​The Changing Tax Landscape Kim Wong Strategic Alliances Manager

The Changing Tax Landscape Kim Wong Strategic Alliances Manager

Agenda Avalara for QAD Supreme Court Case: South Dakota vs Wayfair Tax Complexity Avalara Compliance Suite Customer Success Story – SI-Bone Q&A 2

Your Avalara Partner Team Andrew Kim Director, Strategic Alliances Kim Wong Strategic Alliances Manager Chris Rossini Director, Sales Jerry Koning Partner Sales Manager – QAD/SIG Avalara. Confidential and proprietary. 3

Avalara Founded in 2004 Over 20,000 active customers More than 600 pre-built integrations 6.7 billion transactions processed in 2017 Over 18 million exemption certificates managed 28.9 billion in taxes prepared for remittance in 2017 CONFIDENTIAL & PROPRIETARY 4 4

Avalara & QAD Partnership A strategic QAD solution partner since 2012 QAD alliance/channel partners may also be Avalara partners (SIG, Logan Consulting, ProStar, etc.) QAD / Avalara Partnership Complementary Solution Partner QAD Cloud and/or On Premise Licensed by Avalara QAD built and owns the connector Avalara. Confidential and proprietary. 5

Avalara for QAD Solution Overview Solution: Avalara AvaTax Integrated with QAD Global Tax Management (GTM) Provides sales tax automation, exemption certificate management, and filing & returns. Available for*: QAD SE 2008 and above (must have Progress 10.2B and above) QAD EE 2013.1 and above QAD 2016 EE embedded in QAD software *QAD Connector is currently for U.S. and Canada only Avalara. Confidential and proprietary. 6

QAD / Avalara Integration How it works AvaTax works in conjunction with QAD Global Tax Management (GTM) No longer manually update and pull down tax tables Enhances tax functionality, improved tax reporting accuracy – calculates taxes within the QAD ERP solution Calculate sales taxes on sales quotes, sales orders, invoices, and purchase orders AvaTax supports all QAD document types currently supported by GTM 7

South Dakota vs Wayfair Ruling issued by the Supreme Court on June 21, 2018 Multiple states now following suit 8

What was South Dakota vs. Wayfair, Inc. about? Overturned Quill Corp v. North Dakota (1992) physical presence nexus rule for determining when a state can make remote sellers collect sales tax. The Supreme Court ruled in favor of South Dakota on June 21, 2018. South Dakota is granted authority to impose sales tax obligations on out-ofstate transactions. Avalara. Confidential and proprietary. 9

South Dakota vs. Wayfair, Inc. ruling details Affected: Remote sellers not currently registered with the state who meet threshold requirements Annual sales in excess of 100,000 or 200 transactions into South Dakota The ruling adds economic nexus to the existing list of nexus-creating activities. Most impactful is that the “physical presence” rule has been overturned. Check out Avalara.com Resources SD vs Wayfair website Avalara. Confidential and proprietary. 10

Economic nexus by state as of September 14, 2018 Avalara. Confidential and proprietary. 11

Avalara. Confidential and proprietary. 12

Is your company staying compliant? Audits look at more than correct tax calculations Tax calculations Nexus 1 6 Product taxability 2 Jurisdiction assignment 5 State and local tax prep and filing 3 4 Avalara. Confidential and proprietary. Audit readiness Exemption certificates 13

States rely on sales tax revenue Total state government tax collections Selective sales taxes 16.6% General sales and gross receipts taxes 30.5% Sales and gross receipts taxes make up 47% of total state revenue States are losing 13B from uncollected tax on ecommerce sales* Source: US Census Bureau: Finance – Survey of State Government Tax Collections at 2016 State Government Tax Tables * Government Accountability Office report, November 2017 – SALES TAXES: States Could Gain Revenue from Expanded Authority, but Businesses Are Likely to Experience Compliance Costs Avalara. Confidential and proprietary. 14

The nexus challenge Own / lease real property Field sales / service staff Inventory location Multistate locations Maintenance / service / repairs Direct / online sales Licenses / royalties / fees Trade shows Manufacturer’s reps Marketing / web advertising Investors / board meetings Hosted data centers Affiliates Economic nexus Avalara. Confidential and proprietary. 15

The product taxability challenge Tree trimming in California Snow removal in Midwest Taxable With lights Taxable Ohio Product definitions vary by jurisdiction Takeout in Colorado Bagels in New York Taxable Straws, cup lids Taxable Sliced Complex product-based tax exemptions and special rates Taxability may vary based on how the product is used Avalara. Confidential and proprietary. Exempt Labor only Exempt Cups Donuts in Texas Taxable 5 Exempt 6 Exempt Illinois Exempt Whole Candy bars in Indiana Taxable Snickers Exempt KitKat, Twix 16

The jurisdiction assignment challenge 12,000 U.S. jurisdictions Avalara. Confidential and proprietary. 17

The jurisdiction assignment challenge 12,000 U.S. jurisdictions Boundaries may overlap ZIP code-based jurisdiction assignment is inaccurate 80111 taxes 2.9% .25% Colorado Arapahoe State 7.85% County Avalara. Confidential and proprietary. 1.0% Douglas County 4.35% .10% 3.5% 3.0% 2.5% 1.0% Englewood City 4.35% Greenwood Village City 6.85% Centennial City 7.72% Football Regional District Transport 7.35% District .10% Science and Cultural 5.10% District 18

“But most of my sales are exempt, so I don’t have a sales tax problem ” The time and effort to file is an on-going burden. Distributors Avalara. Confidential and proprietary. Manufacturers It’s not about collecting tax, but proving why you didn’t. 19

“Exemption certificates are the same thing as cash money; missing an exemption certificate can cost you thousands of dollars in an audit.” JAMES PALMER TAX MANAGER, NORTHERN TOOL & EQUIPMENT

The exemption certificate challenge Employees find it difficult to collect them Employees are not trained to validate them properly Certificate retrieval is time consuming and hard Some certificates expire A single missing certificate could cost much more than the taxes you failed to collect Avalara. Confidential and proprietary. 21

The state & local tax prep and filing challenge Managing the filing calendar Aggregating information across multiple billing systems Responding to state tax notices Spending too much time on prep and filing vs. higher valued projects Avalara. Confidential and proprietary. 22

The audit readiness challenge Access transaction and tax detail data when needed Provide proof of valid exemption certificates for all tax-exempt sales Comply with each jurisdiction’s records retention rules Avalara. Confidential and proprietary. 23

Why do companies outsource tax compliance? Auditor is NOT LIKELY to find mistakes 25% 75% Auditor is LIKELY to find mistakes ** Yearly employee costs of compliance* 67,000— 400,000 *Aberdeen Research, The Costs of Compliance **Wakefield Research, Sales and Use Tax Compliance, 2017 Avalara. Confidential and proprietary. 24

“Any efforts spent on sales and use tax compliance and related activities are non-revenue generating.” JENNIFER MESIANO IT DIRECTOR, WALTON SIGNAGE

Avalara addresses the challenges Avalara Sales Tax Suite Nexus 1 Audit readiness Product taxability Find jurisdictions Automate Easily Handles using Uses Add jurisdictions built-in full access prep, address, certificate rules, tax filing, data and management documents and ZIP not ongoing with remittance one codes updates click Avalara. Confidential and proprietary. 6 2 State and local tax prep and filing Jurisdiction assignment 5 3 4 Exemption certificates 26

Avalara Tax Compliance Suite End-to-end sales tax automation CertCapture AvaTax exemption management tax calculation Request Certificates Your customers Customer info Transaction info Taxes Your systems Returns managed filing Research tax rates, boundaries, and rules Research filing rules, forms Returns, remittances Government ERP, ecommerce, POS, billing Avalara. Confidential and proprietary. 27

Avalara. Confidential and proprietary. SI-Bone Case Study Special Guest Speaker Jennifer Maggio 28

SI-Bone Overview Advancing the diagnostic understanding of the sacroiliac joint and minimally invasive surgery for certain causes of SI joint disorders. HQ located in Santa Clara, CA Version: QAD 2010 SE Avalara customer since 2016 Avalara products: AvaTax, Certs, and Returns Avalara. Confidential and proprietary. 29

CUSTOMER CASE STUDY SI Bone https://si-bone.com/ Jennifer Maggio Challenge Solution Results Corporate Controller Distributed employees with Nexus implications One step monthly reconciliation process SI-Bone Company growth increased obligation Full Avatax Suite purchase to handle everything from exemption certificates to calculations to filing returns Key Influencers: Strategic Information Group (SIG) “We went with Avalara because that longitude/latitude capability is pretty slick!” 2-3 days monthly, required to file returns for more that 25 states Did not increase internal human resources or outsourced consultants with company growth One time implementation of full suite to manage end-toend compliance needs 30

Is Avalara a Good Fit for Your Company? Sell into 4 states (particularly NY, CA, TX, CO, IL, LA, AZ, TN) Have been or about to be audited e-Commerce and/or have multiple Order Entry systems One or more employees dedicated to compliance efforts Mergers & acquisitions Upgrading QAD ERP software 31

Questions? Avalara Partner Team Andrew Kim Director, Strategic Alliances Kim Wong Strategic Alliances Manager Chris Rossini Director, Sales Jerry Koning Partner Sales Manager – QAD/SIG Avalara. Confidential and proprietary. 32