Good afternoon everybody, and welcome to another NachoTuesday. Today, I have Pujan here with Kintsugi, and without further ado, we'd love it if you could introduce what you guys do over there. I've heard a lot of buzz about the company but would love to hear the backstory. Of course! First of all, thank you for having me on your podcast. I'm representing the entire team here at Kintsugi. We are 37 employees strong and growing very aggressively. From a 30,000-foot view, what we do is we put your company's sales tax on autopilot. What that means is if you're either a software company or an e-commerce brand, we help you with sales tax compliance end-to-end. That includes registrations, filing, remittance, handling sales tax exemption certificates, and even helping you get compliant on your back taxes that you may owe to different jurisdictions through voluntary disclosure agreements. We essentially automate all of that stuff. The way I like to think about it is it's a hybrid approach: automation when you need it and a white-glove service when you want it. That's really powerful. I know, especially with e-commerce companies, sales tax and little things like that—they might think it's a little thing, but those can really add up and become a lot of problems for a lot of companies. Especially if you're selling internationally, it can be a nightmare if you try to go back and fix it when it's too late. So, I guess what got you down this path to start Kintsugi, and how did you develop this passion for sales tax? For sure. I jokingly say that sales tax and just tax compliance is in my DNA. My dad actually worked in the space for 37 years of his professional career. Over his professional journey, he worked with the likes of Avalara, Saas, and Vertex—some of the massive players in the market. Very cool. Sales tax is something that I saw even when I was growing up. I remember going to the office with him, seeing stacks and stacks of paper. Back in India, a lot of invoicing happens physically, and he meticulously went through the data to ensure that while the founders and the company were focused on topline revenue and growth, he was helping companies get compliant. Not necessarily sexy stuff, but oftentimes very important yet overlooked. The reason I decided to start this company, which we incorporated in 2023 (though we started working on the idea much earlier), was a Supreme Court ruling. This was South Dakota vs. Wayfair, where sales tax used to be a big company issue, but after this Supreme Court decision in 2018, it became a problem for every e-commerce brand and software company. The TL;DR of the case is that it changed a key part of sales tax: even if you were an online business, you had to keep track of where your customers were coming from and buying the product. In the case of e-commerce, that's the ship-to address, but for software, it's the bill-to address. You needed to get compliant based on where your customers were buying your product from. As someone who has managed an e-commerce business myself before, I have to tell you it became a nightmare after that court ruling. I remember that coming out, and the accountants started chasing you down to make sure you were compliant in each and every state. A service like yours would really come in handy in that regard. Was your dad more on the strategy side, or was he also technical in nature? I understand you have a technical side too and helped build this whole thing. Yeah, my dad is not technical; he's not an engineer by training. He's what we call in India a Chartered Accountant, which is equivalent to a CPA here in the US. He's an accredited person whose life was to help companies get compliant on taxation. So where you came in is using technology to help scale what he did. Exactly. When my dad made me aware of this problem space, especially when this Supreme Court case was going on, I was still at Facebook as a senior engineer. I come from a data and AI background, and sales tax is something that Kintsugi did not invent. It's a problem that has existed, but what we are uniquely doing is how we are solving for it. If I were to identify three different pillars, they would be: How we leverage a PLG (product-led growth) motion, pioneered by my co-founder and CDO of the company, Jeff Gibson. Kudos and a shout-out to him. The hybrid sales approach we are taking, where unlike our competition, you can get started and onboarded with seven clicks or in three minutes. But we also offer white-glove service, where if people have questions about sales tax or want a hand-holding experience, our sales team can provide that. Our AI, which allows us to expand into various jurisdictions faster than our competition. Can you give a quick overview as well? Can you integrate with somebody's existing systems, maybe a Shopify integration? Yeah, we do. We have integrations with Shopify, Chargebee, Stripe, and even QuickBooks invoicing. How this works is you get started by clicking the 'Get Started' button on Kintsugi. You go in, connect your ERP and billing solutions, and as soon as you connect those and input information about where your employees are working from, within seven minutes, we show you your sales tax exposure—where you have to get registered for sales tax and the liability associated with it, which is the amount of sales tax you need to pay. Oftentimes, when an e-commerce business sets up shop, they think Shopify is taking care of their sales tax. Shopify definitely has a button where you can checkmark and say, "Hey, collect sales tax," but it does that unintelligently. You have to cross a certain threshold, which in sales tax jargon is called sales tax nexus, to start getting registered and then start collecting and remitting sales tax. The second mistake that founders, especially first-time founders, often make is thinking sales tax is due annually when actually it's due monthly, making it very difficult to be compliant. That's tedious. So, what do you find a lot of SMBs also get wrong with managing their sales tax strategy? You mentioned a big one there: a lot of them think it's an annual thing they can deal with at the end of the year like all the other taxes, but it's something they have to stay on top of each month. Anything else they should be aware of or are probably doing wrong today? I think there are two bands of two camps of people where a founder falls into. Some of them actually kick the can down the road when they shouldn't. These are people who start getting some product-market fit, doing some Facebook ads, Google ads, really getting customers on their website, and selling—the fun part. They're hyper-focused on growth but do not collect sales tax. A couple of months in, especially as the business crosses the 500K threshold, where they're selling in multiple states, they get a letter in the mail saying, "Hey, sales tax is due. You need to be compliant, and you aren't. These are the liabilities and penalties associated. Please get compliant. (09:12) And given that they haven't charged sales tax from their end customers, this now comes out of their profit margins, which is roughly around 9%, which hurts a lot. Yeah, it's not a bill you want to get. No, you don't expect it. Exactly. And the second camp of folks are actually those who are, in some sense, too cautious and collect sales tax on each and every transaction. That actually, I'd argue, is an even worse problem to have because if you collect sales tax and you don't remit it to a state, then that's a misdemeanor you're committing. You can get into a lot of legal trouble. In addition to that, you are not supposed to collect sales tax unless you're crossing these thresholds that I was alluding to, which can be in the form of the number of transactions that have happened in one jurisdiction or the dollar amount associated with the transaction. (10:18) Kintsugi is a quintessential piece of the puzzle as it's solving for that use case where our intelligent APIs can tell you where to collect sales tax, how much to collect, and once it's collected, how to remit and pay for it. Not only do we tell you, but we do the entire process for you. We get you registered, get you remitted, get you filed, and take care of your sales tax exemption certificates if that's the kind of business you have. If you have back taxes—let's say you've been operating your business since 2016 or 2017 but haven't paid attention to sales tax—then we can also get you current. (10:53) Aren't we glad we don't have to go through all the paperwork like we used to in the past? We do all the lifting for you so you can focus on growing your business. Does your onboarding experience have like a big easy button? It sounds like it—you just hit the red button, and we automate a lot of that stuff for you. That's the idea, and I think this is the key insight that we had: a lot of people kick the can down the road. What we do is we want to make this PLG flow very seamless where someone can come in, connect their data sources, and indicate where they have full-time employees and contractors. Then, they can see their sales tax exposure and liability. Now, they have an option: they can either chat with our sales team and onboarding team if they have some complicated use case or if they want a hand in the loop. But for folks who do not want to talk to anyone, they simply click a button, put down their credit card information, and we get them registered. At the end of the next month, we get them filing. (12:01) That's great. Are there any common ways you see SMBs overspending on their taxes where this might help them save money? For sure. A lot of businesses have an interesting use case when it comes to sales tax. Often, if you're relying on platforms like Shopify or Stripe to do your sales tax computation, they just rely on the zip code for sales tax calculation. But a zip code in the US can span two different states. If you look at sales tax jurisdiction, it can be part of up to five different sales tax jurisdictions. What Kintsugi does is address validation at a roof level. So, if you have a ship-to address in the case of a physical product or a bill-to address in the case of software, we can tell you very precisely, down to the rooftop level, the amount of sales tax you should be charging. At the end of the month, when you're trying to close your books and do the compliance piece, there are no surprises. (13:17) Very nice. And one thing I would mention is there's only one other competitor of ours that offers this service, and kudos to our entire product and engineering team. Our competitor charges $50,000 a year for that piece, and we provide this free of cost to everyone using Kintsugi. (13:55) Wow, that's amazing. Do you guys have any sort of dispute feature as well? Like, let's say a government starts coming after one of your clients, can you provide a report showing how you calculated the sales tax data and present it to the government accordingly? Yeah, we do have that. You can export all our reports about how we calculate sales tax. In addition to that, all our premium customers get what we call the Kintsugi Guarantee, where we cover up to $2 million of audit insurance. So, in case a business gets audited and they're using Kintsugi Premium to put their sales tax on autopilot, we'll ensure that we interact with the government and cover any fines they incur. (14:30) That's very cool. It's kind of like TurboTax, where they offer account auditing if you need that service as well. That's smart. Yeah, and I think for more experienced founders, they realize they want that peace of mind, which is why people choose us. They don't want to deal with sales tax; it's a non-revenue-generating activity, it's very boring, but it's a necessary evil. It has nothing to do with the business, so they can focus on the business. (14:59) You're the guy selling the shovels in the gold rush, you know what I mean? Not the coolest, not the reason everybody thought they were there, but the guy making all the money at the end of the day, providing people an actual service that they need. That's the big idea, just getting started there. I like it. (15:30) Diving into the ever-evolving world of sales tax, can you explain some of the trends you're seeing in sales tax programs at a national and maybe a global level? Sure. Let's talk about the US. This ruling happened in November 2018. By November 2019, 48 out of 52 jurisdictions, including Puerto Rico and DC, had sales tax rules regarding how to charge on physical products that were being shipped, D2C products. Ever since then, despite a global pandemic, the US collected $600 billion in sales tax in 2022, the first year after we had COVID vaccines and whatnot. That number is just going up and up. (16:00) Essentially, what has happened is a lot of local jurisdictions and local governments realized that as the IRS is getting weaker and with rising interest rates, sales tax has become the number one source of revenue for these local governments. Statistically, right now, for 54% of states, sales tax is the number two source of revenue, and for the remaining 42%, sales tax is the number one source of revenue. Wow, so that happened on a US level. Now, when a massive change happens in the US, a lot of other countries follow. You see similar trends in Europe, Canada, Asia with VAT, CST, GST. Even Dubai, which is traditionally known for no taxes, is now introducing a value-added tax. (17:29) That's interesting. Do you know any states that don't have sales tax? I know Oregon doesn't, and a lot of people from Washington State go down to Oregon to buy products and come back up. I imagine it's only a matter of time, to your point, because it is a great revenue source. (18:03) Generator for governments, exactly. I think that's the key insight. Every jurisdiction was watching very closely when South Dakota tried to make an example out of Wayfair in 2018. When they succeeded, everyone realized that this is a very big piece of the pie. As I mentioned, $600 billion of sales tax was collected by the US in 2022, and they want a piece of it. (18:42) The meta point here is that sales tax rules, when they were originally written, were for brick-and-mortar shops. They were not written with the internet in mind and all these online marketplaces shipping products directly to the consumer's doorstep. I think 2018 was a big wake-up call, with the Supreme Court realizing that these rules are archaic and need to be updated. A lot of what we are seeing are the ripple effects of that. (19:16) Yeah, it's going to continue in that direction, it appears. With that in mind, are there any sales tax exemptions or redemptions that business owners should be aware of? Maybe if they have a good program in place, what opportunities exist for them to legally write off or avoid some of these sales taxes? Of course. As I mentioned earlier, depending on where the founder falls—whether over-collecting or under-collecting—the answer is somewhere in the middle. Being diligent and mindful of using intelligent APIs at checkout that understand their business ensures they are collecting and remitting the right amount of sales tax. That's a happy middle ground. (19:49) Another thing businesses can do, and should do, is utilize product classification. This is a feature we offer for free to all our customers. Sales tax can vary for different items. For example, clothing up to a certain dollar amount is sales tax exempt, but if it exceeds either $150 or $250, depending on the jurisdiction, it becomes taxable. For someone selling clothing online, they may not realize this. This is where companies like Kintsugi, especially our intelligent API, can help. We see the dollar value and the product in real time during the transaction, and we can help optimize this piece for you. (21:00) How about internationally? With the interconnected world and a lot of e-commerce, how do you see the relationship between Europe and the US? If you're buying a product from Europe or vice versa, how can companies optimize the sales tax process and avoid getting caught not paying taxes they should? One key thing, and this is the biggest issue I see when talking to customers, is that many folks don't realize they can apply for sales tax exemption certificates or collect certificates when buying raw materials or selling to other B2B businesses. Europe, for instance, has a robust program for this. You can share a unique code with the business partner, and at checkout, this can be checked programmatically. If Pujan is selling something to Andy and Andy provides this code, Pujan's invoice does not charge sales tax, does not collect it from Andy, and doesn't have to remit it. The problem is solved at the invoicing level. (22:07) What I see is people not doing this. It's boring stuff. Like any other founder, I would much rather focus on increasing revenue, but instead, you pull back and optimize these aspects to run a sustainable business. (22:42) That's a good point. I didn't know that one. Some vendors I've worked with over the years had that kind of ruling in place and asked me to work accordingly. But you have to be very proactive with it, and many vendors, both in Europe and here, aren't aware of that specific exemption. That's a big one you brought up there. Thank you. (23:13) The list goes on and on. We could sit here all day, and I could tell you all these interesting ways. Or, you could just press the Kintsugi button, you know? (23:43) Exactly. Love it. How do you see AI and that technology playing a role in tax collection going forward, both in terms of how you guys utilize it and how governments might use it to assess how much money you might owe? I'll start with how we use it and then move on to the government. For us, the reason we've been successful in capturing the market is that we are not building an equity shop of CPAs doing the research on sales tax rules, which can change on a city, county, and state level. We leverage cutting-edge tools to stay ahead. (24:21) The local governments that we are constantly keeping track of—if they have published any new jurisdiction—we have an in-house sales tax engine that can parse the new rule. It can tell us with what confidence we are certain that the parser has done the right job. If we are supremely confident, more than 99%, then there's no human being in the loop. As a result, we are able to update the rules and have our customers follow the latest rulings in real time. If, in case, our parser is unsure, we have in-house sales tax experts that can go and look at those rules, fix those rules in the system, and provide that feedback to the AI model as well. By the way, if a rule is published, you have anywhere between 90 days to 180 days from when the rule is published to when it goes into effect. Our full-time employees who are sales tax experts can go in, fix the rules, and then provide that feedback to the AI model. (25:42) Now, with that AI model, we can actually land and expand in a lot of different countries quite rapidly. We are expanding into Canada later this year. We'll be expanding into Europe and the UK as well. Because we don't have sales tax experts doing this research to the same degree as the number of people that perhaps an average CPA firm would hire, we can do a lot of things at at least a tenth of the cost. Andy, I think this is something you were alluding to. Once you connect your data sources to Kintsugi, both your revenue as well as where you're paying payroll, we can use Kintsugi's intelligence to tell you how you can optimize your sales tax that is dependent on product classification. We can tell you the best category to classify your products to make the most intelligent decisions for your business because we have a 360 view of your business. (26:23) I'm sure CFOs and accountants love you guys. They certainly do. We are just getting started, but I think the initial traction shows that we are doing a lot of things right. (27:01) I've seen your posts online. You guys have built up quite a community. It seems like a lot of people are really excited about what you're doing. They're like, "Yay, sales tax automation, finally! Hey, somebody did it!" Yeah, exactly. I think that's the key unlock here—using PLG and AI in tandem with providing the white-glove service, whether that's from our sales team or from our onboarding team. We'll meet the customer where they are in the journey. If they want to talk to a sales rep, sure, let's jump on a call. If they want to talk to someone who has done onboarding for sales tax, let's get them into a call. If they have a unique case for sales tax, let's get them in touch with a CPA who is a full-time person here at Kintsugi. But there are also a lot of people who are like, "I do not wish to talk to anyone. I know what I'm doing. Just take my money and solve this for me. This is boring, unsexy stuff." They can hit seven clicks or take three minutes and put their sales tax on autopilot. We want to embody this idea of meeting the customer where they are. (28:10) I agree with you. Some people like the white-glove service, but there's been a big shift in software sales towards the self-service model. A lot of people are really educated and have access to a lot of online material to figure out how to use something. They like to figure it out themselves, and if you make the onboarding UX very easy, they'll just, like you said, plug and play themselves. Exactly, and that's the thing. Combine this with utilization-based pricing. I think that's a match made in heaven. Let me walk you through a concrete example. Let's say it's a business that has connected their data and sees they owe sales tax in eight different jurisdictions. They choose to put only one jurisdiction on autopilot using Kintsugi. We will never force anyone to get registered and compliant in more states than they want to. Ultimately, it's the business owner's decision. Let's say this is the state of New York. We get you registered, which is a $100 one-time fee. Once you're registered, let's say your business is not doing a lot of transactions or dollar amounts in the state of New York. New York comes back and says you only have to comply with your sales tax on a semiannual basis. We will charge you $100 every six months to do that remittance and filing fee. (29:47) So yeah, the monthly cost is not $100 a month. It's actually a lot smaller because we only charge when we interface with the government systems for you. Everything else is our service to the founding community to set up and make an intelligent decision about whether you want to get compliant or not. (30:29) That's a choice, especially considering, like I mentioned before, a lot of governments are starting to adopt this technology. They will be looking for better ways to be more efficient and productive in collecting taxes. They're going to use AI tools to help identify businesses and areas where they might be potentially missing out on sales tax. The race is on, so you have to really fight AI and use the productivity features you guys have created to get ahead of the sales tax issue and ensure compliance. Because if you don't, the government will catch up at some point using the same productivity tools on their side to figure out if you owe the money or not. No, that's exactly right. States are realizing as well that they want high-income individuals and businesses to move there, so they are disincentivized to charge high on income tax. As a result, they want to charge based on usage, which is sales and use tax. They want people like you to move to their state so that their state gets a lot more money, but they only charge you a portion of what you spend. I think that's a more intelligent way of conducting business. (31:24) I think so too, honestly. It's like a necessary evil almost. You're paying based on consumption. I want to do something, and there's a little fee attached to that. I'm okay with that. I do see that in states that have been able to do it effectively. It is a great revenue generator for them. For sure. That is what gets me super excited. To your question about how states find out if they want to be compliant or not, with the IRS weakening a little bit, local governments are realizing they are on their own. When you have someone on payroll, you as a business owner have to get registered, so they have that information on the payroll. Now they can go to platforms like Shopify and Stripe and do regular audits to see how much sales a business is getting in their state. With automation and AI, they can run this a lot faster because everyone wants a piece of the pie. They are aligned to come after businesses. (32:35) Once again, skate where the puck's going. They're going to come after you, so get ahead of it. I'd love if you could give people a few key reasons why they should pick up Kintsugi today and start working with you guys. The government is figuring out how to optimize their tax collection methods, so now is better than ever to get ahead of that. But I would love if you could highlight a few other key points for anybody in the market considering automating their sales tax compliance. I would say a couple of things. We pride ourselves on excellent customer support. Our onboarding is super easy—takes seven clicks or three minutes. We have a hybrid approach with an excellent sales and onboarding team to provide white-glove support if needed, or you can do it yourself. It's a "Choose Your Own Adventure." There's no onboarding fee, no annual contracts, and no fee for connecting your data and seeing your liability. At best, you are educating yourself to see where your sales tax exposure and liability stand today. As one of the three co-founders of Kintsugi, I assure you that we will never force any business to get compliant in a jurisdiction where they don't want to be. We truly believe in creating value for our end customers. If you use Kintsugi to put sales tax on autopilot for any given state, only then do we collect our fee. (34:19) That's very smart. It sounds like your product sells itself. That's the big idea—make it super easy for the customer and create value for them. Anything else they should be aware of before they head over to your website? Our largest customer does more than hundreds of millions of dollars in revenue. Our smallest customer does around $50,000 in revenue. Some of our customers are pre-revenue, and we don't charge them anything. We support all use cases from software, both B2C and B2B, and e-commerce whether you're on Shopify, BigCommerce, WooCommerce, Amazon, Faire, whatever. So, it doesn't hurt to either book a demo or get compliant with us. (35:51) That's incredible. I think I'd be excited about a sales tax product, but I love your product strategy and mission and values. I'm pretty excited to hear about this company today, and I'm sure everybody else is too. Press that easy button—try Kintsugi.com. Check them out today. Pujan, once again, really excited to be partners with you guys. We do have Kintsugi in NachoNacho's B2B SaaS Marketplace as well. Go there today, check it out. We have the best brands at the best prices, and obviously, we have the best sales tax compliance software, thanks to Pujan here. Check them out today in the NachoNacho Marketplace. (36:56) Some exceptional people work here that have helped us build the strategy.