Zamp targets growing demand for sales tax solutions

Until six years ago, many e-commerce and SaaS companies could avoid paying sales tax in states where they had customers but no physical presence. But as online shopping grew, states realized they were losing tax revenue.

The era of freebies for online retailers ended in 2018 when South Dakota sued Wayfair over sales tax collections. The Supreme Court ultimately sided with South Dakota.

Today, online stores and SaaS companies must collect sales tax from their customers wherever it is required. This is no easy task, as tax laws vary widely by city, county, and state.

Rohit Bhadange, who has worked in venture capital and private equity, identified sales tax compliance as a major pain point for e-commerce and SaaS companies. So about 18 months ago, he launched Zamp, a startup whose software can automatically calculate and file sales taxes for businesses of all sizes.

Since then, Zamp has expanded its customer base to more than 400 companies and achieved annual recurring revenue in the mid-millions, according to Bhadange. The rapid growth has captivated investors.

On Thursday, Zamp announced a $10 million Series A funding round led by Valor Equity Partners with participation from Venus Williams, Day One Ventures and other investors.

In addition to expanding its e-commerce and SaaS client base, Zamp has begun working with accounting firms struggling with talent shortages caused by declining interest in the profession. The firm’s accounting clients include top 25 U.S. accounting firms Baker Tilly and Withum.

Accounting firms are under increasing pressure to help clients comply with sales tax laws, especially as states step up tax audits, Bhadange said. “We have a perfect storm where enforcement is up; tax compliance is up, (but the number of) accountants is down.”

To meet this demand, Zamp is introducing a new product called Z-tax, which helps accountants and bookkeepers provide sales tax services without having to add staff.

“We want them to focus on higher value advisory services while we handle the entire sales tax process,” Bhadange said.

Zamp isn’t alone in the sales tax compliance solutions market for startups, especially SaaS companies. Its main competitor is Anrok, backed by Khosla Ventures and Sequoia. Founded four years ago, Anrok may be a bit older and bigger — it recently raised $30 million in Series B funding — but Zamp’s rapid growth suggests there’s room for multiple players in the space.