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How real estate giant Zillow handles sales and use tax compliance – Part 2

Scott Peterson, Avalara
In Part 2 of this interview, Scott Peterson, Vice President of U.S. Tax Policy and Government Relations for Avalara, continues his discussion with Jason Heckel, Senior Director of Tax at Zillow Group, who describes how he led Zillow in automating their sales tax group. Jason also explains the benefits and challenges of implementing business processes in a large, growing organization. Find Part 1 here.
 Scott: How much time do you spend trying to stay ahead of tax changes?
Jason: I spend at least four to five hours a week — each and every week — reviewing our systems. I’m analyzing how the company is changing and how we can adapt our other software systems to stay ahead.

Scott: How do you prioritize sales tax compliance among all your other financial and accounting obligations at your company?
Jason: Sales tax compliance must be a priority. At Zillow, we’ve automated, and that has been fabulous for our company. Using an automated tax compliance solution has been well worth the money and time, and helps ensure we are compliant.

Scott: Was there a specific event or activity that made you rethink the state of your company's sales tax compliance?
Jason: For Zillow, it was the acquisition of Trulia in 2015. Because it was such a large acquisition, there was a substantial public announcement in the media. Any major announcement like that brings attention to you in many ways, and can alert sales tax auditors. I was hyper-aware of this exposure because when I was working at a previous company, auditors heard about us when we were mentioned in a newspaper. The visibility brought attention to our need to reanalyze our tax compliance and tax determinations. And your exposure only grows as times goes on.

Scott: How do you evaluate your current accounting systems and processes?
Jason: As part of a recent transition, we were forced to reevaluate processes, procedures, and systems. In some ways, I was given a lucky break to be forced down that path with the entire finance organization.

Scott: What were your considerations when choosing an automated accounting solution?
Jason: A big part of our decision was driven by the plugins that were offered for our invoicing systems. We use Zuora as our billing, finance, and commerce platform and it took literally an hour to set up, and we made some adjustments in just a few minutes.  That ease of use was a big part of why we chose our sales tax compliance solution. There is also a simple, easy way to dashboard the relevant information: What are our taxes? What were our revenues by jurisdiction? That's how we manage our 'sales action plans.'
Scott: What tools or processes were you using for sales tax compliance before you automated?
Jason: In terms of actual reporting, we were literally doing it by hand. It was extremely manual.
We were notified by a couple of states and we were filing in those states, but we could see that it was just going to increase. As time went on, we knew we needed a better solution.

Scott: How did you evaluate a sales tax automation solution?
Jason: I contacted several vendors. I anticipated a software solution and decided, early on, that the best solution would likely be to automate the true sales tax compliance side of it.
I wanted an all-in-one solution and I wanted to avoid multiple vendors. Some vendors had a software solution, but not a compliance team that could produce the returns, and vice versa. I knew we needed a software solution that was easy to use, easy to plug in, and had the backend side of tax compliance Zillow needed. Knowing my requirements in advance made it easy to determine which vendor to go with.

Scott: What advice would you give peers regarding sales tax compliance?
Jason: I have found that there are a few key points that will help guide your decision. These may seem like common sense steps, but when navigating all the requirements and vendor offerings, it's a good idea to have a road map.
1. Don’t wait too long and stay ahead of it. If you are considering automating sales tax calculations or reporting, the vendor selection process, budgeting, and analysis can take a while. Your exposure only grows as time goes on so it’s best to start the process early.
2. Have a clear understanding of what your business requires — now and in the future — so you can properly scope and price.
3. Consider how a solution would work with your existing technology systems and how it integrates with billing, ERP, ecommerce platforms, etc.
4. Mitigate your exposure and risk as quickly as possible. Regardless of your sales tax solution — manual or automated — it’s essential that you understand your company’s sales tax liabilities, risk, and exposure.

Jason Heckel is Senior Director of Tax at Zillow Group. A tax specialist with more than 14 years of experience working for and with both private and public multinational companies, Jason has expertise with SEC reporting, large corporate income tax reporting, mergers and acquisitions, entity restructuring, IRS and state tax examinations, as well as indirect tax analysis including nexus and taxability studies.
Zillow Group houses a portfolio of the largest and most vibrant real estate and home-related brands on mobile and the web. With its living database of more than 110 million U.S. homes, Zillow serves people throughout the home lifecycle, including buying, selling, renting, and financing. The company also provides Zestimates, starting points for determining a home’s value, Rent Zestimates, and other home-related information. In 2015, Zillow acquired Trulia, an acquisition that greatly changed the way Zillow conducts business and operates on a day-to-day basis.
Scott Peterson

Scott Peterson is Avalara’s Vice President of U.S. Tax Policy and Government Relations. Prior to Avalara, he was the first Executive Director of the Streamlined Sales Tax Governing Board - an organization devoted to making sales tax simpler and more uniform for the benefit of business. Scott also spent 10 years as the Director of the South Dakota Sales Tax Division and 12 years providing research and legal writing for the South Dakota legislature.

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