Numeral raises $35M to automate sales tax with AI

Sam Ross, the co-founder and CEO of Numeral, conceived the idea for his sales tax compliance startup during his travels, a journey sparked by his previous role as a product manager at Airbnb. Reflecting on his experiences, he recalls that back in early 2018, the landscape of remote work was vastly different. The rise of direct-to-consumer businesses had taken off, and to support his globetrotting lifestyle, Ross managed several self-funded e-commerce ventures, including an online jewelry store and a vitamin DTC site. Despite enjoying the freedom his businesses provided, Ross found himself increasingly frustrated by the convoluted process of managing sales tax for his products. Prior to 2018, e-commerce and SaaS companies were exempt from collecting sales tax in states where they had no physical presence. However, a landmark Supreme Court ruling changed everything, mandating that these businesses collect taxes in all states where their customers reside. "Suddenly, I went from managing tax obligations in California to dealing with over 40 states," Ross explained. "It was quite a challenge." In 2023, Ross applied to the startup accelerator Y Combinator, where he was encouraged by partner Gustaf Alstromer—who had once been his boss at Airbnb—to develop a startup dedicated to automating sales tax management. This week, Numeral proudly announced it has raised $35 million in Series B funding, pushing the company's valuation to $350 million. This significant funding round comes just six months after they secured $18 million in Series A financing, with Mayfield leading the latest investment and participation from notable investors like Benchmark, Uncork Capital, Y Combinator, and the venture capital firm Mantis, co-founded by members of the electronic music group The Chainsmokers. While there are various software solutions available for sales tax management, Ross envisions AI as a game-changer that can simplify the process, akin to having a human tax accountant. The technology promises to tackle numerous tasks, from monitoring tax law changes across over 11,000 jurisdictions to managing tax-related mail and handling filings and payments on behalf of clients. Because most sales tax rules lack ambiguity, Ross believes the risk of AI making mistakes is minimal. However, some tax laws can be quite peculiar. For example, in New York, a whole bagel is tax-exempt, but if it's cut in half, it becomes taxable as a ready-to-eat item. Numeral's AI is equipped to navigate these complexities, being aware of thousands of such nuances. Over the past year, Numeral has seen a remarkable revenue growth of 3.5 times and now serves over 2,000 clients in the software and e-commerce sectors, including notable names like EightSleep and Graza Olive Oil. Though the niche of sales tax management might seem specialized, multiple startups are entering the fray, with competitors including Anrok and Zamp, alongside established player Alavara, which is set to go public soon. Ross emphasizes that Numeral's international capabilities set it apart from its rivals. "We’re filing taxes for clients in Tanzania and Kenya, among other smaller markets, where traditionally they would have relied on CPA firms," he stated.