Sam Ross, co-founder and CEO of Numeral, conceived the idea for his sales tax compliance startup while traveling around the world after working as a product manager at Airbnb. “This was early 2018, before remote work became as common as it is today, ” he told TechCrunch in an interview. At the time, direct-to-consumer businesses were booming, so Ross supported his travel lifestyle by running several self-funded e-commerce ventures on the road. He managed an online jewelry store and still runs a vitamin direct-to-consumer site. Although he enjoyed the freedom his businesses provided, Ross (pictured above, left) was constantly frustrated by the complicated and bureaucratic process of managing sales tax on his merchandise sales. Prior to 2018, e-commerce and SaaS (Software as a Service) companies were not required to collect sales tax in states where they had customers but no physical presence. However, later that year, the Supreme Court ruled that these businesses must collect taxes in the jurisdictions of their customers. “All of a sudden, I went from only collecting tax in California to dealing with 40-plus states, ” Ross said. “That was painful. ” When Ross applied to the startup accelerator Y Combinator in 2023, he was encouraged by partner Gustaf Alstromer—who had been his boss at Airbnb—to create a startup that automates every aspect of sales tax management. On Thursday, Numeral announced it had raised $35 million in Series B funding, valuing the two-year-old company at $350 million.

This funding round, just six months after an $18 million Series A, was led by Mayfield and included investors such as Benchmark, Uncork Capital, Y Combinator, and Mantis, the venture firm co-founded by the electronic DJ group The Chainsmokers. Although many software products exist for managing sales tax, Ross believed AI could simplify the complexities and serve clients like a human tax accountant would. This includes monitoring changes in tax laws across over 11, 000 jurisdictions, handling tax-related mail, and filing and paying taxes on behalf of clients. AI can manage most sales tax-related tasks because most rules are clear-cut, minimizing the risk of errors or hallucinations. “But some of the laws are pretty crazy, ” Ross explained. “In New York, a full bagel is tax-exempt, but if you cut it in half, it’s considered ready-to-eat and becomes taxable. ” Numeral’s AI is programmed to understand thousands of such nuances. In the past year, the startup’s revenue has increased 3. 5 times, now serving over 2, 000 software and e-commerce clients including EightSleep, Graza Olive Oil, and Manus. While sales tax management may seem niche, numerous startups are addressing it. Competitors include Anrok, Zamp, and others. Meanwhile, Avalara, a 26-year-old incumbent owned by Vista Equity Partners, is expected to go public later this year. Ross highlights Numeral’s international capabilities as a key differentiator. “We’re filing taxes for clients in Tanzania and Kenya, in smaller markets where traditionally people would have relied on CPA firms, ” he said.