- Zamp is a startup that helps online sellers with sales tax compliance.
- Sales tax compliance laws are complex and constantly changing.
- “They just want to know it’s being done right,” Zamp CEO and cofounder told Insider.
Most people think of sales tax as a couple dollars tacked onto their grocery receipt, but for the seller, managing those dollars on every single product is more complex.
Zamp is aimed at helping online sellers of all sizes manage their sales tax compliance. The financial-technology startup, which was founded by Edward Lando and Rohit Bhadange, launched on May 10.
Businesses have to report and file the sales tax they charge on their products to the state’s Department of Revenue, but the rules and regulations for doing so vary on a local level and are constantly changing.
“Customers don’t like sales tax,” Bhadange said in reference to the businesses Zamp works with. “They don’t want to learn sales tax, but they do want to be confident that it’s being done right by a team who knows what they’re doing and has done it before.”
Zamp announced a $4 million seed round on May 10, with funding from Valor Equity Partners, Soma Capital, Day One Ventures, and angel investors, among others. Bhadange declined to share the startup’s current valuation.
“Because this is such a pervasive problem, it’s not always the first two things that businesses always talk about, but it’s always the third or fourth thing,” Bhadange said. “It’s enough of a problem that investors are intimately familiar with the gaps today because a lot of their portfolio companies are online sellers.”
Sales tax is a pain
Sales tax compliance is complicated by laws that require an out-of-state seller to report and file sales tax once they meet a set level of sales or number of transactions within said state. These laws came about as a result of the 2018 Supreme Court case of South Dakota v. Wayfair, Inc.
So it not only matters where a company’s employees work and where its inventory is stored, but also where it is processing orders.
Additionally, sales tax compliance is handled on the state, county, city, and district levels, rather than the federal level. There are over 12,000 different sales tax jurisdictions within the US, according to Bhadange. Increasing or lowering sales tax is often a political talking point, so rules and regulations are prone to change with changes in government leadership.
Zamp handles every aspect of sales tax compliance for the customer, from reporting and filing to handling notices from the state.
When a Zamp customer reaches the threshold in a state to report and file sales tax, the business is notified by Zamp. Then, they approve Zamp to register them for compliance in that state and maintain the account going forward. When compliance laws change, the startup makes those changes automatically to the account as well.
Growing the team and expanding to new customers
Bhadange considers market leaders Avalara, TaxJar (which was acquired by Stripe in April 2021), and Vertex to be Zamp’s competition.
In contrast to its competitors, Zamp is completely automated and charges an annual software-as-a-service fee based on the customer’s complexity, which is determined by the number of transactions the business does in a year and the number of states the business reaches the sales tax threshold in.
The startup currently has around a dozen customers, including digital services companies, consumer packaged goods companies, and food companies.
Zamp is a team of 15 people, including early employees of Avalara and TaxJar. Looking ahead, Bhadange wants to grow the team as well as support customers who are selling internationally. Currently, Zamp only serves customers selling within the US.
“At Zamp we’re eliminating the concept of self-management and going to a third party,” Bhadange said. “Customers are looking for one vendor for their end-to-end compliance, and frankly, the market hasn’t really given them that.”
“We’re giving them the technology and automation with the tailored guidance and support that customers are looking for into one streamlined managed solution,” he added.