order is submitted
Slide 43 − Zuora Confidential, not for distribution beyond intended recipient
Tax Docs created in Avalara ready for remittance
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Delivered in May Release
If you’re interested, please contact Zuora Support
Questions?
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Slide 46 − Zuora Confidential, not for distribution beyond intended recipient 46
Use promo code Revenue50 and receive 50% off
Thank You
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