Online marketplace finds peace of mind and ability to scale with Avalara

Founded in 2000 by a Chicago art student and self-proclaimed tech geek, Threadless is both an online community of artists and an ecommerce marketplace. Designs for apparel, accessories, art and decor are submitted each week and put to a vote. The top-scoring designs are produced, sold and dropshipped to customers.

The team at Threadless has a mission to support independent artists and help them monetise their art. Developing expertise around sales tax compliance doesn’t fit into that mission. “We’re still a relatively small company and we all wear a lot of hats,” says company Chief Financial Officer Jason Macatangay. “The last thing I want to do is to spend my precious time doing things like booking tax debits and credits in our accounting records.”

“We don’t want to build a best-in-class, in-house tax accounting organisation,” Jason adds. “We want to build a best-in-class financial leadership capability, understanding and analysing the business and providing guidance that moves the company toward its goals.”

Threadless had been getting along fine, only collecting sales tax in Illinois. Jason says the company was content to let Amazon fight the battle against sales tax collection on behalf of all online marketplaces. ”As soon as Amazon relented and started collecting sales taxes everywhere, we read the writing on the wall,” remembers Jason. “The South Dakota v. Wayfair, Inc. decision made it clear that we’d need to start collecting sales tax.”

Jason started getting enquiries from various states and from artists who had questions about liability. “We didn’t want to have a conversation with every state, every time their requirements changed,” he remembers. “We decided to just volunteer nexus in every state. It was a clear message, within the company, that we were taking a strong stance on compliance.”

In 2017, Threadless acquired a company called Bucketfeet that used the Avalara connector with its Shopify site. “We got a good look at what Avalara could do,” says Jason. “After seeing how effortless it was, I picked up the phone and reached out to Avalara about a larger integration with our homegrown platform.”

Jason also wanted Avalara to take over registering Threadless in every state. “It’s not a productive use of our time, to be honest,” Jason laughs. “Avalara’s questionnaire was easy to understand and really made things easy. Some states were slower than others to process our registrations, but overall, the software implementation was on par with others.”

“Because of the ease and success with AvaTax, we’ve asked them for additional support with international sales tax collection, customs and duties, and the like,” Jason says. “We ship products around the world. Being able to offer the added convenience of collecting those taxes and duties up front is a nice enhancement for that customer set.” The company implemented Avalara Item Classification (now Avalara Managed Tariff Code Classification), which employs machine learning and specialised human expertise to assign the right Harmonized System (HS) codes for each country. Properly classifying goods upfront helps companies import and export more quickly and confidently.

In addition to using Avalara for both domestic and international tax calculations, Threadless uses Avalara Returns for automatic filing in all 50 states.