Numeral co-founder and CEO Sam Ross worked as a product manager at Airbnb before traveling the world and came up with the idea of a sales tax compliance startup.
“This was early 2018 and I wasn't working remotely like I do today,” he told TechCrunch in an interview. At the time, consumer businesses were a huge trend, so he supported his travel dreams and ran several self-funded e-commerce brands from the road. He runs an online jewelry store and still maintains the Vitamin DTC site.
While he loved the freedom his business provided, Ross (pictured above, left) was forever irritated by the complex, bureaucratic process of handling sales taxes on the products he was selling.
Until 2018, e-commerce and software as a service (SaaS) companies didn't have to pay sales taxes to the states that had customers, but they had no physical presence. However, the Supreme Court ruled later that year that these companies must collect taxes in the jurisdiction where the client is located.
“All of a sudden, I have to deal with 40 plus states because I have to deal with tax collections from my California clients,” Ross said. “It was painful.”
When Ross applied for Startup Accelerator Y Combinator in 2023, he was encouraged by his former Airbnb boss, partner Gustaf Alstromer, to build a startup that automates all aspects of sales tax management.
On Thursday, Numeral announced it had raised $35 million in Series B funding, valued the company two years ago at $350 million. The round takes place just six months after raising the $18 million Series A, led by Mayfield, and participation from other investors including Benchmark, UNCORK Capital, Y Combinator and Mantis was co-founded by members of electronic DJ group The Chainsmokers.
There are many software products for managing sales taxes in the market, but Ross believed that AI could remove complexity and serve clients as a human tax accountant. This includes everything from tracking how tax laws are changing in more than 11,000 jurisdictions to tracking tax-related mail, filing and paying taxes on behalf of clients.
AI can handle most aspects of sales tax, as most rules are not ambiguous. Therefore, the risk of hallucination is low.
“But some of the laws are pretty crazy,” Ross said. “In New York, if you have a full bagel, it's tax-free, but if you cut it in half, it's considered ready to eat and it's taxable.”
Numeral's AI is aware of thousands of such laws.
Last year, the startup increased its revenue by 3.5 times and now serves more than 2,000 software and e-commerce clients, including Eight Sleep, Graza Olive Oil and Manus.
Sales tax management may seem like a niche, but there are a few startups trying to solve it. Competitors include Anrok, Zamp and more. And Avalara, the 26-year-old incumbent owned by Vista Equity Partners, is set to be released later this year.
Ross says Numeral's international products distinguish it from its competitors.
“We file taxes on people in Tanzania and Kenyans in all these small markets where they traditionally had to use CPA companies,” he said.