How sales tax impacts company growth: Interview with Jerome Kaiser, CFO, SeneGence

Originally published on The Progressive Accountant.

Patrick O’Leary, Associate Publisher, PMG360 recently sat down with Jerome Kaiser, CPA and CFO of SeneGence, to discuss sales tax from the perspective of the CFO of a fast-growing company.

SeneGence is a is a privately owned, network marketing company in the business of developing and selling personal care products through an independent sales network, committed to making a positive contribution to women everywhere. Jerome began his career in public accounting at PricewaterhouseCoopers and has held financial management positions with such notable companies as Liz Claiborne, Mikasa, Meguiar’s, and Ultramar.

Patrick O’Leary: How do you think about business efficiency from a financial perspective?

Jerome Kaiser: I believe efficiency is about timely service for internal and external customers and that means reducing errors and waste. In finance, we reduce errors by spending time creating and testing automated processes that validate the veracity of our data and increase our overall confidence in that information.

PO: How do you think about minimizing company risk?

JK: Minimizing risk starts with consistently doing the right thing. That can pertain to the treatment of customers and the quality of the product. Beyond that, we've established a captive insurer to write coverages that cannot be carried by commercial carriers.

PO: How did you prepare SeneGence to handle such an influx in growth?

JK: It was critical to our success to surround ourselves with good team members; that includes internal team members and external team members. First, I evaluated our professional service providers and replaced vendors with ones I felt could accommodate the growth we were anticipating.

Internally, we established policies that would attract and retain top talent. And we were fortunate enough to be successful on both fronts.

Beyond that, the more technical aspects are technology and systems that can accommodate volume and allow you to scale.

PO: How do you evaluate the accounting, processing, order entry, or other systems being onboarded?

JK: For SeneGence our requirements are about growth and high volume. So, the first level of evaluation of any system, accounting or otherwise, is its ability to scale. The second evaluation focuses on minimizing errors. Timely and accurate reporting is foundational to all accounting departments, whether they are high growth or not.

PO: When I say sales tax, what comes to mind?

JK: The first few things that come to mind are headaches, disparity in tax laws, and confused distributors.

Our distributors are confused over whether a product is taxable or non-taxable. Is a service like shipping taxable or non-taxable? Is handling taxable or non-taxable? And of course, these are all treated in a variety of different ways, depending on the tax jurisdiction in which you reside.

Then there’s differences between a sales tax certificate and an exemption certificate. It's a morass of confusion and it's something that we deal with daily.

PO: How are you educating distributors?

JK:  It’s important that our distributors are kept up to date and well-informed. Our Avalara partners provide good solutions and good insight and we rely extensively on those solutions. We then provide our distributors with that same information and insight.

PO: How does sales tax impact other areas of your business?

JK:  Sales tax is a big part of our purchasing process. And not just sales tax, but use tax as well. It drives our behaviors for how we collect and report information for inventory, how we record information for supplies that we provide our distributors, and how we plan marketing events we provide to our distributors. These different activities have differing sales tax implications on what we sell, how we charge, and even how they're characterized. It's an issue that's frequently discussed on many levels within the organization.

Furthermore, in the direct marketing business we deal with two primary issues:

1. Timely and accurate payment of commissions to our distributors, and
2. Accurate collection and remittance of sales tax.

Being a direct marketing business elevates sales tax to a higher than normal priority within the organization.

PO: Was there a specific business event or activity that forced you to address sales tax compliance?

JK:  During the first few months of hyper growth we experienced, it became clear that sales tax was an area we were going to have to lean into. We realized we were going to have to depend on our suppliers, our partners, our internal employees, and our service providers, like Avalara, to give us timely and accurate sales and use tax calculation and reporting.

PO: How or when do you decide to prioritize sales tax compliance among all your other financial obligations?

JK: In business, I like to say that there are musts and there are thrusts.

The musts are the things you need to do to stay in business, such as regulatory compliance. Sales tax is one of those musts, it's foundational. If we're not collecting and remitting sales tax timely and accurately, we have a major challenge. It isn't something that we try to do well. It is something that we must do extremely well to stay in business.

The thrusts are things you do to establish a competitive advantage, to accelerate the business, but often, you need the must-haves in place in order to thrust the business forward.

PO: How do you stay in front of what's next?

JK: For starters, we're members of the Direct Selling Association. There's a great deal of information we can gather from that association and we know they're big supporters of our efforts and all direct selling companies. 

Second, we have a top-notch, internal legal department responsible for not only distributor compliance but Federal Trade Commission rules and regulations.

Third, I have top-notch sales tax people I rely on that do research, write whitepapers, and keep our executives well-informed of some of the changes coming in legislation and elsewhere. 

Last, we rely on our outside providers and partners, like Avalara, to provide not only compliance services, but consultative services as well.

PO: What advice would you give your peers, as it pertains to compliance lessons learned in your business?

JK: I would recommend a few things:

• First, surround yourself with good people, good professional service providers, and good employees. That is foundational to any business initiative.
• Second, be ready to make a mindset change. As you grow your business, it will likely require change and you have to be ready for that change — you have to embrace that change. You just can't do things faster and try to do things better — you have to be ready to change the way you do things.
• And third, if you're going to spend money, spend it on technology. Get out in front of it and make good investments in technology.

PO: What’s the structure of your finance and tax team and how do they manage tax compliance day to day?

JK: At SeneGence, we have a tax manager and two additional tax employees. The three of them coordinate all tax activities and work with Avalara to manage sales tax compliance.

PO: How has automation helped you manage efficiency within your tax department?

JK: Many of my peers have tax departments with six to up to 15 employees. I'm pleased we have found a great rhythm, operating at our size, while managing our high volume of transactions. Essentially, we are finding success with one tax manager, two dedicated staff, and a partnership with Avalara. That's an efficiency that most companies our size have not yet achieved, so I'm very proud of that.

PO: How have you addressed audits at SeneGence?

JK: Compliance is not only about the collection and remittance of sales tax. Our three tax professionals — with support from Avalara — are also responsible for all tax audits. When you grow quickly, you find yourself on the radar of a lot of tax jurisdictions. I'm pleased to point out that our team manages all of the letter requests and in-office tax audits that take place.

SeneGence Company Profile

SeneGence is a multifaceted, international corporation committed to making a positive contribution to women everywhere. SeneGence is a privately owned, network marketing company in the business of developing and selling personal care products through an independent sales network. In 1999, SeneGence started with LipSense Long-Lasting Liquid Lip Color as its premier product. Initially, only six lip colors, a moisturizing lip gloss, and a lip color remover were offered. SeneGence now has a complete line of long-lasting cosmetic colors and anti-aging skincare products as well as accessories and boutique items.

Jerome Kaiser Bio

Jerome Kaiser, CPA, has served as SeneGence Chief Financial Officer (CFO) since September 2016. Prior to SeneGence, Jerome was Chief Financial Officer of Stemtech HealthSciences and ORYXE International, Inc. Jerome began his career in public accounting at PricewaterhouseCoopers and has held financial management positions with such notable companies as Liz Claiborne, Mikasa, Meguiar’s, and Ultramar. He is a Certified Public Accountant and is a member of the California State Society of Certified Public Accountants and the American Institute of Certified Public Accountants.