Area firm at online sales-tax nexus
For many, it is a rare moment when one can see an entire witness the entirety of a career distilled to a single moment. For David Campbell that moment came last April, with the visual of Supreme Court Justice Clarence Thomas picking up a brief during oral arguments and flipping through the pages, then leaning over to confer with Justice Stephen Breyer.
It was the only brief that day that took no sides in South Dakota v. Wayfair, the landmark decision in June in which the Supreme Court determined that states could collect sales taxes for online transactions, a historic omission that had long been the prime driver of e-commerce sales, and put stores at a major disadvantage.
It was a moment for which Campbell has been preparing for a decade, with his Norwalk-based company TaxCloud among several providing back-end systems for online merchants to assess sales taxes and keep up with rate changes, whether at the state or local levels.
With Wayfair in the rearview mirror, companies are scrambling to ensure that they are ready for a renewed push by states to mandate taxes for online sales. Since 2008, a Streamlined Sales and Use Tax Agreement has offered states a standardized set of rules to do so, with TaxCloud’s home state of Connecticut among the states that have yet to sign the agreement, instead negotiating separate agreements directly with Amazon and more than 100 other companies to collect sales taxes.
It is a service TaxCloud offers states and companies on an outsourced basis, as well as Intuit and a handful of other organizations that belong to a National Association of Certified Service Providers that filed the Supreme Court brief alongside the Software & Information Industry Association.
“There was one point in the oral arguments when the attorney for Wayfair started talking about how expensive the (tax calculation) software was, and Justice Thomas reached and pulled up one of the briefs, and it was a green brief,” Campbell told Hearst Connecticut Media. “The green briefs are the ones in support of neither party, and ours was the only one.
“The ruling goes into ... all these arguments that it (was) too costly and complicated, and then it says that’s not the world we live in today,” Campbell said. “Pretty exciting — our goal now is to get all the merchants that have to comply with the law, to get their marketplaces and online platforms to finally turn us on. They’ve known about us — we’ve been talking to them for years.”
From Providence to Connecticut via Seattle
TaxCloud’s technical heritage stems to an automated database updating tool Campbell undertook in 1993 at Rhode Island School of Design in Providence as his final project supporting his studies in industrial design, when early web browsers began to catch on in the era of dial-up modems.
With his girlfriend at the time and now-wife a Stamford native, Campbell moved initially to Connecticut and he set out to create a company that would help other businesses automatically update databases over the Internet. It did not generate much interest, so they moved to Seattle where Campbell had grown up to create a database synchronization company.
Like most businesses, Campbell did not collect sales tax initially for his company’s services, but began doing so in 2008 when the state of Washington joined the Streamlined Sales and Use Tax Agreement that had been created by the National Governors Association and the National Conference of State Legislatures.
Campbell set out to find a tool that could help him remit sales taxes to the varying jurisdictions where his company was selling, analogous to websites calculating shipping charges based on destinations where merchandise was being sent. With the earliest version of the system that would become TaxCloud built in 2008, other states began to gravitate to the Streamlined Sales and Use Tax Agreement.
TaxCloud is not the only provider of sales tax collection services, with others including Intuit via its Exactor subsidiary; the Boulder, Colo.-based Taxify service of Sovos; Avalara in Seattle; and Taxometry outside Salt Lake City.
Dwindling holdouts post Wayfair
Campbell and his wife moved back to Connecticut in 2009 for family reasons, with TaxCloud establishing a small office in Norwalk where it is located on East Avenue today just off Interstate 95.
TaxCloud has close to 20 employees today and with the Wayfair decision in place is now in growth mode, with Campbell saying he is scouting office space in South Norwalk. He said he is looking for equity funding to support that growth as TaxCloud adds roughly 10 merchants on average daily to its platform.
Under Gov. Dannel P. Malloy and former state tax commissioner Kevin Sullivan, the state Department of Revenue Services has resisted joining other states in the pact, while negotiating agreements with Amazon and other individual companies to collect taxes on the sale of merchandise in Connecticut.
Connecticut is not alone among the state holdouts, with California having been the biggest outlier but in the wake of Wayfair taking steps to join others nationally.
TaxCloud has created a humorous online ad campaign depicting a girl running an online business out of her bedroom, struggling to figure out sales taxes from state to state amid general mayhem as her friends attempt to fulfill orders streaming in.
Campbell promises its as easy as flipping a switch — in Connecticut and beyond. Despite the long road to Wayfair, he says he has never seen TaxCloud’s longterm success as anything but inevitable, given the revenue states know they have been missing out on from online sales.
“States are going to be getting the money that’s been owed to them,” Campbell said. “The technology is there for them.”