Company context
The client is a $40M ARR vertical SaaS company selling subscription software to mid-market customers in all 50 US states. The team had been collecting sales tax in three states (state of incorporation plus two early-customer states) since founding. After the Supreme Court's 2018 South Dakota v. Wayfair decision, every US state plus DC enacted economic nexus rules — typically a $100K revenue or 200-transaction threshold per state per year. The company crossed those thresholds in many states without realizing it.
M&A diligence in late 2025 surfaced the exposure: the buyer's diligence team estimated $1.2M–$1.8M in unremitted sales tax across 28 states, plus interest and potential penalties. The deal didn't die but the purchase agreement carved out the tax liability into a special escrow with the seller responsible for resolution. That's when we were brought in.
- $40M ARR, all-50-state customer footprint
- Selling into states with combinations of taxable, exempt, and partially-taxable treatment
- Stripe handles billing; NetSuite is the GL
- ~80% B2B (frequently exempt with valid resale or exemption certificate)
- ~20% B2C / SMB (typically taxable)
- 4 years of accumulated nexus exposure
- IPO-readiness on 18-month horizon
Before — what was actually broken
Sales tax was being collected in 3 states (SD home state plus 2 customer-pressure states). Stripe charged tax based on the 3 configured jurisdictions. NetSuite booked the tax payable; payments to the 3 states were timely. Everything outside those 3 states: collected $0, remitted $0, accrued nothing, disclosed nothing.
The exemption-certificate process was equally informal: customers who claimed exemption were trusted on the email assertion alone, without a valid certificate on file. About 60% of B2B customers had no valid certificate; if any of those states audited and pushed back on exempt treatment, the company would owe tax + interest + penalties on those transactions too.
- Sales tax collected in only 3 states
- No nexus monitoring; no quarterly threshold review
- ~60% of B2B customers had no valid exemption certificate on file
- Stripe tax configuration outdated relative to actual sales footprint
- No accrual of unremitted-but-likely-owed tax
- No tax disclosure in financials beyond the 3 collecting states
What Ledger Summit implemented
A six-track remediation: (1) full nexus assessment by state-by-state revenue and transaction history; (2) Voluntary Disclosure Agreement (VDA) negotiation in highest-exposure states; (3) registration in 28 states; (4) Avalara deployment integrated to Stripe and NetSuite; (5) exemption-certificate cleanup with CertCapture; (6) ongoing nexus monitoring as part of monthly close.
- State-by-state nexus assessment using 4 years of Stripe transaction history
- Voluntary Disclosure Agreement (VDA) program in 6 high-exposure states (typical: tax + 2 years interest, no penalties)
- Registration in 28 states (24 with full statutes-of-limitations exposure, 4 within VDA programs)
- Avalara AvaTax integrated to Stripe (real-time tax calc on invoices) and NetSuite (GL posting)
- Avalara CertCapture for exemption certificate management
- Avalara Returns for monthly/quarterly filing automation in registered states
- Monthly close discipline: nexus threshold review, exempt-customer certificate validation
- IPO-readiness disclosure: tax provision, sales tax payable rollforward, contingency disclosure
Nexus and remediation mechanics — what the assessment covers
Each state has its own economic nexus threshold, taxable-products rules, and remediation programs. Below is the standard analysis pattern applied state-by-state.
| Mechanic | What it requires |
|---|
| Economic nexus threshold | Typically $100K revenue OR 200 transactions in prior or current year (varies: $250K in CA, $500K in NY, $100K in TX, etc.) |
| Physical nexus | Office, employees, inventory, or other physical presence creates nexus regardless of revenue |
| Affiliate nexus | Related-party activity creating nexus — relevant for groups with multiple entities |
| Click-through nexus | Referral arrangements (largely superseded by economic nexus post-Wayfair) |
| Marketplace facilitator laws | When selling through Amazon/Shopify/Etsy, marketplace may collect/remit on your behalf |
| Taxability rules | SaaS taxability varies dramatically: TX, NY, OH typically tax SaaS; CA, OR, MT typically don't |
| Resale exemption | Customer reselling product — needs valid resale certificate |
| Use exemption | Government, education, nonprofit — needs valid exemption certificate |
| Voluntary Disclosure Agreement (VDA) | State program — typically 3-4 year lookback, waived penalties, sometimes reduced interest |
| Amnesty programs | State-specific time-limited programs with similar terms; check periodically |
| Sourcing rules | Origin-based vs. destination-based; bill-to vs. ship-to vs. service-delivery location |
| Filing frequency | Monthly / quarterly / annual; based on annual liability — adjusts as you grow |