An Alternative For The Online Tax Collector: AvaTax

Avalara, Bainbridge Island, Wash., produces AvaTax Collect, a Web-based sales tax management service sold through its channel of resellers and geared toward the small-business customer. AvaTax Collect works with a customer's accounting software to collect and calculate tax information over the Internet and sends it back to the user.

Since 2005, the software vendor's roster has grown from about 100 channel partners to more than 500 resellers, all of whom are working in the accounting application and software development channels for the SMB market, said Avalara CEO Jared Vogt. Resellers can learn how to integrate Avalara's products into their offerings through the company's training program—Avalara University. "Our primary focus right now is the accounting apps in the SMB space," he said.

The online service is unique to the market, Vogt said, and provides VARs, who focus on the small-business customer, the opportunity to see recurring revenue.

"In our case, they get a chunk from the installation, but then they also begin to build a revenue stream. As long as the customer is signed up and continuing to use our service, they continue to get money," Vogt said.

Kirk Goodwin, president of Navigator Technologies, an Akron, Ohio-based reseller who specializes in the installation and support of Microsoft Dynamics line of business-management solutions, began partnering with Avalara last winter when a customer needed a solution that could handle multijurisdictional tax requirements.

"After doing some research, they gave us the best solution without [our customer needing to hire] their own in-house person," he said. "If they're a .net that is going to have worldwide sales or even U.S. and Canada sales—where there are multiple jurisdictions, I think it's fantastic. There's a real need in the marketplace for this solution."

Installation was simple, Goodwin said. "There's a small component that lines the division software to the service, but at that point it [the software] is all over the Internet," he said.

Navigator Technologies also has used Avalara's development kit to create an add-on that it is reselling through some of its own partners.

The solution isn't flawless, however. "Initially, the reporting was a little bit weak, but they've really filled that out in the past couple of months," Goodwin said. "It [also doesn't do] international address validation. It does OK with Canada and the United States, but it doesn't validate European addresses. It would be nice to have that address validated too, but that gets really complex," he said.