How Byte’m simplified sales tax compliance with Numeral

Jack Davis and Jacob Tubis wanted to make brownies for a living, and they were armed with a secret weapon: Jack's mom's legendary recipe. 

Their company, Byte'm Brownie Bites, was born from this desire, and Jack and Jacob had a clear vision for how to make "the tastiest brownie possible." They would start with the famous recipe, use high-quality ingredients, treat taste as the top priority, and fill a gap in the marketplace left by other companies that used junk ingredients or emphasized protein at the expense of edibility. 

Fortunately for the two co-founders, their bite-size brownies caught on quickly. After only a few months, Byte'm went from being on sale at one store to being available at more than 500. 

With such a rapid rise in demand, Byte'm, of course, faced some growing pains, including when their co-packer sold his business, forcing the company to find a new manufacturer fast. And that led to a slew of problems. "We had to spend a lot of time focusing on each aspect of the business and trying to make it more scalable," Jack said. 

One of those problems turned out to be a financial issue that wasn't even on their radar from the start: managing sales tax compliance.  

Exponential growth created a sales tax compliance challenge 

Sales tax became a source of concern for Byte'm for many reasons, including the speed of the company’s expansion. "The growth curve has been really tough to deal with. Things start slow and then explode all at once," Jack said. 

As Byte'm grew, the company expanded its sales channels, adding to the complexity of its sales tax obligations. 

"We currently do one-time online orders and have been looking at bringing on subscription boxes. We also work with a local New York distributor, and we're onboarding with larger ones like UNFI. We sell most of our product direct to retailers right now. Retail makes up about 90% of our sales, but we have been looking to expand more into ecommerce."

Unfortunately, this combination of exponential growth and different sales channels created a perfect storm of sales tax complexity, for several reasons:

• Byte'm must manage which sales are tax-exempt. Resellers and wholesalers can often purchase products without paying sales tax, while retail customers must be charged sales tax on taxable goods at the time of purchase. Ecommerce sales may also be taxable; however, if products are sold through a marketplace facilitator, the marketplace facilitator may take responsibility for tax collection.
• Byte’m must keep exemption certificates on file. Resellers and wholesalers must provide each state's required exemption or reseller certificates in order to be eligible to make non-taxable purchases. Byte'm must verify that the certificates it collects are valid and keep them on file. Without these exemption certificates, the company could become responsible for covering the costs of any uncollected tax.
• Byte'm must track economic activity in every state where it does business. This is necessary to identify when it has established economic nexus in a state and thus created an obligation to register and begin collecting sales tax there register for sales tax by the state's deadline. Complicating matters further, each state can set its own economic thresholds: an amount in sales and/or a number of individual sales. A company may also have an obligation to register and collect sales tax when it establishes physical nexus in a state, through a physical presence such as offices, inventory, or employees.
• Byte’m must charge the correct amount of tax in any state where the company is registered. This means the company must understand how different states tax food products like brownies, as well as whether shipping is taxable or non-taxable. 

"You have to keep track of so many different states. It would be one thing if it was just the state your business is based in. But 50 states is too many — all while you are trying to grow and deal with so many other parts of the business. It is too much for a small team to handle unless you can automate it or use tools to help," Jack said. 

"That's why we are happy to partner with Numeral — because they have professionals on their team who can help you navigate it, so you don’t have to face it alone." 

A sales tax system that didn't work

Like many companies, Byte'm had not been handling sales tax very effectively as the company grew. Sales tax is complicated and doesn't drive revenue, so compliance often isn't a top priority for a growing business. 

"We would always forget to do it and do it last second. Jack even had to get his dad to help file some of them for us. It was a very tedious process, and it feels like you need a specialized degree just to understand it," Jacob said. 

Jacob and Jack knew their process wasn't effective and wouldn't scale, but they had other priorities, so it took them a long time to pursue a solution. "Sales tax always felt urgent, but when we started to go from 500 to 1,000 stores, we were already dealing with a lot of growth pains. Sales tax falls to the wayside and becomes one of the least sexy things to address."

Without a comprehensive compliance process, the company was at risk. And their manual approach quickly became untenable as the business grew, especially as Jack's dad tired of doing a tedious job he'd never signed on for.

The company eventually did hire an accountant. But sales tax is a complex and specialized process that even a CPA doesn't always want to manage on their own, especially with competing demands on their time. 

Fortunately, their accountant had a solution for Byte'm that would let the company stay compliant without tying up valuable in-house staff resources. 

"When we finally got an accountant, they suggested Numeral so they could focus on other parts of our finances." 

An accountant-recommended solution that exceeded their expectations

The co-founders became Numeral fans as well, as soon as they saw how easy onboarding was and how comprehensive Numeral's support was. 

"The onboarding process has been great! They have multiple team members who have been very responsive and are there for any part you need help with."

Numeral took over managing all aspects of sales tax compliance, with Jack and Jacob both appreciating the specialist support Byte'm received. In fact, Jack noted that Numeral's responsiveness was one of the best parts of working with the company. "They have different teams to handle different parts of the business, which is really professional." 

Now, Numeral takes care of:

• Nexus monitoring. This includes tracking sales across all of the different sales channels Byte'm uses, to determine when the company is nearing or has met a nexus threshold and must register in a new state. 
• Auto-registering Byte'm when registration is required due to economic or physical nexus. Registration enables Byte'm to legally begin collecting the required sales tax on all taxable sales within the jurisdiction. 
• AI product classification. This involves applying state-specific tax rules to determine whether a product is taxable or exempt, then ensuring the correct sales tax is charged on the product and, where applicable, shipping.
• Collecting exemption certificates. Numeral requests these certificates from resellers and wholesalers, or confirms that the buyer already has a blanket certificate on file. Numeral also verifies the validity of the certificates and keeps the certificates accessible and organized so Byte'm is audit-ready in case any state's tax authority wants to determine whether a tax-exempt sale was valid. 
• Filing and remitting sales tax returns and sales tax payments. This is required in all locations where Byte'm has registered for sales tax. Numeral manages different filing schedules based on sales volume and local rules to ensure that every return is submitted on time.
• Sales tax planning. As the company expands into new markets and grows its ecommerce operations, Numeral is there to provide guidance, support, and sales tax strategy so Byte'm can make proactive choices and ensure that sales tax is no longer an afterthought. 

Numeral is an end-to-end solution for Byte'm and even manages sales tax correspondence with states through a virtual mailbox. And every service is backed by the Numeral Guarantee. 

While Numeral makes most aspects of sales tax management hands-off through intuitive tools like auto-registration when nexus thresholds are met, Jacob and Jack can also track their tax obligations through Numeral's user-friendly platform. "They are very modern," Jack said.

Both Jack and Jacob also appreciate that Numeral understands the consumer packaged goods industry and is dialed into what growing companies prioritize.

Most importantly, Numeral allows the pair to "focus on the fun parts of business like selling brownies and seeing the smiles on people's faces while Numeral handles the boring parts like tax compliance so our growth doesn't slow down."

And while they describe their experience with Numeral as "Amazing, 11/10," they do wish they'd done one thing differently: started working with Numeral sooner. "Focus on investing in software before you think you need it. Otherwise, your process will implode as you grow fast."

Numeral opens the door to new growth opportunities

With their newfound freedom from the drudgery of sales tax compliance, Jack and Jacob will be focusing on growing the business, with more ecommerce and more retail sales. They’re also excited about launching new products. 

And Numeral will be there to help them ensure that they are ready to comply with the sales tax obligations imposed on ecommerce and retail businesses. This continued support is one of the many reasons why Jack and Jacob feel that Numeral provides "the best experience and service possible in one of the more boring industries."

Of course, with Numeral's help, sales tax compliance isn't quite so bad because, as Jack explained, "Numeral added joy and excitement to one of the parts of our business we used to dread the most."