Sales taxes. Customers hate them, retailers hate them — or do they?
Maybe not anymore.
TaxJar, a San Diego-based provider of tax management software for online retailers, just picked up $600,000 in seed funding from several angel investors.
“We’re solving what is perhaps the biggest administrative and compliance burden for small businesses — the headaches of sales tax,” said Mark Faggiano, TaxJar’s chief executive and cofounder.
TaxJar’s opportunity lies in the high complexity of sales taxes that govern online sales. Here’s one complicated instance: Some states require sellers to collect taxes based on a customer’s address, forcing them to juggle tax calculations based on hundreds or thousands of jurisdictions. Whether a seller has a physical location, such as a fulfillment center, also affects their sales taxes.
Although services similar to TaxJar already exist, most of them are focused on large enterprise clients, leaving the door open for TaxJar to provide a product fit for smaller businesses. Its current customers range from small merchants selling less than $100,000 per year in one marketplace to bigger merchants selling tens of millions of dollars per year through multiple channels.
The company will use the funds for customer acquisition and to develop new features, namely a tax rate lookup service, sales tax return e-filing, and support for additional shopping carts and marketplaces.
However, TaxJar claims it has no plans to expand beyond the sales tax sector. “We see a ton of runway where we can help our merchants further simplify their sales tax challenges, like e-file, and also see ways to expand internationally,” Faggiano told VentureBeat via email.
Participants in this seed round include Facebook’s vice president of partnerships Dan Rose, H Barton Asset Management partner Harris Barton, Magento cofounder and chief operations officer Roy Rubin, as well as unnamed angel investors from eBay, Intuit, ShipWire, and other companies.