Character AI is a different kind of AI platform. Instead of focusing on enhancing productivity and accomplishing routine tasks, it allows users to create customized AI personas and enjoy interacting with them through role-playing and realistic conversations.
Although Character AI is a relatively lean company, people across the globe have embraced the platform, which reports more than 20 million monthly users.
However, because it’s a lean company, Character AI can’t dedicate resources to maintaining a full-time accounting department to handle its finances. Instead, it turned to Karsten Loose, the founder and managing partner of Karlon Group, which provides fractional accounting solutions for software and consumer companies.
Karlon Group provides startups with support for all financial and accounting functions. Its role is to bring financial structure and clarity to clients, and one of the key ways it does this is by helping with sales tax compliance. Loose explained, "As companies like Character AI expand and grow, sales tax becomes an inherently complex area of the business."
Fortunately, Loose knew just who to turn to to make sales tax compliance effortless for Character AI. Numeral was the perfect solution.
Sales tax compliance is a major operational gap
Before founding Karlon Group, Loose worked in-house at a number of startups. Both with those companies and with the businesses he works with at Karlon Group, he has noticed a trend. Many startups lacked a plan for managing sales tax, VAT, and GST obligations.
"Sales tax is not necessarily a strategic focus," he explained. "It's pure compliance. There's no revenue that can be generated, or even cost savings. So when I start working with companies, one of the patterns I see is that it's not something they're proactively focused on."
Many companies lack a formal process for sales tax compliance, and some might not even think about sales tax until they receive a notice from the state. Unfortunately, businesses risk audits and penalties if they don't register and begin collecting and remitting tax as required.
Solving this issue is one of Karlon Group's many services aimed at helping companies get their finances in order, but an effective solution involves finding the right partner.
Modern sales tax compliance requires a different kind of solution
In his role as a fractional finance professional, Loose has had a unique opportunity to explore multiple sales tax solutions. He's worked with third-party accountants and used software programs he described as "archaic." So when it came to finding the right partner for Character AI, he knew just where to turn.
"I initially came across Numeral when doing an RFP for a global software business with users and creators all over the world," Loose said. "I realized they needed to start collecting sales tax in the U.S. and VAT in other countries, so I was looking for a global solution, as our current sales tax provider focused only on the U.S."
That software company needed a sales tax solution that could handle complexity, as it not only worked with creators and customers from all over the world, but also needed to get caught up on past obligations. He also wanted the solution to be fast, intuitive, and able to scale with the business.
And he wanted this same speed, simplicity, and growth potential when choosing a solution for Character AI.
"Numeral checks all of those boxes," he said. "Over the years, I've worked with a lot of different sales tax software companies. There are the legacy companies, there are the 2.0 versions, and then there's the 3.0 version, which is Numeral."
As Loose explained, the Numeral platform is different because "it's a really modern, elegant software solution. It's really fast. It's laid out in a really intuitive way. And I think that's very different from some of the legacy platforms out there."
How Numeral helped facilitate Character AI's global expansion
When Loose came in to support Character AI, he explained that sales tax had become an operational roadblock to growth
"As Character AI grows and expands globally, sales tax becomes a really complex area for the business," he said. "Every country has different registration processes. They have different VAT or sales tax rates. They have different remittance procedures. And those rules can change at any time. So you really need a solution that you can rely on to manage that entire complex process across dozens of countries."
In Karsten's experience, many companies provided some sales tax support services, but few handled every step of the process. "You have not only the collection of the sales tax, but also remittance, and then you have to register in new states. Typically, a software company will not do all three of those things. So that's a big challenge for finance and accounting teams."
Numeral was different. Numeral was able to take over the entire process of managing sales tax compliance for Character AI. This includes:
- Tracking nexus to determine when registration is required in new jurisdictions, both within the U.S. and globally.
- Integrating with sales platforms and billing systems to calculate and collect the correct amount of tax.
- Automatically registering the company in new jurisdictions when nexus is established.
- Filing sales tax returns and remitting payments.
- Receiving and responding to mail from tax authorities.
- Keeping Loose and Character AI up-to-date on sales tax obligations and complex tasks.
With Numeral's help, Loose doesn't have to think about sales tax; it's just handled.
"Numeral is my go-to solution because it's an end-to-end solution," Loose said. "They handle everything from registrations to remittances to filing. They handle all the compliance, all of the mail. I can trust that Numeral has global sales tax compliance taken care of, so I can focus on other things."
Numeral offers sales tax automation, plus accuracy and a human touch
Karsten's focus was on finding software that worked, but he also wanted a partner that was more than just a platform.
"Another big challenge with the legacy sales tax companies is that they're usually overly automated, and they're almost 100% software solutions. So there's no human touch involved. The way sales tax works, sometimes you just need to talk to someone."
Numeral fits the bill, offering both the type of software that Loose feels "just works" and the real human support that's so essential. And these weren't the only features that made Numeral the obvious choice.
There were a few other ways that Numeral differentiated itself from the competition as Loose looked for a sales tax solution:
Effortless onboarding and a platform that just works
Since Loose manages financial compliance for clients, he needed a tax solution that offered him a big-picture view of the company's obligations so he could keep tabs on compliance tasks. Numeral delivered, offering the information he needed at a glance, on a platform that provides a top-notch user experience.
"The platform gives you a ton of visibility into our sales tax," Loose said. "But it’s not difficult to learn. That's extremely important. I think the other important thing is that it has to be able to handle the complexity of your business as you scale, but it shouldn't be really clunky. And difficult as that is, I think Numeral fits that description really well."
Human expertise when you need it
Numeral is an AI-native platform, but Numeral also offers support from tax experts. And that support goes far beyond Numeral's policy of having a tax expert review every return.
"What makes Numeral really different is not only the fact that it’s very modern, elegant software. It’s also the fact that they have a high-touch human element. So when you're onboarding, you're connected with a single account rep to help you," Loose said.
Loose also wanted a true partner in sales tax compliance, not just a company to fill out forms. And Numeral delivers that. In fact, Loose explained that Numeral was "also really helpful when we were just thinking about our sales tax strategy overall."
"Numeral stood out to me because their sales tax recommendations were very strategic,” he said. “They not only understood the rules very clearly, but also had a really good sense for prioritization, which is really important for growing companies."
The Numeral guarantee
When Loose chooses a sales tax compliance solution for the companies he's supporting in his role as fractional CFO, he must have the utmost trust that the company won't let him down. That's one more reason he chose Numeral to manage sales tax, GST, and VAT compliance for Character AI.
"Numeral stood out to me because it's more accurate," he said. He was also comforted by Numeral's guarantee. Under this guarantee, Numeral takes care of filing fees, as well as penalties and fees, if an audit uncovers that we made an error or filed a return late.
"If Numeral were to file something incorrectly, they would take care of penalties and interest," he said.
Numeral is the partner of choice for managing tax complexity
Loose believes that Character AI is just one of many startups that could benefit from Numeral's support with tax compliance.
In fact, while sales tax may not be a primary focus for most up-and-coming businesses, Loose believes it's best for new companies to focus on putting the right systems in place early.
"The longer you wait to build out a proper finance function, the harder it is," he said. "It's never too early to invest in finance and accounting."
When you're making that investment, Numeral is the obvious partner to turn to for sales tax help. "At the end of the day, my job is to bring financial structure and clarity to my clients," Loose said. "Numeral handles the tax complexity behind the scenes so we can move faster and live a little easier."
