Sales Tax Compliance for Distributors: Webinar Recap with Avalara
Technology and growth are a double edged sword for distributors. The moment you expand into new states, add new sales channels, or increase shipment volume, sales tax complexity rises fast.
In this webinar, Sequoia Group hosted Avalara to walk through today’s sales tax landscape and practical ways distributors can reduce risk, reclaim time, and automate the parts of compliance that should not require spreadsheets, inbox chasing, and fire drills.
Below is a quick recap, key takeaways, and the full transcript for anyone who could not attend live.
What you will learn
This session is especially relevant for distributors and manufacturers using Infor ERP or operating across multiple states and channels.
Key topics covered include:
Why sales tax enforcement is accelerating, and why states are investing in audits
How economic nexus works after the South Dakota v Wayfair decision
The real cost of missing exemption certificates
How automation supports accurate tax calculation, certificate management, filing, and reporting
How to think about compliance across both sales and purchasing, including use tax
Why sales tax compliance is getting harder
States rely heavily on sales tax as a revenue source. In the webinar, Avalara highlighted that in many cases nearly a third of a state’s revenue can come from sales tax, which is a major reason enforcement continues to grow.
Avalara also shared the scale of change businesses are expected to track:
11,000 plus sales and use tax rate updates in 2023
85,000 plus taxability updates across the United States and Canada
98,000 plus sales tax holiday rule updates
6,000 plus international taxability updates and 337 international rate updates
And inside the United States alone, there are more than 13,000 sales and use tax jurisdictions. Manual processes simply do not scale with that reality.
Economic nexus after Wayfair
The Supreme Court decision in South Dakota v Wayfair (2018) reshaped the compliance landscape. Before 2018, sales tax collection was largely tied to physical presence.
Now, economic thresholds can create nexus even when a business has no physical facility in a state.
Typical triggers include:
Revenue thresholds as low as 100,000 dollars
Transaction count thresholds such as 200 transactions
Inventory stored in a state, including marketplace inventory
Affiliates, referrals, or business activity that states interpret as nexus generating
One critical note that came up in the discussion: even exempt sales can count toward nexus thresholds in some states, which can surprise distributors who assume they are “not taxable” so they are “not exposed.”
The hidden risk: exemption certificate management
One of the most practical parts of the webinar was the real world math behind missing exemption certificates.
Example shared in the session:
Auditor reviews a one month sample in a 36 month audit period
Finds a 15,000 dollar sale with missing or invalid exemption documentation
At an 8 percent tax rate, that is 1,200 dollars uncollected
The auditor extrapolates across the audit period
Outcome: 43,200 dollars in assessed tax and penalties from a single missing certificate
Avalara also shared a real world case example of a business that assumed it did not need to collect tax because of customer type, but lacked the documentation to prove exemption. The initial assessment from the state was over 400,000 dollars, driven by missing documentation rather than intent.
The blunt truth is this: exemption certificates are not a detail. They are the proof that protects you when the audit notice arrives.
How Avalara supports distributor compliance
Avalara outlined a compliance portfolio that supports the full lifecycle, from determining nexus risk to automating calculation and filing.
Core areas covered:
Sales tax calculation
Accurate, real time tax determination is especially important in complex jurisdictions. The webinar called out an example that resonates with a lot of distributors: Colorado, where tax boundaries can change at a very granular level. Calculating “by ZIP code” is not reliable.
Exemption certificate management
Automates collection, storage, expiration tracking, and audit ready retrieval. Avalara highlighted guided customer workflows to help ensure certificates are complete and valid.
Filing and remittance
Supports returns population, filing, remittance, and in some cases notice management. The big win here is consistency, fewer late filings, and reduced reliance on manual workflows.
Use tax and purchasing side compliance
Compliance is not only about sales. The session also covered purchasing workflows, vendor exemptions, and use tax accrual and reporting.
Supporting tools
Tools mentioned include tax research, cross border classification support, and 1099 workflows for businesses managing contractor and vendor reporting.
Where Sequoia Group fits
Sequoia Group works with distributors to modernize operational systems and reduce risk through the right mix of process, ERP alignment, and proven partner solutions.
If tax compliance is growing more complex for your team due to expansion, e-commerce, multi state operations, or audit risk, we can help you evaluate:
Where you may have nexus today
Where your exemption certificate process is vulnerable
How automation could reduce time, risk, and disruption
Full webinar transcript
Below is the cleaned transcript for readability. Light edits were made for clarity, punctuation, and obvious spelling issues while keeping the original meaning intact.
Transcript
David (Sequoia Group):
On behalf of Sequoia Group, I welcome each of you joining us for this critically important webinar. We are thankful also to Michael and his team, who are incredible individuals. I had an opportunity to meet Thomas just a few months ago as well. You are going to find they are highly competent, and in addition to that, they are very personable. It is a wonderful blend of human relations skills and expertise in the field.
We are joined today also by Kevin Harsh and Tom Tomas, and Kaisa, who many of you know, has been instrumental in putting this webinar together. Steve Fitt, our CEO, asked that I conduct this in his stead. He has an overlapping assignment today, but he will view the recording.
Thank you in advance for allowing us to record the session, as it will be broadly distributed to Sequoia’s client base. This is a gift to our clients who will begin to understand proactive tax compliance strategies that reduce risk and save time, presented by Avalara.
Without further ado, I will turn the time to Michael and Thomas Price.
Michael (Avalara):
Thank you so much, David. I really appreciate the introduction and of course our partnership with Sequoia Group. I laugh a little bit because when you talk about tax compliance and you also discuss our human relationship skills, you have to have a good sense of humor and be able to relate to people because sometimes this topic can feel dull. But we are going to make it exciting and cover strategies to reduce risk and save time when it comes to tax compliance.
Disclaimer: I am not a CPA or a lawyer. This is informational and not legal or tax advice.
Thomas, do you want to introduce yourself?
Thomas Price (Avalara):
Hi everyone, my name is Thomas Price. I have been with Avalara since November 2021. I just hit my three year anniversary. Before Avalara, I spent seven years with Infor. So about ten years collectively in the Infor and Avalara space.
Michael:
Thank you, Thomas. I am going on almost two and a half years with Avalara. I joined Avalara leading beverage alcohol partnerships. Prior to Avalara, I ran a large winery, so I am very familiar with manufacturing and distribution. I also ran compliance management for a year at that winery. Manual compliance can be very expensive.
Today we will cover the US tax landscape, trends and updates, how to navigate sales tax compliance, and Thomas will wrap up with the Avalara compliance suite.
Michael:
States rely heavily on sales tax revenue. In some cases, nearly a third of a state’s revenue comes from sales tax. Tax rates, rules, and requirements change often. In 2023 alone there were over 11,000 sales and use tax rate updates, over 85,000 taxability updates in the United States and Canada, over 98,000 sales tax holiday rule updates, over 6,000 international taxability updates, and 337 international rate updates. Doing that manually is virtually impossible.
In 2018, the Supreme Court ruling South Dakota versus Wayfair changed the compliance landscape. Prior to Wayfair, collection and remittance were primarily based on physical nexus. Now, if you meet economic thresholds, you are responsible to collect and remit in those states.
Nexus can be created in many ways: physical presence, economic activity, inventory, data centers, board meetings, and more. It is important to understand where your business may have nexus, especially if you are growing and expanding.
Economic nexus thresholds often start around 100,000 dollars in sales or 200 transactions, but each state is different. Exempt sales can still create reporting obligations, and in some states, exempt sales count toward thresholds.
Marketplace activity has its own rules. Some states still require registration and filing even if a marketplace collects and remits on your behalf.
States are investing in audits: hiring auditors, using AI and data mining, sharing information between states, expanding out of state audits, and in some cases encouraging whistleblowing. Audit lookback periods can range from three to eight years.
Compliance is complex and unavoidable. Over 13,000 jurisdictions exist in the United States. Many businesses still manage compliance manually: calculating rates, filing returns, managing exemption certificates, and preparing for audits. One of the most common challenges is keeping up with changing tax laws.
Avalara offers tax research, which is like a Google for tax, to help you understand tax rules and changes.
David:
Michael, I remember a conversation about Colorado, where a jurisdiction can change even on the same street. Is that correct?
Michael:
That is correct. Many businesses assume tax is based on ZIP code, but it is not. Colorado is especially complex. Without Avalara AvaTax down to rooftop level, it is nearly impossible to consistently get it right.
Michael:
Let’s talk about the cost of missing an exemption certificate. Imagine an audit period of 36 months. An auditor reviews a one month sample and finds a 15,000 dollar sale with missing or invalid documentation. At 8 percent, that is 1,200 dollars uncollected. Auditors often extrapolate across the audit period. That can result in 43,200 dollars assessed from one missing certificate.
Thomas:
Real world example: a company shipped nationwide but was only registered in a handful of states. Texas notified them of an audit. They assumed they did not need to collect tax based on customer taxability, but they did not collect the documentation that proved why. Texas gave an initial assessment of over 400,000 dollars. Exemption certificates are critical.
Michael:
Avalara provides automation for exemption certificate management to simplify workflows, automate collection, reduce risk, drive efficiency, and improve customer experience.
Avalara also offers a 1099 solution to support 1099s, W2s, 1095s, and W9s with paperless workflows.
I will hand it over to Thomas to cover solutions.
Thomas:
Compliance is not only about selling. You also purchase goods and services. Businesses need licensing, registration, risk assessment, voluntary disclosure support, and property tax support.
Avalara provides solutions for business licensing, sales tax registration, sales tax risk assessments, voluntary disclosure support, and property tax returns.
Once you are compliant, you sell product. You need accurate tax calculation, documentation for exempt sales, filing and remittance, and in some places e-invoicing. You also need product taxability, cross border classification, customs, and federal forms.
Avalara solutions include AvaTax for calculation, exemption certificate management for capture and storage, returns filing and remittance support, tax research, and 1099 workflows.
We also support purchasing and use tax workflows, including vendor exemptions and use tax accrual and reporting.
We support many integrations including Infor ERP, e-commerce platforms, marketplaces, point of sale, and APIs where needed.
From a services standpoint, Avalara can support registrations, returns, risk assessments, implementation, training, and managed services, including managed exemption certificate collection and validation.
If you would like to discuss solutions, nexus risk, or compliance needs, we would be happy to talk. You can reach out to your Sequoia representative to connect with us.
Michael:
That wraps it up. Thank you, David and Sequoia team. Please reach out to continue the conversation and let us know how we can help with your tax compliance needs.
Frequently asked questions
What is economic nexus for distributors
Economic nexus means your business can be required to collect and remit sales tax in a state based on sales volume or transaction count, even without a physical location in that state.
Do exempt sales matter if I do not collect sales tax
Yes. Exempt sales can still require proper documentation, reporting, and in some states they can count toward nexus thresholds.
Why are exemption certificates such a big audit risk
If you cannot produce valid exemption documentation during an audit, auditors may assess tax, penalties, and interest as if the sale was taxable.
