Avalara's Service Makes Accounting Less Taxing

Yet as dry as that sounds, Bainbridge Island, Wash.-based Avalara managed to sign up 64 new Sage Software partners at Sage's partner conference this past May. All told, that gives Avalara 150 partners that also sell Sage (formerly Best) accounting applications, out of 235 total. Not bad for a product that's been available less than a year.

"Tax rate stuff can be pretty boring, but it's critical," said Ruth Menter, president of Macdonald Consulting Group, an Atlanta-based Sage Software business partner who sought out Avalara's booth at the conference. "Avalara focuses on sales tax, and they've gone the next step by integrating their service with [Sage] accounting applications."

In fact, Avalara's hosted service has out-of-the-box integration with accounting "packages including Sage's MAS 90/200, MAS 500 and Accpac Advantage, and Open Systems' self-named software as well as Microsoft's Great Plains and Navision. The company is also in talks with SAP about integrating with the Walldorf, Germany, company's Business One suite, said Marshal Kushniruk, Avalara's vice president of sales and marketing. "We also tie into ERP and e-commerce applications through our On Demand SDK," Kushniruk said. "We think our software is perfect for any company that does business in multiple jurisdictions."

John Kearns, president of Accounting Micro Systems, agrees. Offering Sage's MAS 90/200/500 lines as well as Great Plains and SAP Business One, the San Francisco-based solution provider became an Avalara partner at the Sage show. What was the attraction?

"It addresses an acute need that's becoming more acute each day," Kearns said. "We are seeing more customers doing business in multiple states, which means collecting taxes in multiple places. Avalara makes it easier to not have to think about all of the complexities."

Both Kearns and Menter said they were drawn to the fact that Avalara offers its information as a service—and not just because a service model gives them a recurrent revenue stream. More important is the fact that the hosted information can be changed and updated by Avalara, without partner intervention.

That's a fairly appealing prospect for a number of reasons.

"We can use Avalara as a door opener, allaying the tax pain for organizations that may need to change their financial software," Menter said. "We can then sell them [Sage] software, with add-on applications that we write. I think this model will do well with us."

Avalara said partners earn 20 percent margins on activation fees and 20 percent of the first year's service fee. They then earn a 20 percent fee for each subsequent year that clients renew the service.