Sales Tax Fundamentals
Get up to speed on the basics of sales tax
Launched in 2015 for men who want the best-fitting, best-feeling underwear, Underwear Expert is a subscription-based underwear curation company that features proprietary technology based on founder Michael Kleinmann’s two decades in the underwear industry.
Initially, Underwear Expert needed a sales tax software to handle their sales tax responsibilities in only a couple of states. They found TaxJar years ago and used basic services to generate necessary reports to remain compliant. As their men’s underwear subscription business grew and evolved, so did their need for a more comprehensive solution.
Similar to TaxJar, Underwear Expert is a technology-focused company that differentiates themselves by their innovative approach that curates men’s underwear to create a truly custom and unique customer experience. They were initially drawn to TaxJar because of their need to classify their products as apparel (tax rates can be different depending on the types of products sold) and ensure they were calculating the right sales tax rates.
With the passing of the South Dakota v. Wayfair decision in June 2018, businesses like Underwear Expert quickly found they could be responsible for remitting sales tax in as many as 45 states (depending on their economic activity). This landmark case left Underwear Expert with more complex sales tax needs than before, and they reevaluated finding a new solution or upgrading their services with TaxJar.
“Having a software solution to handle changing rates and accurate product tax codes that could match the technology we were integrating with was important. We needed something that was enterprise-grade and robust. We didn’t want to change tax software as our business grew,” Kleinmann said. “We had been a TaxJar customer for a while, but after the Wayfair decision we had an obligation to remit sales tax in dozens of states,” he added.
TaxJar provided Underwear Expert with additional features such as Address Validation and Rooftop Accuracy, along with a truly human onboarding and 24/7 customer support.
“We have complex situations that require us to talk to professionals before our tech teams can implement changes. Having access to a support team who can get back to us quickly is great, because sales tax is so complicated and the implications of incorrect sales tax are very costly.”
“Also, being able to clarify what we filed each month with each state is really helpful. In the event that something is wrong, it’s really nice to be able to connect with TaxJar,” Kleinmann said.
Underwear Expert’s unique technology curates underwear and allows customers to preview their selections before they ship as well as make changes to the products or shop directly from Instagram. With sales increasing across the country, they enjoy the ability to automatically file their sales tax returns with each state at the correct filing frequency, ensuring they never miss a deadline.
“We use AutoFile whenever possible. The reporting interface is really nice because sometimes you need to know your revenue during a time period in a certain state to determine if you’re going to have nexus, or if you are getting close to having it,” Kleinmann said. “Once you get everything set up, AutoFile is nice and you just manage issues with the states where you have nexus. To have all the sales tax information in one place is very useful.”
“Having a subscription-based business model is more complex than a traditional eCommerce model, so getting things right from the beginning is important,” Kleinmann added.
“We’re a relatively small team that’s very lean and efficient, so we look for products that can help us. We could spend huge amounts of time and money on accounting, but we need to align ourselves with products for a modern-day company. TaxJar is very helpful in that regard that it doesn’t add an administrative burden.”
As high-growth eCommerce businesses like Underwear Expert continue to evolve and have economic nexus in multiple states, TaxJar is a comprehensive, full-service, cost-effective sales tax solution. Visit www.taxjar.com/how-it-works/ to learn more about how TaxJar can automate and simplify sales tax for your online store.