Brent Reeves, Co-Founder of Ceretax Part 1: Accidental Beginning to Technological Insights

Meredith: 00:01:02

Welcome to SALTovation.

The SALTovation show is a podcast series featuring the leading voices in SALT where we talk about the issues and strategies to help you make sense of state and local tax.

Meredith: 00:01:14

Today on the SALTovation podcast, we're joined by Brent Reeves, a serial entrepreneur in the tax technology space. In this episode, we trace Brent's journey From co founding SureTax to launching SaraTax, and we dive into the driving forces behind his success.

Brent shares how his early partnerships, real world tax pain points and the evolving market needs led to the creation of multiple platforms that serve businesses of all sizes. It's a candid conversation about industry disruption, building agile teams, and finding purpose in sales tax.

Meredith: 00:01:48

All right, Brent, thank you so much for joining us today on the SALTovation podcast. It's great to have you here.

Brent: 00:01:53

Thank you so much for having me, Courtney.

Meredith: 00:01:55

So, Sarah, tax is your first pass at software. How did you find yourself in the software space and more specifically sales tax, and where did you start to gain that foundation?

Brent: 00:02:07

Yeah, I'm probably like most people, I don't know too many people who set out their, their life going, I'm going to, I want to go into sales tax.

So there's always some kind of like, event or something that pulls you in this direction, you know, even like people who go, I want to be in accounting or something like that. I mean, it's never usually like, I want to be in sales tax.

So I'm going to say I found it by accident and I'm going to blame it all on my partner, Mike. So Mike's first job out of college with a company called Atlantax, which is, you know, was a tax compliance firm, you know, way back in the day.

After that, him and a partner started Tax Partners. I think that was in the late 90s. And him and I knew each other back then, actually.

Our wives had their first jobs together out of college, so we were more, you know, running around buddies than we were business partners.

d to Thompson Reuters in like: 2005

, I want to say it was around: 2009

I was, I was with that I had started and he had this, this great idea and I said, well, you know, I really don't know a lot about this, but I will surely learn. And I will also help, you know, obviously put it together and fund it. And so, yeah, that's kind of how it started.

And we founded SureTax in: 2010

So, yeah, that's kind of my immediate background, immediate foray, I guess, into the industry, like I said, kind of like a lot of folks kind of by accident.

Kristine: 00:04:06

But then: 2015

Brent: 00:04:17

Yeah, I guess. I guess I left that out. So, you know, sure, Tax was great. It was a great run.

And when we got acquired, I don't think we had any intention of ever, you know, starting another one, quite frankly, at the time. But it just, you know, sales tax was moving quickly. It's moving quickly as a SaaS. And just Mike and I are kind of quick movers also.

And we, you know, didn't. I guess we didn't acclimate as well to that, that really large kind of bureaucratic type of company.

And after a while, you know, we were looking at other ways of doing things. We started getting calls from another number of folks in the industry, which led us to believe there was.

There was space still for another player that was nimble, agile, taking advantage of new technology.

So we put our heads together and said, okay, well, who do we know out here in the space that we think are, quote, unquote, the all star team of people that we've worked with in the past, not just with our company, but with some of the other players. And we started inquiring and we were able to put together a pretty solid team that we felt were best and brightest.

And so that was kind of when we decided to make the leap and do it again.

Kristine: 00:05:34

But who was the team? Is that tech? Is that sales?

Brent: 00:05:36

Like, what's the. Right. Well, yeah, it was more tax and tech.

Right, because obviously I kind of explained my background and, you know, I never try to put myself off as the tax expert, resident tax expert here. But one of the key things that we have to have is I think all technology in this space has to be driven by tax experts.

So for us, you know, kind of the key early people were, yes, the technology people, for one, obviously, but really having the.

Not just technology people, but technology people who also have the tax background because, like, you just build a SaaS, any other kind of SaaS, it's not the same. I mean, until you've been in the space for a number of years, you really don't understand like the complexity of what you have to build because.

Kristine: 00:06:23

Correct.

Brent: 00:06:23

So it's so interdependent on so many things. Unlike if I just want to build a, I don't know, even a CRM. It's like you just kind of do it right.

You go, here's my vision, this is what I want to build. And you hire very intelligent technology people to get you where you want to go.

But in tax really there's so many inner working parts of it, especially obviously in indirect tax that have dependencies that you don't want to just pull technology people and try to pull, put it, you know, kind of just draw it for them.

They really have to understand, you know, how everything works from the, you know, state level, district authorities, all the, you know, units of measure and all, I mean just all, just all the interplays that you have with, you know, GIs and everything else.

And you really kind of, you know, have to understand and have gone through some of the battles of bad implementations or really, really complex kind of transformational type projects. I think in order to build a good foundation in the space.

One of the things we thought why there was still room is that that has to continue, that innovation has to continue and you can't constantly be paying for legacy technical debt that's out there. That granted, yeah, maybe it was a cloud based system, but it wasn't really a cloud based system, it was a hosted solution.

So yeah, you are moving it into a, you know, a data center, but you're not building it on true cloud enabled tools, which is where you really get the efficiency. Right? I mean that's where you really can hyperscale.

It's where you really like, you can use, you can take advantage of these tools and the redundancy to eliminate downtime. So there's still a lot of that that's, you know, that, that we can do, you know, because we're building on all new technology.

But also, you know, going back to what you were saying earlier is, you know, now that the government has kind of crammed it down to where, you know, everyone has to comply. Right.

So before, like you said, you might have to be a 30, $40 million company to afford a 70,000, 80,000 or $200,000 implementation, but the 3 and $5 million a year guy, you know, really wasn't held accountable. But now they are, you know, now they're super accountable.

So you've got to provide a solution that, you know, fits in that budget, you know, and is allowed, you know, that also gives them that, that capability of, of connecting multiple devices, but platforms. But, you know, not just saying, okay, here's the connector, download the connector, and then here's a connector, download this connector.

And they don't really talk to each other. You don't really know what's happening. And then the worst part is you just can't get any support.

So like, you're sitting there with a bunch of connectors and you're like, okay, this is not, they're not talking to each other. What, why? And you. Two weeks support ticket. Two weeks support ticket.

And then you get one answer and then you work for another hour and it doesn't work. And then you get another answer and you work for an hour and then you're two weeks at a time.

You're waiting on answers, you know, so, you know, what we try to do with our platform is just say, okay, how do I just most easily make this and you know, enable this for everybody. So we've got APIs for just pulling data. We got APIs for just pulling rates.

Even like if you just, you know, to feed certain tables, we could, using APIs, we could pull data from this system and this system, combine it into one. One kind of source of truth, if you will, for reporting.

So, yeah, so the biggest thing was obviously we have connectors and we have to support those connectors, but making sure these connectors are supported in a way that a, if you run into problems, you have issues, I've got a whole team that's going to walk you through that. Right? But then also have the API tools to say, okay, well maybe I, maybe that's not the most efficient route.

Maybe we just want to connect an API to pull, pull rates to feed this. And then over here though, we want to pull, you know, reporting.

You know, it's just that, that's kind of just an approach, I guess, you know, we took when we even started down. I mean, Judy, you know, I mean, it's like the space has been dominated for the most part by, you know, two major players.

I mean, there's several others that maybe stay way up on the Enterprise space. There's a bunch trying to enter now that are on the very kind of, kind of low end of the space and they all serve a very good purpose.

But, but you know, that, that tier from, you know, just above, hey, just, it's just widget times rate, which, you know, is fine. But to, hey, I've got, you know, three sources of revenue. I've got three, you know, places where I interact with my customer.

I've got resellers, I've got divisions. I've got, you know, product lines that span multiple verticals. Once you kind of get into that space, but you're not the enterprise tier.

You really only had two options before us.

And yeah, we just felt like we could fill that niche between obviously, service support, flexibility, but also building on all new technologies to where it's just super efficient as far as cost goes.

Kristine: 00:11:28

We were very appreciative because you helped integrate a very small company, maybe 3 million in revenue a year, but still needed to comply. And it was seamless for them. I mean, great feedback. They have built their own custom website.

Everything is sort of custom to their unique business and they were able to get integrated. That's huge for them, you know, and for a much more reasonable price and some peace of mind and some hello, I answer the phone.

Brent: 00:11:50

So it's an interesting space for sure. And it doesn't seem to be getting any less interesting, if you will.

It's kind of funny, you know, when we, you know, I talk to people live around me and they say, oh, what do you do? We have a, you know, sales tax automation platform. Like, oh, really expensive. And then. And then again, like, if you don't know, you just assume.

Well, I mean, it's just like, you know, I go down to my local store and I buy something and it's just 7%, right? They don't understand all the things that go into that 7% and how you need to report on that 7%. And now it's not always 10%.

And you just start talking to them about, you know, funny things.

Things like, oh, well, you know, that that straw and that drink may have a different taxability if they served it to you, you know, with the Coke or if you bought the straw in a box or if you got it at a restaurant versus the gas station, you know, things like that. And people start to get, you know, people first of all start to get really kind of like, what? Are you serious?

And then they get kind of mad because they realize how many times they're getting taxed on things that they. That are just invisible to them. Right?

So, but if you're a business owner, if you think about it like that guy who's my neighbor that I just talked about, if you're that business owner, you know, and you don't know this stuff, but you're supposed to comply with it, what I Mean, gotcha, you know.

Meredith: 00:13:06

So one, Brent, with your straw example that goes back to what you said kind of at the very beginning of like anyone can build a software, but it's about really like what makes a difference. And from like a sales tax perspective, there are all of those laws that you've got to incorporate that your software platform can then. Right. Do it.

Right? Because there's no point of integrating a sales tax software that doesn't work. Right.

It's the wrong rates, it's the wrong rules and you can't rely on it.

So as you are building this platform and we've probably touched on a couple of these things that you might address, but what are some of those factors that you had to consider when building a sales tax software?

Brent: 00:13:47

I mean that's limitless and we're finding even now that like that's a never ending scope, right? So it will, it will never change as long as the government keeps, you know, making things more and more complicated.

Which I guess goes back into the question is like, what did you have to consider? And it's the fact that the government's never going to make things less complicated.

It was like, how do I make this software flexible enough to just assume the unassumable. Right? So it's like, you know, and it's every. So, so it goes to two ways, right? Number one is obviously the technology.

So making it so flexible to where it's not just like a rate change. Anybody captures a rate change, right?

I mean, you know, we're using, so we've created AI tools, we've created, we've got a great staff of, you know, in order to verify and, and collect and we've got scrapers all over the place. So we're capturing those.

And I'm proud to say, you know, I have definitely a few examples that come from the last couple months where we caught things that the legacy providers didn't. And honestly I think it's just because we've built better kind of processes around it. But it goes into also what we call our content model.

So that's our research model, right. So building a model to where it's like, okay, when something changes or you know, a different vertical becomes taxable. It wasn't taxable, whatever.

It doesn't kind of break your whole system and it doesn't require you to build a module. Right. That's where I think a lot of like the legacy providers also got killed.

It's like, is like, okay, well we do this and I think it's going to Also be a barrier for those lower entry products that try to go upstream. Because it's like, okay, we do this, this basics.

Well, if you don't anticipate really complex rule changes in your model, in your overall, then when you try to move to another vertical or something that changes or that's real complex. Whether you're changing, you're changing the taxability based on units of measure, this happens a lot.

Like energy, communications, you know, oil and gas, you know, a lot of niche verticals. Right. And some that we're not even seeing that are, you know, obviously coming to the forefront, streaming, things like that.

Those types of changes happen all the time.

And if you haven't built your, your, your product and your model based on like super Flex technology that has to create that, then that creates either a whole nother module that you have to build and then you have to connect the two modules or that customer now has to have two modules. Right? And this talks to one and this talks to another. So.

Kristine: 00:16:15

Yeah.

Brent: 00:16:15

So one of the things we had to take into consideration is a, as we're expanding into the universe of products, how do we make the product itself so flexible that as we enter into different markets or markets change that it doesn't break the system because that's really disruptive to the client.

Same thing though is how do we make it so flexible that if I'm connecting with multiple ERPs, plus a custom and then an API that I can do all of that without disrupting, you know, I don't need three products. I don't need the, you know, the light product and then the, the POS product and the other product. I'm trying to connect all those.

Still going through kind of one central product. So that was one of the things we had. We, we thought really deeply about.

But also, you know, okay, well, there's just all this new technology out there. Why are we not using it to make sure they're like, there is no downtime. Right. And there's no volume. Right. You know, throttling. Right.

So it's like, you know, again, you're talking about legacy technology where it's like, you know, they built it a certain way and yes, it's gotten better and better and you know, it's hosting us.

But then we're thinking of like, okay, Black Fridays, you know, you know, companies like we have, we have, we have companies that send us like call detail records. If you think about it like that, like they're sending us millions of transactions or.

Well, I can't have his huge Activity impacting this guy over here, especially, like during reporting. Right.

So how do I do that to where I can hyperscale everything without interrupting anybody at any point in time so that this guy over here who only runs a thousand transactions, he's just as important because he's gotta have his reports the same time everybody else does. So how do I make sure he can get his reports in an instant? But with this guy over here who's sending 30 million records today, also needs his report.

Like, how do I make sure I can do that without having any disruption? And so it's, that's kind of like what we took into consideration. So I would say it's the content model one.

And then it's, and it's just using new technology. So there's no throttling, there's no downtime, there's no, you know, you know, no gaps.

So I would say those are the, were the, were the big things that we took into consideration.

Kristine: 00:18:25

Well, and I think also your telecom, oil and gas and, and those specific industries are very complicated. Much more complicated than a B2B or B2C goods company. Even SaaS is less complicated than oil and gas and telecom.

Cause there's so many different local fees and taxes and measurements that you really have to be thinking about that. Not a lot of companies have that same issue. Like vaping is a new one too, where there's some different excise taxes and that's a new product.

Vaping, right.

Brent: 00:18:51

Well, to be honest, like Judy, and you know this, I mean, because you're, you're, you know, you do a lot of research. You're obviously no. The ins and outs of all this, like take vaping or cannabis or something like that. Right.

We don't have a clue how they're going to do it yet. Like, like they're just starting. Right? So that's what I'm saying.

It's like I have to build a content model, you know, to where, like I have to anticipate being able to absorb any kind of, like, we don't know what they're going to. I mean, like, they're just starting about this. But like, we don't, we don't, we don't know how that's gonna, how that's gonna shake out.

And what we really have no insight into is like what local authorities do, right? Because.

Kristine: 00:19:28

Oh my God.

Brent: 00:19:29

Right.

Kristine: 00:19:29

Well, I live in Colorado. We live in Colorado. So this is our life. Local.

Brent: 00:19:33

Yeah, right. Yeah, exactly.

You know, we see it and especially like in a telecom space where it's like local jurisdiction wants to, wants to impose, wants to raise some cash. And. But they, you know, but they know better than to try to pass a tax that, that everybody kind of knows about. So, you know, they'll put it.

They'll put a fee on top. I mean, you know, a football stadium fee that's somehow attached communication service. It's like, we've got to. And then. All right, well, that.

Is it based on the dollars? Is it based on the, the seats? Is it based on the, you know, the connectivity is. You know what you just have to be able to, to anticipate.

Like when we said we're like, all right, how do we build a platform, like I said that, that anticipates all these things, Whereas before, what was cutting edge at the time? It's like we have to anticipate what's cutting edge today, but what will adapt to tomorrow.

And I think that was some of the things that, you know, the legacy providers even, quite frankly, still struggle with. Right. So.

Kristine: 00:20:31

And what we've done a lot the last few years is we've gone through and fixed things that have been broken because they got audited or they didn't add new tax rules when they added new products because they didn't know, and then they got audited. So people aren't watching this technology because they're not managing it within their own business.

So there's a big disconnect between the very large multinational taxpayers of our. Of America and the small businesses that have to comply with the institutional knowledge to manage this tax issues.

Yeah, there's a definite break there that I find ourselves to be in the middle of where it's like, oh, my gosh, you know, you're a three to six million dollars company and you're not doing this. That's bad because that's going to cost you money.

Brent: 00:21:08

Typical business margins are anywhere from 15 to 40%. You know, if you're selling products, right. Sometimes they're higher.

But, but, you know, if you've got a penalty because you haven't been doing, you know, a sales tax, let's just use an average of 7%. Right. And you haven't been doing it right for a couple of years. I mean, you know, that's a huge.

I mean, you're wiping out a year of profit, potentially.

Kristine: 00:21:29

Totally. Totally. And we find clients with millions of issues. It's very stressful for us. It's very sad.

Brent: 00:21:35

Yeah, well, and it's also these guys are the guys that, that, that move fast. Those are the guys that go like, okay, today I have an online store, but then tomorrow I'm also going to have a distribution channel, because I can.

And then also I'm going to sell. Now, maybe, you know, funny enough, maybe I do brick and mortar, you know, backwards. Like, you go backwards, you know, who knows?

But those are the guys that, like, they move really fast in their business, and they're the ones that kind of get trapped because they turn around and go, oh, I didn't realize that. You know, I mean, Wayfair is sort of old news, but it's. It's still like.

It's just not in the top of mind because, you know, you got a company who's saying, hey, I sell whatever widget, right? And then they kind of have a handle on things, but then they get a partner. It's like, man, I love that. And I want to distribute that for you.

And I'm gonna. But we're gonna do it this way. And they don't realize potentially how that impacted their nexus.

Kristine: 00:22:31

Correct?

Brent: 00:22:32

Right. Everywhere.

Kristine: 00:22:32

100%.

Brent: 00:22:33

And so, yeah.

Meredith: 00:22:37

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