Axios Pro Exclusive Content

Exclusive: Sales tax automation startup Kintsugi AI raises $6M

May 29, 2024
Illustration of a cursor hand holding a price tag.

Illustration: Gabriella Turrisi/Axios

Kintsugi AI, which has developed a platform to automate sales tax compliance, raised a $6 million Series A at a $40 million valuation, it tells Axios exclusively.

Why it matters: Calculating sales tax and remaining compliant across dozens of jurisdictions is a huge problem for e-commerce sellers and software providers.

The big picture: Following the Supreme Court's 2018 ruling in South Dakota v. Wayfair, every state with a sales tax has enacted a law requiring remote sellers and marketplaces to collect and remit applicable sales tax.

  • However, each jurisdiction has different requirements and methods for tax collection, remittance and information retention. That creates challenges for remote sellers and their marketplace partners.

State of play: "A typical business that's doing more than half a million dollars in revenue has to be compliant in more than 25 jurisdictions," Kintsugi founder Pujun Bhatnagar says.

  • "What that means is, for each jurisdiction, they have to keep track of how much they owe in sales tax, based on the kind of product they sell," he adds.

How it works: San Francisco-based Kintsugi uses AI to automate all aspects of sales tax compliance, including tax calculation and validation, registration, filing, exemptions and back taxes.

  • It integrates with various billing, e-commerce, accounting, and HR systems to collect sales tax data for all transactions and calculate liabilities in real time.
  • The platform also enables businesses to register and automatically file their taxes in any jurisdiction.

Between the lines: Unlike other products in the market, Kintsugi operates on a freemium model and allows businesses to sign up and see their sales tax nexus and liability for free.

  • It then charges them $100 per state for each filing and registration they make after that.
  • In addition to its self-serve signup offering, the company also sells through channel partners like fractional CFOs and accounting firms, billing and ERP solutions.

Fun fact: Bhatnagar says Kintsugi was named after the Japanese art of repairing broken pottery, because it "brings different pieces together, which is all these different data sources, and we join it with gold to give a holistic view."

Zoom in: Kintsugi's latest financing comes from Link Ventures, Venture Highway, Kyber Knight, Plug and Play, and DeVC, among others.

  • The company raised a $2.2 million pre-seed round in September 2023 before making its product generally available last December.

What's next: With the new funding, Bhatnagar says Kintsugi is focused on expanding support for sales tax compliance outside the U.S. and developing automated value-added-tax (VAT) solutions for Canada and Europe.

Go deeper