Seattle-based sales tax software specialist Avalara achieved a $2bn+ market valuation when it listed on the New York Stock Exchange last Friday (15 June).
In the days that followed, the share price has surged $10 from $35 to $46, taking the company towards a capitalisation of $3bn. The healthy welcome from investors shows the esteem in which Avalara is held and the potential investors see for global growth.
Avalara develops cloud applications to calculate and file sales tax returns. The company cut its teeth in the labyrinthine US sales tax market, where it caters for thousands of different sales tax regimes at state, county and even municipal level. Based on that experience, Avalara expanded into Europe, where the unified VAT rules make life much simpler (sic) and beyond to South America and Asia.
Each year, Avalara files more than a million tax returns and boasts that it has more than 600 connectors linking its software to accounting, ERP, ecommerce and other business applications.
‘Just another way to raise finance’
Speaking from Avalara’s UK headquarters, vice president Richard Asquith told AccountingWEB that the team was pleased with how the float went. While it was an important day, the public offering was just another way of raising finance to grow the business.
“It’s part of the normal lifespan for a company like ours when we realised the size of the global opportunity,” Asquith said. “We’ve been building towards it for a number of years so we can get more resources to broaden our product range and geographical reach.
“We’ve grown fast – our team in Europe has gone from four to 104 people in four years,” he continued. “Tax authorities are becoming more demanding on customers in terms of tax reporting, so we have got to invest to keep ahead.”
The big driver behind this growth is the shift to live transaction reporting, particularly in South America, where the focus is on using technology to combat VAT fraud. Columbia and Chile have followed Brazil’s example and introduced e-invoicing, and Europe is heading down the same route.
According to Asquith, Spain tweaked its immediate information supply (SII) regime on 1 July to require VAT-registered companies to file electronic invoices within four days of supply. Other EU countries are following suit.
“We see announcements about once every two months of a new country making this a requirement,” said Asquith. “All their regimes are different and the local accounting and invoicing solutions are all variable. That does make it a challenge.”
Death of the VAT return
The long-term move to electronic invoice submission moves reporting away from end of quarter reporting that gives businesses and advisers some wiggle room to make adjustments.
“I think we’ll see the death of the tax return process within five years,” Asquith said.
“The tax authorities are inserting themselves into the heart of the transaction because that obviates the need of hundreds of VAT inspectors. With so much cross-border trade and so many variations and platforms, it’s not possible to cope with this in an ERP or accounting system. There is always a need for a tax engine to calculate cross-border tax properly and make sure the invoice submitted to tax authorities is correct. We see a lot more people buying tax engine based technology in our market.”
About John Stokdyk
AccountingWEB’s Head of Insight has been with the site since 1999 and likes to spend his time studying accountants’ technology habits. When not nerding out, you can find him exploring obscure indie music and searching for the perfect organic sourdough loaf from his base in Brighton, UK.