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Sales tax automation startup Numeral has raised $18 million in Series A funding led by Benchmark, it tells Axios.

Why it matters: Online sellers are struggling to comply with a fractured sales tax system founded in a pre-online world.

The big picture: Companies addressing sales tax calculations have seen sizable exits recently, with Avalara, founded in 1999, taken private in 2022 by Vista Equity Partners at an $8.4 billion valuation. TaxJar sold at an $850 million to $900 million valuation in 2021 to Stripe.

How it works: Numeral says it can create a more AI-enabled and user-friendly version for e-commerce companies across the country's patchwork of state, city, county and district tax jurisdictions.

It uses generative AI to crawl city council notes and state websites to keep track of legal changes. It also sets up remote mailboxes for its clients, keeping an eye on letters for updates and potential tax violations.

When the clients' sales in a state hit the taxation threshold, Numeral will automatically register them in that state.

Numeral also automatically files taxes on behalf of the client, which might be required quarterly, monthly, semiannually or annually. The tax calculation uses rules-based logic rather than generative AI.

If Numeral makes a calculation mistake, it promises to pay the difference and file amendments. It generally charges per filing.

Context: Sales taxes previously were considered largely an issue for companies that had physical locations in states where they sold goods.

That changed in 2018, when the Supreme Court ruled against furniture seller Wayfair, making online sellers responsible for sales taxes on online purchases, even if they don't have a brick-and-mortar location in the state.

Now in most states, sellers with at least $100,000 in purchases from a given state must pay sales tax there.

What they're saying: "It's a crazy system that's not made for someone that doesn't have a lawyer or a tax accountant," says CEO Sam Ross. "It's a very old-school system designed for your local business — your ice cream shop down the block."

Famously, and strangely, in New York City a whole bagel isn't subject to taxation, but one cut in half has an 8.875% rate.

In Illinois, a candy item has a 6.25% tax. But if it contains flour, it's considered groceries and is therefore taxed at 1% — meaning Kit Kats are in the groceries column, and Starbursts are out.

Flashback: The company started with a focus on e-commerce companies that sold via Shopify, as marketplaces like Amazon and Etsy built tax calculations into their offering.

But Amazon and Etsy sellers are increasingly opening stores, too, says Benchmark general partner Chetan Puttagunta — giving Numeral a larger potential market. "A lot of e-commerce merchants are now branching out from single marketplaces," he says.

Exclusive: Benchmark leads $18M deal in sales tax AI startup Numeral

Numeral helps sellers navigate sales taxes.

Illustration of a calculator that reads help

Sales tax automation startup Numeral has raised $18 million in Series A funding led by Benchmark, it tells Axios.Why it matters: Online sellers are struggling to comply with a fractured sales tax system founded in a pre-online world.

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Exclusive: Benchmark leads $18M deal in sales tax AI startup Numeral

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