Basecamp Simplifies Heavy Burden of SaaS Sales Tax Compliance With TaxJar
Basecamp has grown to become a leading SaaS-based, project management software company. But with only a little more than 50 employees spread across the U.S. and globe, they needed sales tax expertise they didn't have in-house. That's where TaxJar came in.
The Challenge
Back in 2004, when Basecamp first began web app development and selling software-as-a-service, the business model wasn't even called SaaS, as CTO and Cofounder David Heinemeier Hansson explained.
As the SaaS company grew in popularity, Basecamp had to deal with their fair share of challenges along the way, including banks wary of their subscription plans and early customers who were skeptical of providing their credit card information online.
While Basecamp eventually overcame these obstacles, sales tax would become a new major challenge to solve. They ran into the same problem that many other SaaS companies have also experienced: not collecting sales tax because they were unclear where and when SaaS products were taxable.
Our first introduction to sales tax was dealing with it as a liability," Heinemeier Hansson said. "We discovered we should have been collecting sales tax but we weren't, so we had a number of liabilities in different states that needed to be cleaned up.”
With new legislation around digital goods and software services becoming more liable to sales tax, Basecamp was just one example of SaaS businesses who painfully realized the importance of sales tax compliance. All told, they had to pay millions in back taxes and soon realized they needed a sales tax solution that could tell them when, where and what they needed to remit.
The Solution
To ensure they wouldn’t owe back taxes again, their quest for a sales tax solution not only needed to be easy to use, but had to fit the company's principles and approach to technology.
"Lots of choices in SaaS are driven by huge companies, which isn't us," Heinemeier Hansson said. "We base most of our tech decisions not on what will work for us, but what we are trying to do with the solution."
So, upon hearing about TaxJar, Basecamp was more than excited.
"The initial appeal was just how easy it was to work with the system," Heinemeier Hansson said. "We knew rates were up to date and we were billing our customers accurately. We could defend all of that when we were submitting our paperwork."
Once given a bit of time to become familiar with TaxJar, it became apparent to Basecamp they had found the perfect solution for their subscription-based billing model and future growth plans they were searching for.
Sales tax is not our specialty, and we don't want (it) to be our specialty, which is why we were thrilled to find TaxJar," Heinemeier Hansson said.
The Results
With TaxJar up and running, Basecamp found they were able to outsource their sales tax functions while preserving their small team’s identity and culture.
Remote is a key pillar of our company culture," Heinemeier Hansson said. "We don't have a full-time accountant or financial planner, just a small group of administrators. And thanks to TaxJar, we can outsource sales tax and not have to spend money on a full-time position."
As SaaS companies like Basecamp grow and come to terms with their sales tax liability, it helps to have a comprehensive, full-service sales tax automation solution in place.
Learn more about how TaxJar can protect your business and simplify sales tax.
About Basecamp
Basecamp is an online project management tool that helps teams stay organized, communicate better and be more effiecient. Their company is headquartered in Chicago though most of their team works remotely.