Stripe acquires TaxJar to add cloud-based automated sales tax tools to its payments platform – TechCrunch

Stripe, the now $ 95 billion private payments company, has made an acquisition to expand the range of tools (and services) it provides to online businesses. It acquired TaxJar, a popular provider of a cloud-based tax service suite, which can be used to automatically calculate, report and classify sales taxes.

A key point of TaxJar is that it works in a number of geographies and the many different sales tax regimes that each one uses – a complex area for many companies doing business online.

Financial terms of the deal are not being disclosed, but in some context, the company was valued at $ 179 million after the money when it was last raised in January 2019, according to data from PitchBook.

Stripe has confirmed that all 200 employees of TaxJar, based in Woburn, Mass., Are joining the company.

Stripe will integrate TaxJar technology into its revenue platform – where it will partner alongside Stripe Billing (its subscription tools) and Radar (its fraud prevention technology), and potentially create new services by. using AI and other technologies to automate more functions – but businesses can also continue to use TaxJar directly.

Launched in 2013, TaxJar now has around 23,000 clients. Stripe hasn’t commented on the two companies’ overlap in terms of users, but the two have over the years gained a lot of popularity with startups and other online businesses, which is likely one of the reasons for which TaxJar caught Stripe’s attention.

“There’s a reason TaxJar has been a top choice for businesses: Their software tools make it incredibly easy to manage sales tax,” Dhivya Suryadevara, CFO of Stripe, said in a statement. “With TaxJar, we will help millions of internet businesses operating on Stripe with their sales tax and make it easier for them to sell internationally. And as CFO, I am delighted to welcome so many new colleagues who care deeply about tax calculation and reporting! “

When TaxJar last raised funds – a 2019 $ 60 million round led by Insight Partners – it mentioned that it had been profitable since 2016 (fueled by a 2014 $ 2 million investment from Rincon Venture Partners and Daher Capital), and said it has 15,000 clients. , so that this base has increased (in particular, 53% in two years).

Stripe has already taken a few steps in the tax arena, acquiring Payable in 2017 to help create 1,099 reports for clients who pay entrepreneurs and partnering with Intuit to help on-demand workers manage their finances. The acquisition of TaxJar, however, fills a notable gap in its native product set, as well as a sore point for its clients, particularly in the area of ​​sales tax.

Stripe says adding sales tax collection and remittance – a complex system that covers up to 11,000 tax jurisdictions in the United States alone – was one of the most requested features by users, a fact which users themselves have openly lamented:

Ironically, if you link the Tweet above, you will see it in a wire, TaxJar enters the conversation.

This is because TaxJar was already “fully integrated” with Stripe as a partner, meaning that businesses could use TaxJar to calculate and manage sales taxes on transactions made by Stripe. But using the two together required logging into TaxJar, creating a separate account, and then getting a unique URL to paste into your Stripe order settings to run the services together: not the picture of the simplicity that Stripe usually presents to users.

Some of this will now become smoother for Stripe customers as part of its larger push for more automated tools to cover the more repetitive aspects of the online sales transaction process. (Other automated areas include algorithms regarding payment rejection, billing methods, etc.)

“Like everyone at Stripe, we think every day about how we can help startups and multinationals remove barriers to growing their businesses,” said Mark Faggiano, CEO and Founder of TaxJar, in a statement. . “And that means the complicated job of sales tax compliance is as easy as it gets. We know that in order to grow the Internet’s GDP, compliance is essential. We couldn’t be more excited to join Stripe and help millions of businesses around the world. “

Stripe noted that the types of services covered by TaxJar include providing accurate and localized sales tax rates at checkout, submitting tax returns to local jurisdictions, and remitting collected sales tax, and reporting. detailed on local jurisdictions to show sales taxes and sales taxes collected, and suggesting the correct product tax code based on a company’s products.

The fact that TaxJar closes the deal with its own customer base and revenue model matters for another reason – it’s another sign of diversification for Stripe – key as the $ 95 billion business continues. to grow and is potentially heading for public listing, now under consideration. rumored to be late 2021 or early 2022. Other signs of this diversification strategy include the acquisition of Paystack by Stripe last year in Nigeria to help it make payments in Africa, a deal it closed for more than $ 200 million.

(TaxJar’s SaaS price starts at $ 19 / month and increases from there, including an enterprise level that will be handy for Stripe’s platform.)

Stripe had a turnover of $ 1.6 billion (or up to $ 7.6 billion! … Stripe declined to comment on both numbers) in 2020, according to this WSJ profile, but he has also been shaken quite significantly by the COVID-19 pandemic. Some industries where Stripe played a big role, like travel, saw a big drop in transactions, while others, like e-commerce, saw a much bigger increase.

One thing to take away might be: Regardless of what our ‘new normal’ will look like, it seems that e-commerce in one form or another will continue to grow, offering a wider range of services, such as the automatic calculation of sales tax and reporting. around its core business, payments, will allow Stripe to increase revenue per user to offset the ups and downs of specific industries when and if they happen again.

The field of tax technology sits somewhere between e-commerce and fintech and has found its own momentum in recent years, following both the growing size of the e-commerce market and the evolution of fintech, where startups build the complex processes that are not the core competency of their target customers and put them into products that are easy to use and integrate. Others in the same space as TaxJar include Avalara, Vertx, and Sovos, among a larger field of startups.

Update to correct the fact that the last round of TaxJar was led by Insight Partners

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