Numeral Raises $35M to Automate Sales Tax with AI

The Genesis of Numeral: Solving a Global Sales Tax Challenge

Numeral, a sales tax compliance startup, was conceived by Sam Ross, its co-founder and CEO. The initial idea arose during his travels following a tenure as a product manager at Airbnb.

Ross explained to TechCrunch that in early 2018, remote work wasn’t as prevalent as it is today. He financed his travels by operating several independently funded e-commerce businesses while on the road.

He managed an online jewelry store and continues to run a direct-to-consumer vitamin brand. Despite the freedom these ventures provided, Ross found the process of managing sales tax to be consistently frustrating and overly complex.

A Pivotal Supreme Court Ruling

Prior to 2018, businesses involved in e-commerce and SaaS didn’t face sales tax obligations in states where they lacked a physical presence. However, a Supreme Court decision that year altered this landscape.

The ruling mandated that these businesses collect taxes in states where their customer base was located. This dramatically increased Ross’s responsibilities.

“I quickly transitioned from managing sales tax for customers in California to navigating the regulations of over 40 states,” Ross stated. “The situation presented significant difficulties.”

From Idea to Funding: Y Combinator and Beyond

When Ross applied to the Y Combinator startup accelerator in 2023, he received encouragement from Gustaf Alstromer, a partner and his former manager at Airbnb. Alstromer suggested he develop a startup focused on automating all facets of sales tax management.

On Thursday, Numeral announced the successful completion of a $35 million Series B funding round, which valued the company at $350 million. This funding arrived just six months after an $18 million Series A raise.

Mayfield led the Series B round, with additional participation from investors such as Benchmark, Uncork Capital, Y Combinator, and Mantis, the venture capital firm established by the electronic music duo The Chainsmokers.

Leveraging AI for Sales Tax Compliance

Ross believes that artificial intelligence can simplify sales tax management and provide a service comparable to that of a human tax accountant. This encompasses tracking changes in tax laws across more than 11,000 jurisdictions, managing tax-related correspondence, and handling tax filing and payments on behalf of clients.

The majority of sales tax regulations are unambiguous, making them well-suited for AI processing and minimizing the potential for errors.

“However, certain laws are remarkably intricate,” Ross noted. “For instance, in New York, a whole bagel is exempt from tax, but a halved bagel is considered prepared for consumption and therefore taxable.”

Numeral’s AI system is programmed to recognize and apply thousands of such nuanced regulations.

Growth and Competition in the Sales Tax Space

Over the past year, Numeral has experienced a 3.5-fold increase in revenue and currently serves over 2,000 software and e-commerce clients, including companies like EightSleep, Graza Olive Oil, and Manus.

While the sales tax management sector is becoming increasingly competitive, with startups like Anrok and Zamp emerging, Numeral distinguishes itself through its global capabilities.

A long-standing player in the industry, Avalara, owned by Vista Equity Partners, is also anticipated to go public later this year.

Expanding Global Reach

Ross emphasizes that Numeral’s ability to handle international sales tax sets it apart from its competitors.

“We are currently processing taxes for clients in countries like Tanzania and Kenya, providing a service that would traditionally require the engagement of a CPA firm,” he explained.