I’ve been aware for some time of a company called Avalara, which is in the cloud-based tax-compliance business. In the US, Avalara keeps track of the vast array of sales tax rates, which are imposed not only at the state level but often also at municipal and county levels. Avalara integrates with a number of electronic commerce platforms, which can pass destination address info to the system and thereby obtain the appropriate tax rate in real time and include it in the end customer’s charges at checkout.
The company did its Initial Public Offering on June 13, and AVLR quickly jumped from its IPO price of $24 to about $45 , putting its market capitalization at about $2.9 billion. Yesterday, the Supreme Court issued a decision that has great implications for Avalara’s business…as well as for the businesses of hundreds of thousands if not millions of on-line retailers and the consumers who buy from them–and as of this moment AVLR is trading at $52.16, with a market cap of $3.32 billion.
What the Court apparently ruled is that states can impose sales taxes on on-line transactions (and, I would presume, classical mail-order transactions as well) even when the seller does not have a physical “nexus” (such as a warehouse, and office or a factory) in that state. (And you can be sure that most of them will take advantage of this opportunity.) This is really “just” a cost problem for very large on-line merchants such as Amazon, but the compliance issues for smaller businesses are going to be considerable. Avalara seems well-positioned to help with this problem, but the ruling is still going to be far more burdensome to the smaller on-line merchants than to the large ones.
See discussion of the sales tax issue at the Instapundit post.
Regarding Avlara, I have not analyzed this company as a potential investment and am not giving an opinion on it for that purpose either pro or con, certainly not giving investment advice here.