In this episode of the SALTovation podcast, we unpack how artificial intelligence is reshaping tax compliance and the unique challenges that come with managing tariffs in local tax systems. Our guest, Scott Peterson from Avalara, shares insights on how generational shifts in tax expertise are influencing today’s policy landscape.

We also dive into the world of digital goods and licensing, offering practical strategies for navigating the complexities of tax automation. Throughout the conversation, we highlight the vital role of human oversight, reminding us that while technology streamlines processes, informed human judgment remains essential.

Key Takeaways:

• The impact of AI on tax compliance and local tariff management
• How generational shifts in tax expertise shape evolving policy
• Navigating digital goods and licensing in a complex tax landscape
• Why human oversight remains essential in an automated industry

Chapters

00:00 - Intro

00:24 - Transforming Tax Compliance with AI

03:24 - Understanding Sales Tax Returns

13:02 - Generational Shift in Knowledge and Technology

15:08 - Understanding AI in Business Processes

22:57 - Understanding Tariffs and Sales Tax

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Welcome to SALTovation.

The SALTovation show is a podcast series featuring the leading voices in SALT where we talk about the issues and strategies to help you make sense of state.

And local tax in this episode. Welcome back to our discussion with Scott Peterson at avalara.

In our continuing conversation, we discuss how AI is transforming tax compliance, the challenges of managing tariffs, and why local tax systems often struggle with scale.

From zero dollars returns to the nuances of digital goods and licensing, this episode offers practical insights into the evolving world of tax policy and automation.

Scott, Judy and Meredith reflect on the generational shifts in tax knowledge, the growing pains of digital transformation, and the critical role of human oversight in an increasingly automated industry.

Scott, do you know the. The top three states that you remit the most sales tax returns for?

The cat.

There's a cat. Yes. And the. It's California in New York. And I don't know if Florida, Illinois or Texas is third. I don't really.

Okay.

Yeah, so. But it's California's first. Far and away.

Okay. Generally assuming. Right. Population size, but still Texas is almost as big.

I mean, I think they're pretty close.

They're getting. Yes, they're getting very close to each other. Yeah.

Yeah. But 30 million. They're 10% of America. Like, I think a lot of people don't understand.

I remember I worked at Deloitte and we split the nation by the Mississippi river. And of course, I didn't understand much about geography then.

And I'm like, I kind of screwed myself because I don't get Florida and New York, you know, and then I'm like, why should get Illinois? And I'm pretty sure the Mississippi river is on the side or the west side.

It's the western border.

The western border, that's right. So I shouldn't have got Illinois because it wasn't on the west side. I'm like, I gotta have Illinois because all I'm getting is California.

Well, I got Texas too, so. But, you know, I had other states, but they're just not as populated. So that's what I really learned about the US populations. I mean, I had people.

I was just talking to a client today, he lives in Nevada, and I'm like, there's 3 million people there. But you're in California. There's 39 million people there. It's a big state. I mean, there's a lot of customers and very aggressive tax policy.

Yes. And they're. They're affluent customers, so they, they shop a lot. I mean, they're.

Yeah, that's a valid point.

Yeah, he wouldn't want 39,000 people from North Dakota because they, no offense to our North Dakota clients.

Do you have a sense of how many. And this, this question will hopefully make sense. You know, how many zero returns you guys are filing. Do you.

I don't, I really don't know.

Well, and because I think the idea behind identifying that is right.

We have some states that are, that have removed their transaction threshold from like a remote seller perspective and just trying to eliminate the burden for kind of like $0 compliance. And if, you know, that was something that Avalara kind of had data on or was trying to support, now might be kind of the counter business model.

Right. Well, can't charge for a return that you don't have to file. But if there's, you know.

Yeah, I wish, I wish I'd have thought about that because in our normal avatars, we probably don't file inordinate number of zero returns because we, if, if you're a zero return person, they move you to annual.

Yeah.

At some point. Yeah.

So.

Right.

I wish I'd gone, I wish I'd thought. Gone out there and looked at our, our January filings because that's, that's our big month.

And it's because we file so many annual returns and many of them are.

You've got all of them. You got the monthly, the quarterly, the.

Annual, and a lot of them are zero.

The annual.

Now in our SST business, we follow a lot of zero returns because that, it's, it's free. So, you know, someone comes in, you know, they says, well, why not? Why shouldn't I sign up for all of them?

Because it's not going to cost me anything either way. Correct. And you know, they end up having zero sales in Wyoming. And so we file up.

They have the possibility to give them it. That's what you need. You need the license open.

And we have to file, we have to file monthly in ssd. So we. Okay, we we it from as a percentage of the total. We file more in the SST side of the world than we do the normal avatar side of the world.

But why are they always monthly?

They just, it's easier to banish the rule in sst. It has to be done monthly, which is okay. Honestly, that's one of the issues we have.

We have customers that come to us and, and wonder why they're having to file monthly. When they used, they were on, they were on the quarterly cycle before that.

Right, right, right. And you're like.

And nothing changed. They're they would not have gone to monthly in that state based upon the amount of sales they have. They only went to monthly because they joined sst.

Right.

Which isn't.

Which mean what in it, you know, in, in the, the big picture, the only thing that matters is that we take the money out of their account quicker, more frequently than they would have had to done it themselves when they stayed according. But it still cost them nothing.

So. Yeah.

Yeah. And I mean would you think.

Right.

Because there are some states that are just flat out. Hey, if you don't sell a tax. Well, good. We don't want to license. Like Oklahoma is one of those. Right.

Like we have a bunch of SaaS companies or service companies that you know, technically. Right. They have, they have Nexus, they have, you know, in any other state they would have a duty to file something.

But it's like, well, you, you sell a non taxable good. So we don't want a license because we don't want to process anything of that. Do you think that's kind of good bad policy? Do you?

Because you almost can't even force a license.

Yeah.

Like what are your just kind of independent thoughts when, when on that?

You know, when we started the Streamline sales tax 25 years ago.

God, that long ago? Oh, you mean. Oh, yeah. I mean not at Avalara, but you just did it.

Yeah, yeah, yeah. And one of the things that the business community wanted us state folks to, to explore was a simpler and more uniform return.

Yeah.

And so we got every state brought all the returns in and we looked at everybody's returns and then we started asking each other questions. Okay. Why do you collect that information?

Yes.

And almost always it was because it was for research purposes.

Yes.

So.

Yes.

The only reason why I hear states talk about wanting a license from someone who doesn't sell something that's taxable is so they get that return. That gives them an idea of what's going on inside their state.

Yeah.

You know, if so I, I, you know, in the 22 years I worked for South Dakota, I.

12 years working for the legislature and 10 years working for the Department of Revenue, I long ago lost count of the number of fiscal notes I had to prepare or defend.

And.

They'Re virtually impossible to get. Right. Because you don't have the data. You know, this was a long time ago.

Right.

Long time ago. There was less data in general that you could, you could go out and try to find. And the only data that any of us had was on that sales tax return.

And for the most Part that was worthless because you couldn't, you couldn't, you couldn't count on it being right.

And it didn't go anywhere close to enough granular, granularity to, to tell you, okay, yes, if you start taxing, you know, this fence post, steel fence post, you start taxing steel fence.

How do you know you're going to.

Talk X amount of money in sales tax? No idea.

Right.

Impossible. That was a, honestly a rational state. Other than the, the problem with departments of revenue is you only know what you get told.

So when you issue a license to somebody, they tell you we're in the business of doing a, B and C. And you say okay, here's, here's, here's a tax return. Here's a way to file a return, make a payment for us. And this is the tax.

You should collect an A, B and C. And three months later they do A, B, C and D. You don't know they're doing it. It never occurred to you to tell them anything about D. Right. So the only way that you can ever find out is to audit them.

The only way you can audit somebody is if they have a license.

Right.

So it's the states that require license. Everybody like South Dakota does.

Some of that's self defense because you with, with a reasonable straight face they can say I, I have a legal right to talk to you because you have a license.

Yeah, but if you, if you aren't, if you're, if you're a comfortable person and you feel like you can find out enough about somebody without having them have a license, it, it's, they just take up space and I guarantee you they're not filing an annual return. So every year you're going to send them a notice. Every year they're going to call up and whine, why do I have to have a license in the first place?

I don't collect any sales tax from you. Why do you make me do this? I'm sorry, sir, you owe us $25 anyway.

Right? Collecting any tax because you, but it's substantial thing.

As a lawyer, I'm like so many of our clients don't have statute because they didn't file anything. That's my dispute on Tuesday. We didn't file anything they didn't know to their defense. But how you know the duties on them to know.

And if you file something, at least you have statutes. So there is a value to my mind depending on. And if you're doing it a volume, what's another return?

Well, and that's you know what I mean? And, and if, if it's, especially if it's an annual return, you know, there's, there's just nothing.

But it's a memory. Like when you were doing it as a staff person and you don't have a system, you forget.

Yes.

And you can't compile. And it's not easy. And so that I think is a part that people don't understand. Transactions within their own business.

And the person that called the Department of Revenue and asked whether or not they needed to have a license, they retired as is the person from the Department of Revenue. And so you have no defense when they do find you and ask you, why don't you have a sales tax license? Well, you told me I didn't have to have one.

Who told you that?

Yep, yep. And if you don't write that down, I mean, I got, I started my research by calling. We call it notes of informal discussion noid.

And we would put the name of the person, we would put their title, their phone number. I mean, we were anal about that because we didn't have any guidance. We're asking a human.

And you can't count on the other side keeping notes. Oh, no.

Yeah. Well.

And we've even had in some of the Colorado locals where they're like, well, you haven't remitted tax in four quarters, so we're gonna close your license. And it's like, but I don't wanna close my license, right?

No, I don't want to.

You know, like, I have a duty. I have an employee here. I have an. It doesn't matter.

Right.

And it just so happens that this customer today is exempt.

Right.

For whatever reason. But that doesn't mean that customer tomorrow isn't gonna be. Didn't close my license.

Now I gotta go open it again.

I'm set up to collect because this is a one off thing. And so it's just like. But I don't wanna close my license or like, sorry.

And I can't give my suppliers a resale certificate.

Right.

I got no number. So they get audited.

We get a little bit of this whip with governments. Like, do you not understand we're trying to do here?

Yeah.

When I guess technically, do I even have a right to collect an exemption certificate because I'm not licensed.

Right.

Fair question.

So keep down my license.

Why would anybody sell something to you?

I feel like the government wants it both ways. Their way and their way.

Well, not investing. And I.

Well, ask, Ask Sean. That's how, you know, I Do too.

Yeah. Like, you know, when I. When I give my webinars apologize to people, I said, you know, I used to be in. Because I used to.

I said, I used to be in this business. And, you know, there's lots of things that go into the bucket of things you have to do if you're going to be a tax administrator.

And one of them is to make you spend money on not collecting tax.

Yeah.

Yep. And I, I tell people all the time it often costs more money not to collect tax.

Yes.

Because you got to defend yourself. And you have no idea when that's going to happen.

No.

Or how thorough that person's going to be when they do show up.

This client of mine from Nevada selling it to California is like, well, I'm selling 99 wholesale. I'm like, what are you gonna do about the 1%? You gotta do something about it. So when you have that 1%, that's your sales tax audit.

And guess what that does is it get extrapolated over the 36 months and then you owe tons of money.

And because you have that, I don't know, because you have that 1%, they don't trust the 99%.

That's exactly right. That's a really good point. I need to bring that. You know, the other thing, I don't know if you've noticed this.

Obviously you're been around a long time. Me too. And I have watched this generational shift of knowledge. Right. All the younger generation, 30 to 40 something, they grow up on tech.

I didn't grow up on tech. I don't have a cell phone till way later in my life. And. And so it's not common to me. I mean, Meredith taught me how to use Venmo. I'm like, what?

What is Venmo? And then I could barely do it.

You know, my wife does it either.

I'm like, anyway, my husband won't do Facebook. I mean, you know, it's just relative to what we choose to put in our lives. But I. This younger generation is just like, well, tech will solve it.

Tech will solve it. But they don't understand the why of, like, how laws got the way they were and how they need the information to do what it needs to do do.

So they properly give the information off. And so one of this client, very successful startup business, also an Avalarian, they didn't connect everything. Their B2B and their B2C.

So they don't have good reporting. They have to add the B2B to the B2C. To get the right gross revenue into their state returns.

Well, they want to connect that and then have good certs and all that. Well, they don't even know how to get certs. Right. And so. And they were predominantly B2C. That's where their real claim to fame is.

But as you can appreciate, B2B is very lucrative because you have volume. It's actually easier than the B2C in terms of a higher return on a larger sale.

So they're like, well, we want to grow this business, but we don't even understand how to dock it and make sure the system of record works. And I'm like, you can only do a doc upload if you understand that, approve the doc. You have to know how to do that.

And I think the younger generation doesn't understand that because I remember telling one of our clients at a foreign country that they're like, we want to do this internally instead of using their value, add a reseller. And I said, do you really? Because this is a couple hundred thousand dollars of time, effort and software to collect and remit the tax.

And they're doing all that for you. Is the margin that much?

I think you have to really look at that margin if you want to go direct, you know, because the cost of compliance is not really managed well with a cfo, a controller. That's just not their bailiwick. Even an income tax person doesn't understand sales taxes. Oh no, you don't have a knowledge sharing that's effective.

Yes, it's a problem. That's why you want software automation with a bit of human oversight.

Yeah, I know. I often, I often ask customers who tell me their accountant told them this. I asked.

Yes, right.

Tell me about your accountant. What do they do for you? You know, they're in there.

What do they do? Tax returns, my P and L financials. Like that's what they do.

That's what they do.

Yeah. They don't do your payroll filings.

They have no idea what sales tax is like in New Mexico. No. 1 taxable, worst mistake you can make is assume that New Mexico's like you.

Yeah, I think that's super interesting though because, you know, we were Both Meredith with KPMG. I was Deloitte PwC.

So we worked with, you know, I worked with Netflix when they came to us because they were going, you know, out there and they had a very large multi state president do their inventory of their discs and then they pivoted and kept with us and all the things, but they just, they kept with that high level of service. But you have a lot of other businesses that don't. So you go to these regional firms.

They're doing better last few years. Yeah, but you know, understanding the business community and the transactions. I just think so many, so many tax preparers. Look at the roll up.

How much did you sell into Alabama? I need to know each sale, whether to tax it or not. That's a very different answer than just how many sales you had in summary, in a year.

Yep. Yeah, yeah.

Well, I'm kind of talking about like that human intervention. What is Avalar? Right. Because everyone wants to talk about AI and how to utilize it and make our lives better.

And I finished my mandatory AI training this morning.

You had mandatory AI training?

Oh yeah, mandatory.

So then what's Avalara doing to integrate AI? I know they kind of rolled out the new AVI, which is the help feature just within the AVText console. So that's kind of just one example.

And then I'm sure there's native functionality built into kind of the heat map when you log in. It's like, hey, you might have Nexus, but. So kind of what's Avalara doing with kind of this kind of overarching concept of AI?

Well, what we have done recently is require everybody who works at Avalara to have an AI license and to go through this AI training and to be able to be able to report to your superior every month how you're using AI in your job. What we, but we, we have, you know, before. No. So AI isn't new. AI has been around in machine learning.

So we've been doing machine learning for a long time. Our return process today is automated, so we're at 85% of our returns are no human touch.

And that is because of the machine learning tools that we bots that we've, that our internal teams have created all by themselves to make something to automate something that was repetitive.

Four years ago, five years ago, we started a thing called Citizen Developer and our CEO said we need to make more use of machine learning and we can't have this at the top because the top doesn't know what you are doing. You who are doing the work need to tell us what can be automated. In a better world, you would automate yourself.

So we created this thing called a citizen developer and we provided, we had employees who raised their hand and they, you know, they were in the right spot and we taught them how to be developers and they built, they used machine learning tools to automate parts of their job. So we've been doing it for a long time. And so AI today we use it a lot in marketing. We use, we're, we're, we're, we, we have a, a tariff tool.

It's a harmonized, harmonized system code. Hsc.

Yes.

Which is. HSC is something that's required every time you ship a good in, in and out of a country.

Yep.

And the word harmonized and harmonized system code is that every country in the world agrees that the first five numbers in that code are that product. The rest of the numbers are things that you, the country can do to treat that product differently than somebody else does.

And so we're using AI today in, in helping us automate the, the assignment of the HS code to a product to make because we have a, we have a lot of big customers, really big customers for whom we provide the HS code service to. And our, I was in India last month for work and got a demonstration of this process.

Our team has 15 seconds to look at a product and to put the, the correct harmonized system code on it so that sale can go through. Because they were, they were watching live sales on two of the world's biggest retailers.

As in those sales come in, you see, you see the product and you got 15 seconds to put the, the six digit uses, well, six or seven digit number on it.

So that when that product got shipped to wherever it was going and it was mostly coming in the United States, it would come into the United States with the right sales tax and the right tariff and duty. And so AI is helping us a lot in that, in, in the, in the initial part of it.

I mean some goods are, you get to really look at them to figure out what the heck they are. I mean I, I watched this gentleman and it was, I was shocked could have done that. I care how many years I worked doing that.

I don't think I got as good as he was. But a, a, it was a part of a John Deere tractor. No, no, it was part of a Caterpillar Caterpillar piece of equipment.

Like a, a bulldozer and it was a part for a bulldozer and it said Caterpillar. Well, this young man didn't know if that went. He didn't know that Caterpillar was the brand name for heavy equipment manufacturing, United States.

So he had to go out.

He had to go out and do, you know, do took him longer than 15 seconds to get that one done because he got the first rai, gave him the first five numbers, but it didn't give him the rest of it. Didn't give him the numbers it took to get the right duty and tariff and sales tax when that good got delivered in the United States.

Wow, Very interesting.

So we're doing that. It's helping us in a number of our reports. We're using it for training, mostly in the preparation of training materials.

You have to know what you're doing. Well, it's not true. A, you have to know what you're doing, but B, you have to know what to expect when you ask AI to give you an answer to something.

And not that, you know, they use this phrase hallucinate. And I don't know if it's a fair word to describe the answers it provides that aren't right.

Because it's going to try to give you an answer, which is one of the reasons why it is so effective is because it tries to give you an answer, but you have to know what the answer. You have to have a pretty good idea what the answer is going to be so you can see it.

You just don't automatically give that to your client and say, oh, this is what North Dakota says is taxable.

Yep, 100%. Well, it doesn't cite anything, which is.

When it does cite, you have to trust. You have to look at those two. Because sometimes it knows it needs to cite. So it creates a site.

Yeah, but it's on the. You know, you're continuing. You get so much data, so much information, you're trying to streamline it, make it more efficient.

Otherwise, how do you keep growing? You have to be more efficient.

So we do it to summarize things. It's really good.

I mean, it'll take a PDF document, split it in half, and then it'll give you a summary of the first half and the summary of the second half. So things like that. And that's probably how I will use it. I haven't started yet. But how I'll use it.

Help me understand state legislation, understand some regulations.

Well, yeah, when you've got a sift through a bill that's 400 pages long. And you're like, but there are 50 states currently in session. This isn't helpful.

Why did they do it this way? Yeah, I've gotten. So I go all the way to the bottom. I go all the way to the end of documents.

Because if it's, if, especially if it's a budget, all the tax stuff is at the end of a budget. If they're spending money, all the tax stuff at the end. So I always go there, oh, that's funny.

And then go back in.

Then you go back in, you think, okay, what did I miss? I ain't going through this 400 pages.

And so it, it kind of came up.

And I know you've had other conversations about it and we're going to ask about it just, you know, because the answer is going to change by the time this is released.

But. Right.

So tariff is the biggest, hottest, latest word. It is outside AI kind of. What's, what's Avalara kind of doing to manage what's going to come in and then come out and then be temporarily held.

How are you guys treating tariffs over?

Because I could see customers adding it as a code, right?

Oh, absolutely. Yep.

And they're not. Yeah, they're not separately stated item. Yeah. So like shipping and handling. But it's terrify.

Yeah.

Mandatory fee. Yeah, yeah.

So it.

So like I said, we, we have, we've been in tariff business for a long time and so we have this group of customers that, that we help manage the tariffs and we've got an automated tool that looks at the product and knows what to do with the tariff. Normal days it functions very smoothly because normal days there is a lot of change in that space because these are, these are big.

That's a big government change. Tariffs aren't dynamic historically. Last couple weeks have been very dynamic. But then. Yes. So, you know, they're.

To the extent that the tariff is passed on to an ultimate consumer, passed on in a taxable transaction, it is subject to the sales tax, whether it's built into the price of the product or separately stated. We never had a, a product code for tariffs, so.

Okay, I was wondering if you've had one or not.

And so there were. And it's, it's, you know, I don't know if you've worked with us was we create product codes. We're very methodical.

We just don't create a product code.

Yep.

So we know we have to know what all 50 states are doing before we'll create a product code. Yep.

Okay.

But you can Create a custom code very simply. And today our advice is to folks is it's almost certainly subject to sales tax.

And you, you, you shouldn't use a freight or anything like that because that, that doesn't necessarily. That can vary by.

Because it's not handling.

It's not handling, it's not shipping and it's not freight because, and those can vary by state. Whereas a. This, because there is no, there is no exemption in any state's law for tariffs. So it's not like freight.

In some states freights exempt, some state handlings, some state freights taxable handlings exempt. That doesn't, that's not the case with, with tariffs.

So what we're telling them is you need to figure out some sort don't use the product code because that's, that might get you an answer that you don't, you know, you don't have product, you know, you don't have two things in an invoice. One, one, I sold a product for a thousand dollars and then it's all the same product for $5. You don't want that.

Yeah.

So you tell them to do a custom code and create a. Their own tariff custom code.

Okay, interesting.

It's frustrating for our customers, but it's.

Frustrating for you because you can't give a good answer.

Like I said, we have a tariff Tuesday webinar and it's every Tuesday. So we've done seven of them.

We've done seven weeks of tariff Tuesdays and we've had one Tuesday where we didn't wake up that Tuesday and have a change that we needed and go in, had to go in and change the slides one week after this weekend.

Easter baskets eggs. I mean, who knows?

Last week it was. No, no, it was just the iPhones.

And all the iPhones, all that stuff got exempted.

All the electric. So. And to do tariffs. Right.

Sales tax is easy honestly compared to the harmonized system code process because states go in and look at the underlying material that goes into a product. And so if it's 75% aluminum, it'll have one duty versus 45% aluminum. So you have to be able to go in there, you have to look at that.

And each of them requires a separate or different. Not separate, but a different HS code. And when the, this round of tariff started, it was pretty generic.

We're going to post 10 minimum tariff on everything. Okay, well that's easy. That doesn't require a lot of effort on our part or our clients part.

Right.

But when they came back this last week. And they exempted all the electronic parts.

Right.

The exceptions of the problem that we, There was hundreds of HS codes that had to be used, had to be amended, had to be changed in our system to account for that. That one, that one, one sentence change.

Thanks a lot. Government. Stop doing that to us. Makes the pies very difficult.

It's very difficult. And it, I mean it's, it goes to, it goes to the argument that I made at the beginning. Governments don't collect taxes.

And they should be nicer to the taxpayer.

They should accept the fact that somebody else is doing the work for them.

That's right. And be nicer to them because they're funding their buildings and their payroll and their salaries.

You know, we don't impose tariffs on countries. Oh no, we impose tariffs on people. People who import things from countries.

That's right. Yes.

There's no governments involved in this at all.

Well, and I almost feel like sales tax, like everyone's like, well, it's a pass through. I'm like, no, it's not necessarily. And then I, even with income tax, people be like, well, I get a credit.

Not necessarily because some states don't have an income tax. Some states have a higher rate. You only get a rate, a credit for the rate. So I don't think people really understood that.

So that felt like over my career a lot of generalities got said and I'm like, it's the specifics that matter.

Yeah, it's definitely the specifics that matter. And in, in the international trade, it is very, very specific.

Yeah, yeah. And it's written in Chinese or you know, some other language. One thing I say about America, at least it's all written in English.

You may not understand the words, but that'll.

That only matters though, if you speak English.

Yeah.

Like if you don't speak Chinese. So like.

Oh, yeah, yeah.

You know, that's. But Scott, as we wrap up and I.

Is there anything that you want to share, share or thoughts or things that you're looking out for, you know, that you think maybe some of our listeners would be interested in?

So I, from a policy perspective, I spent a lot of time looking for retail delivery fees. There was a lot of talk at the beginning of this year. There's.

Oh, there were like 10 states.

Yeah, there's. But I don't. Maybe, maybe one will do it. And I'm not even sure that one will do it now. So that part is, is good news.

So they're finding it to be trouble.

Because it is, you know, if, if, if in theory you craft a retail delivery fee that was simple to administer, in theory, no one has yet. So neither state that has one has done one. And none of the ones that I looked at so far this year were what I were even they were.

And they were all different. So all 10 that were introduced this year were all different from each other and different from Colorado and Minnesota.

So we, if they, if they Pass, we'd have 12 different versions of the same stupid thing.

Oh yeah, agreed.

So those, I think, you know, everybody needs to be on the lookout for those. They, they're, they're. I don't see anybody trying to make them simpler. I don't work there.

As we move away from an income tax based tax structure in many places there's going to be more and more pressure put on other types of taxes.

And the only rational one that they're left with is a sales tax, which means that they have to change, they have to have conversations about what's taxable, what isn't taxable, what does it mean, broaden the base. And they're, you're, what is the definition? What is the definition of this? Exactly right. Because you expose brand new people to old concepts.

Old.

All of us, not all of them. That they have to learn from the beginning.

And if their legislature didn't write exactly the same law as some other state did, there's a reason why it's not the same and we have to presume there was an intent behind the difference. So we have to treat it differently than the everybody else does because that was clearly different. I don't, I just, that's, I think.

In Europe it's interesting. You know, I did a river cruise and you Europe a couple years ago and I. Everything's like 17%, everything I bought. 17%? 17%.

That's a lot of tax on every little purchase I made. So I thought why do they accept that? But they do. It's just so common and they have really good line item detail.

Like all the counties are listed and, or whatever their jurisdictional boundaries are. And I thought why don't we have stuff like that, like our rates don't always show like what we collected.

And I just, we have a really wonky system but we, we charge so little tax if you think about it, because we have so many exemptions. So that's what makes it so difficult. I'm just wondering, is that just more harmonized? Like everybody just pays it and then some of it gets back.

So I think they are more harmonized and it's for the most part the value added taxes are country based. So you don't have this. And so certainly in the European Union that's clearly harmonized.

I mean they've all got together and they've all decided what makes it complicated and tried to figure out one way of doing it. We don't have that. I mean the streamline sales tax is closest we've ever had enough states.

Yeah, no, 24 states. The only state of significant size is New Jersey. Everybody else that's any big state, they don't play ball. I really thought 25 years ago.

So I was five years into practicing, I'm like, oh, I chose the wrong profession. That's not true.

No, you chose the right one. This is a great business to be in.

I mean it's fascinating if you like.

Change.

But if you like helping if you are.

Yeah.

If you're a continuous learner, this is, this is where it's at.

And I think if you like complicated issues, you know, there's this. We took some exam before I went to law school and I can't remember, but I aced this one section. I think it's called Logical Games.

Like laws are logical that how they apply may not be logical based on business unit, but they are logically applied. So I think I just like that you're like, I know what the intent is, I just don't know how to apply it to these facts.

That's what makes it kind of fun.

It is.

You know, and then you can come up with a process and then you can automate it and then you can do the things and now you can go back and do your business. That's what people should do.

And that's why Avalara coming into the market and disrupting has been such a godsend to the greater community because we didn't have that kind of momentum with the other vendors.

Yeah.

So it's good.

It's changed a lot of things. Thank you. Scott McFarland thanks you for that. Because there's no question about it. The right people at the right place at the right time.

Right. Crazy.

And that changed everything.

It did. No. And you are so known. I mean, this client that reaches out to me from foreign country, an Asian country, knows you.

Oh my goodness, that's cool.

I'm like, that's crazy. I mean, nobody can even say vertex. They call it vortex. I mean, it's kind of funny. You know, Avalara has such great brand recognition.

So it's nice to kind of. I remember when you guys were advertising on NPR and stuff. I'm like. I'm like, it's finally time that people paid attention to people like us.

Yep.

You know, we're not the squeaky wheel and the little pain of the rear. We're important parts of business transactions. And million dollars of sales is $80,000 of potential tax. You should be protecting yourself from that.

Plus or plus interest, plus three years, plus.

Oh, yeah. So I think people just misapprehend the risk.

Yeah, I agree.

Yeah. All right, well, that's it. Right.

Well, Scott, thank you so much for the work that you're doing at Avalara for keeping them up to date so our clients aren't in trouble. We really appreciate the work that you're doing and your time joining us again on the Saltivation podcast.

Thank you very much.

Keep on. Keep on fighting the good fight.

I'm going to work on it until they get tired of me. I'm going to be here.

Yeah. That's awesome.

Okay, well, this is another episode of Saltivation. Till next time.

This podcast is for educational purposes only and is not intended, nor should it be, relied upon as legal tax, accounting or investment advice. You should consult with a competent professional to discuss specifics of your situation and the applicability of the information presented.