Main Line firm helps startups navigate state sales taxes
Exactor uses automated processes to help online retailers and small businesses calculate sales tax in real time and file tax returns.
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JONATHAN BARSADE, 52, of Wynnewood, is founder and CEO of Exactor, an online provider of tax-compliance solutions for firms that do business in multiple states. Barsade, a former tax lawyer, started Exactor in 2006. He invested more than $1 million to get the business running. Exactor has 25 employees, mostly in Philly and Miami, and 5,000 clients.
Q: How did you come up with the idea for Exactor?
A: My background is as a tax attorney and I published a lot about the borderless environment the Internet was creating and e-commerce was still nascent. I began to think about sales taxes and online transactions, where will the tax occur and how do you calculate it in real time.
Q: What's Exactor do?
A: We have a fully automated, end-to-end system to calculate sales-and-use taxes and to file tax returns. It calculates taxes whenever necessary, in real time. We do for sales tax what ADP did for payroll processing.
Q: Value proposition?
A: The automation of a process that right now is being done manually by merchants. When you start a business, the last thing you want to worry about is complying with taxes and filing returns every month.
Q: The biz model?
A: Our fees are based on the number of transactions flowing through our system for [tax] calculation and then a fee per return we file for the client. Fees take into account both mom-and-pop operations to companies with hundreds of millions in revenue. For a small mom-and-pop, the fee could be $20 to $30 a month. For large companies with exposure in all 45 states [with a general sales tax], the fee would be $2,000 to $3,000 per month.
Q: Who competes with you, and what differentiates you?
A: Several companies provide our type of service, especially to small businesses. Others have been around a long time, but their focus is Fortune 500 companies. The differentiator is quality of customer service and pricing.
Q: The name Exactor?
A: It means a person who collects taxes.
Q: The Senate passed the Marketplace Fairness Act last year. The House hasn't acted. What would that legislation do?
A: States don't have the power to enforce collection of sales tax on all online transactions. Today, some states collect sales tax from a few online retailers like Amazon. The act would basically enable states to collect tax from any online business regardless of where they are based if they do business in a state.
Q: Where's the biz headed?
A: It's a growth market, but the entry barrier is high. It's a combination of technology that simplifies and is easy to use on the one hand but also content to track the rules and rates.
Online: ph.ly/YourBusiness