Sales Tax Audits Are Coming for Ecomm Sellers, Here’s How to Avoid the Audit with Sam Ross

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Sales Tax Audits Are Coming for Ecomm Sellers, Here’s How to Avoid the Audit with Sam Ross

Sam Ross is the Co-Founder and CEO of Numeral, a company revolutionizing how e-commerce and SaaS businesses handle US sales tax and international tax automation. Before launching Numeral, Sam built several e-commerce ventures that generated over $50 million in revenue, giving him first-hand experience with the challenges of scaling, managing cash flow, and preparing for an exit.

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> Here’s a glimpse of what you would learn….
  • Challenges of US sales tax compliance for e-commerce businesses post-2018 Wayfair ruling.
  • The complexities of sales tax nexus and varying state regulations.
  • Personal experiences of e-commerce entrepreneurs with sales tax issues.
  • The financial consequences of non-compliance, including audits and penalties.
  • Strategies for managing sales tax compliance, including the use of automation tools.
  • The importance of understanding product taxability and state-specific exemptions.
  • Options for businesses with unpaid sales tax liabilities, including retroactive registration and voluntary disclosure agreements.
  • Emerging growth opportunities in e-commerce, such as TikTok Shops and AI-driven search optimization.
  • The significance of customer-centric product development based on search behavior and preferences.
  • Recommendations for e-commerce entrepreneurs on compliance, handling state notices, and investing in new technologies.

In this episode of the Ecomm Breakthrough Podcast, host Josh Hadley interviews Sam Ross, co-founder and CEO of Numeral. They discuss the complexities of US sales tax compliance for e-commerce businesses, especially after the 2018 Wayfair Supreme Court decision. Sam shares his entrepreneurial journey, explains how Numeral automates tax compliance, and offers practical advice on managing tax risks. The conversation also explores emerging e-commerce growth strategies, including leveraging AI, personalized marketing, and niche product development, providing actionable insights for founders navigating today’s challenging tax and digital landscape.

Here are the 3 action items that Josh identified from this episode:
  1. Automate Sales Tax Before It Becomes a Costly Problem
    Run a nexus scan across all your channels (Shopify, Amazon, 3PLs), identify where you owe tax, and automate filings—before audits, penalties, or exit due diligence destroy value.
  2. Never Respond to State Notices Alone
    If you receive a tax letter, pause and consult a CPA or tax attorney immediately. One wrong reply can trigger audits or liabilities—set up systems to track and manage every notice.
  3. Use AI + Niche Search Data to Find Your Next Winners
    Mine long-tail search queries (e.g., highly specific gift or use-case terms) and build modular products around them. Optimize content for AI-driven search and answer engines to capture emerging buyer intent.
Resources mentioned in this episode:
Special Mention(s):
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Episode Sponsor
This episode is brought to you by eComm Breakthrough Consulting where I help seven-figure e-commerce owners grow to eight figures.
I started Hadley Designs in 2015 and grew it to an eight-figure brand in seven years.
I made mistakes along the way that made the path to eight figures longer. At times I doubted whether our business could even survive and become a real brand. I wish I would have had a guide to help me grow faster and avoid the stumbling blocks.
If you’ve hit a plateau and want to know the next steps to take your business to the next level, then go to www.EcommBreakthrough.com (that’s Ecomm with two M’s) to learn more.
Transcript Area
Sam Ross 00:00:00  Washington’s known to just they just sent. I don’t I don’t know how they find you, but they just send letters to almost all of our clients, like they do these, like, surveys. And they’re just trying to see if you have if you’re doing sales or have Nexus there. So I’ll send you a big survey in the mail. Someone will get it. They don’t really know what to do, and they’ll just go fill it out, and send it back. Like, yeah, I’ve been doing stuff there. And then all of a sudden they’re like, oh great, we’re going to audit you now. So you if you get a letter from Washington, you know, make sure you, talk to some, you know, talk to a consultant and a lawyer, someone before you go fill it out and hand over, I think, and just hand over whatever to them.
MC 00:00:38  Welcome to the Ecomm Breakthrough Podcast. Are you ready to unlock the full potential and growth in your business? You’ve already crossed seven figures in sales, but the challenge is knowing how to take your business to the next level.
Josh Hadley 00:00:52  Most ecommerce founders have no idea they’re breaking the sales tax law right now. Are you one of them? Well, today’s guest has a simple solution to help ensure compliance. Welcome to the Econ Breakthrough Podcast. I’m your host, Josh Hadley. I scaled my own brand from 0 to 8 figures in sales, and now my mission is to take it to over nine figures on my journey to nine figures, I bring you unfiltered conversations with the brightest minds in e-commerce. Past guests include Kevin King, Ezra Firestone, and Michael E Gerber, author of the email. Today, I am thrilled to welcome Sam Ross, the co-founder and CEO of numeral, a company revolutionizing how e-commerce and SaaS businesses handle US sales tax and even international tax automation. Before launching numeral, Sam built several e-commerce ventures that generated over 50 million in revenue, giving him firsthand experience with the challenges of scaling, managing cash flow and preparing for an exit. With that introduction, welcome to the show, Sam.
Sam Ross 00:01:56  Thanks for having me.
Josh Hadley 00:01:58  Sam. I know that people could not be more enthusiastic about talking about sales tax right now, but, you are the man here.
Josh Hadley 00:02:07  I actually heard you first on the operator’s podcast, and I was like, this dude smart. And I think a lot of people are actually sleeping on this whole sales tax thing. And I think the message needs to be heard from other people. So I am curious, like, Sam, you you’ve built $50 million, you know, generating or you’ve generated over $50 million in revenue on e-commerce, but now and you still have an e-commerce brand, but now you’re now in the world of compliance. So tell me why you’re in that world of compliance. And what do you see happening in the world of sales tax for ecommerce brands right now?
Sam Ross 00:02:46  Yeah, so I ran e-commerce businesses for a number of years. And, you know, the first business I had was I had a jewelry brand where we were selling kind of, you know, inexpensive jewelry. I buy for $0.50 from China and sell it for $50 using some Etsy growth hacks, $50 on Shopify and Amazon. I got that to good scale, but there was just no retention.
Sam Ross 00:03:12  And so as soon as you know, we had Chinese sellers kind of undercutting us on Amazon and, and Facebook, ad costs continue to climb. we we had no retention. And so the business, you know, effectively kind of went to zero and we sold it and actually made some money. But it was, you know, we could see the trajectory was not good there. And so I was like, okay, I want to do something with more retention. And we started a vitamin gummy, brand we called Fling Wellness that I owned and, you know, does a little over $10 million a year in sales. and so that was much better. You know, the average customer is buying something like four times from us, but at the same time, you know, at the end of the year, 80 plus percent of customers are still are gone. And you have to keep a, you know, it’s still kind of a leaky bucket and you have to keep acquiring customers each month. And, and so I was like, damn, I want something that’s a little bit more durable that, you know, we’ll be around in ten years and I don’t I’m not so dependent on, you know, Facebook ads.
Sam Ross 00:04:11  And so I had previously worked in tech for, you know, my last job before that had been at Airbnb as a product manager. And so I missed building software for for a long time. And so I, you know, I started looking around, what are the things that drive me the most nuts and what are the biggest headaches I have to deal with, with in e-commerce and sales tax was this boring thing that I hated. And, you know, I guess to give some context, when I first started my business jewelry business, I was based in California. This was 2017. I had to collect sales tax from my California customers, but if I shipped it to Dallas, Texas, I didn’t have to. Or Miami, Florida or wherever. I didn’t have to worry about sales tax. I could ship it tax free. And so it was wasn’t a big deal. My local accountant could kind of help me with it. But end of 2018, there was a big Supreme Court ruling called Wayfair for South Dakota.
Sam Ross 00:05:02  And after that, myself along with, you know, effectively all Shopify merchant direct to consumer merchants had to start worrying about collecting and remitting taxes. And, you know, and, you know, as big if you get really big up, you know, kind of basically every US state that that deals with sales tax is 47 of them. And so we, Yeah. And so I was personally had to go and deal with, you know, I had a small company who’s like very, very lean three, three people, but all of a sudden each month having to deal with taxes. And in states like Pennsylvania, West Virginia, Hawaii, all these places that like, why am I dealing with them? And, you know, we had some software. There’s kind of these incumbent softwares that exist, but they weren’t designed for e-commerce merchants. They were really designed for these mid market controllers at big companies or like tax managers and I’m a founder. I don’t want to think about sales tax. I just wanted to not to not deal with it.
Sam Ross 00:05:56  And I’m like on the, you know, getting letters in the letters, in the mail, on the phone with an auditor in West Virginia arguing about something. I’m like, this is crazy. I want to spend my time, you know, on product development, on, you know, planning on growth, obviously marketing. And and so that was really the the idea was, how do we build something that lets you get back to growing your business and not wasting time or having to think about sales tax?
Josh Hadley 00:06:23  Yeah, I love that. Well, we’ve definitely seen the sales tax, you know, world change quite a bit over the last few years. And there’s been good advancements. There’s been some great advancements, I think on the good side. Right. If you’re selling on the marketplace, Amazon’s now forced to collect and remit sales tax for a lot of the states. Right. Those are good things. Whereas before that was not the case right? But, Sam, I’m curious to hear from your perspective, like, what are some of the biggest challenges you’re hearing from e-commerce brand owners that are they a compliant with sales tax, US sales tax law? Are they not compliant? And where are the challenges arising from?
Sam Ross 00:07:07  Yeah, there’s a whole host of challenges.
Sam Ross 00:07:09  I think the first challenge is even knowing, understanding it enough to know what you need to do and where you need to be filing. So, you know, we talk to folks all the time. They’ve quickly scaled their business. There wasn’t some, you know, they weren’t thinking about Department of Revenue, Montana, Missouri or somewhere like that. and, you know, you they don’t even know they have to be dealing with sales tax. So we’ll go. The first thing we do for clients is we do what’s called a free nexus study. So they connect their Shopify data to us. If they have Amazon Connect, Amazon, all their data sources, and we can understand where they need to be registered. Right. So each state has their own set of laws. In Texas, if I sell $500,000 into the state over a 12 month period after register, in some states, it’s as little as 200 orders into that state. And so I think the first thing is, just knowing where you need to be registered is challenging.
Sam Ross 00:08:04  And then on top of that, it’s, you know, actually going what? You know, once you figure out you have a liability, figuring out what you need to do from there to get compliant, there’s all, you know, a whole host of work that needs to happen. And then to be, you know, making sure that you’re staying compliant, you have to file on on an ongoing basis. and also, there’s lots of other minutia that wraps around it that we try to take care of, that we do take care of for customers. But I think, yes, the hardest part to start is just even knowing where.
Josh Hadley 00:08:32  Yeah, well, and I think the challenge also comes into like just because you may have a site on Shopify, but if you’re also generating sales on Amazon, you’ve probably easily crossed that threshold for most states already just because of what’s happening on Amazon. Is that true?
Sam Ross 00:08:52  So yes and no. So yes it’s true. And but so the way it works is each state has their own sets of rules.
Sam Ross 00:09:01  So somewhere like California your Amazon sales count towards whether you have to register there. So the threshold in California I believe is I think like $500,000. but if you sold, you know, $499,000 on Amazon and $3 on Shopify, you know, you do have a liability, you know, on that $3, you just start collecting taxes. Whereas in some other states they only look at your Shopify sales. So that’s one of the things we do is we call it that data. And we have a bunch of rules and we can understand that. But yes. and then there’s all sorts of other minutia in technically, for example, if you have inventory hosted in a state that gives you what’s called Nexus, you need to register there. And of course, Amazon is storing your inventory in, you know, in like often in like 30, 40 states. And so that will give you Nexus at the same time too. We’ve only seen a small handful of states actually ever look at your FBA inventory. And so often just this can be a delta between sort of what’s on the books and what’s actually enforced.
Sam Ross 00:10:04  So we always encourage everyone to be fully compliant. But, you know, a big part of what we do is also kind of show people like, here’s what we see on the ground and here’s kind of here’s here’s like, sort of like what we see as like the, the kind of current enforcement regime.
Josh Hadley 00:10:19  Yeah. Well, I think the reason why I ask you those questions is because, you know, I was, one of the kind recipients of a California audit of sales tax back in 2018 before the Wayfair decision. And that was back when, like on Amazon, you had to set up your own tax collection and remittance. Right. That’s before the marketplace facilitator, tax laws came into place. And so California’s like, hey, by the way, you’ve had inventory in our state because of Amazon FBA. So it’s Nexus and now we’re going to audit you. So that was a fun experience. So I guess my question to you, Sam, is I in my opinion, I think most e-commerce brands are sleeping on this and they’re just kind of like, oh, this isn’t really a thing.
Josh Hadley 00:11:07  But if you’re starting to do some substantial things on Shopify like this is this is something that like really compounds negatively against you. Yes. If you just kind of like pull the blanket over your head and pretend as though, like nothing’s happening, until one day you get those audit letters. So like, yeah, do you see that happening? And like, maybe like, what are the states that are maybe more aggressive and maybe let’s talk about how we how we triage this for these brand owners listening.
Sam Ross 00:11:40  Yeah. Yeah. So that’s that’s definitely the risk. Right. And so you can put it, you know there’s a period. Yeah. You might be able to put it off in the hey is the state. Am I really going to be on the state’s radar. But it does happen. So I actually talked to a merchant, three days ago. Who? You know, he wasn’t filing in Texas. Didn’t really think about it. He got an audit letter. You know, he had to go hand over his data, and he owed about $350,000 in back taxes where he could have been, you know, adding that to the purchase price and passing that cost on to the, to the, the consumer.
Sam Ross 00:12:16  But instead he just wasn’t charging it. And so now, you know, I think the average Texas pretty high tax rate, you know, better than me, but I think it’s, it’s somewhere like 8 or 9, 10%. And so now on all those sales he had, he has to basically take an eight, nine, 10% margin cut. on top of I think there were some penalties in interest that were also assessed. And so, you know, it’s the, you know, you might be able to get away with, with not collecting for, for a fairly long period. But as you if you haven’t registered, the states can go back many years. And these things really, they compound or they or they just grow over time. and so we definitely see we definitely see it happening. So and then you asked me which states, okay.
Josh Hadley 00:13:00  Yeah. What states are coming after you and how do they find your information. So I think it’s kind of like both of those. Right.
Josh Hadley 00:13:06  Because people may just be thinking like, oh, I’m just online. Nobody will ever find me. They don’t even have an address on my website.
Sam Ross 00:13:14  Yeah. Good question. there’s a couple ways states will find. So I think to start with which states there’s a lot of states. And I think we put out some data around this. The ones that come to mind are California, Washington, Texas, New York. those are those have been challenging, I think. trying to think and in some states true. It depends. Like what? Like some of the auditing is even more aggressive, I believe like states like Louisiana. They don’t they like hire third party firms to do the audits, who are just way more aggressive and like and and like disrespectful. And so, so sometimes too, like maybe some of the less likely to audit you, but they’re just like way more aggressive. But yeah, Illinois is one of the biggest ones as well if I did mention that. so those are the ones that come to mind that I’ve just seen a lot.
Sam Ross 00:14:05  And then in terms of getting on the radar, there’s a few ways. so one is often like Washington’s known to just they just send I don’t I don’t know how they find you, but they just send letters to almost all of our clients, like, they do these, like, surveys, and they’re just trying to see if you have if you’re doing sales or have Nexus there. So I’ll send you a big survey in the mail. Someone will get it. They don’t really know what to do, and they’ll just go fill it out, and send it back. Like, yeah, I’ve been doing stuff there. And then all of a sudden they’re like, oh, great, we’re gonna audit you now. So if you get a letter from Washington, you know, make sure you, talk to some, you know, talk to a consultant and a lawyer, someone before you go fill it out and hand over, I think, and just hand over whatever to them. I, I think, you know, we had a client that was actually on, Shark Tank.
Sam Ross 00:14:55  And so, you know, they got a lot of exposure. And then not long, like a, like a month after that, they got an audit, I believe, in Arizona. And so I think even just like sometimes even just being in media appearances, the auditor might just say, hey, I’m gonna go look this guy up in our database. It seems like they’re pretty, you know, because they’re just closing their sales on Shark Tank. And it was pretty large. And so like, this should. Oh, that scale, it should definitely be registered here. And they weren’t. And so they went and got audited. So it can be for media appearances. You know, the other thing too is if you have employees in the state, if as soon as you have an employee in a state, you need to register for sales tax, even if your sales are quite low. And so sometimes, you know, whatever the Department of Labor. Whoever’s doing the payroll taxes will share data with the kind of the sales tax department.
Sam Ross 00:15:41  And so they’ll do it. They’ll do a cross lookup and be like, hey, we see this business looks like an e-commerce business, and they have an employee here. How come they haven’t been filing taxes here? Let’s go. Let’s go audit them. And so that’s another way. You know occasionally we this is not too common. But it has happened where a state will go to like a three PL and try and try to get their list, make them give a hand over their list of customers to see if they have Nexus there, like push you like them in the bigger three bells to try to get that data. I haven’t seen that as much recently, but it I’ve definitely it has happened.
Josh Hadley 00:16:14  So what does a ecommerce brand owner do knowing that like especially when they’re starting up. Right. Because the cost of compliance can get overly expensive, right. You look at a lot of these like there’s a lot of these sales tax softwares out there. Yeah. But you’re going to be paid for every single filing.
Josh Hadley 00:16:33  And let’s say you’re in every let’s say you’re like, I’m going to be super compliant. I’m going to sign up for compliance in every single state. And now I’m filing. Most of them are monthly, some quarterly, some annually, semiannually, etc. but like sometimes that cost of compliance can be a few thousand dollars a month just to remain compliant. And you’re like, I’m not even spending or I’m not even remitting a few thousand dollars in sales tax. So what do you recommend, like brand owners do where they’re like, all right, I do want to be compliant because I don’t want to I don’t want the $350,000 tax bill if I ever get audited right down the road. So what what’s the best approach that you recommend?
Sam Ross 00:17:18  Yeah. So I think, you know, I yeah my approach is always two things. You know sorry it’s expensive. You gotta like just be maximally compliant. But I think, you know, to add some nuance there, I think the first thing you should do is if you’re a small brand, make sure you’re paying sales tax in your home state.
Sam Ross 00:17:39  You’re you know, I’m based in California. When you’re getting started, make sure I register California. I turn on tax collection on Shopify. And I’m, you know, I’m registered and I start remitting. If it’s your home state, maybe your local CPA can take care of it. So you don’t need to pay for a service like companies like New World. We don’t have like a minimum. So if you’re just getting started, you’re in California. Once, once a year, we’ll charge you 150 to register $75 a year to say compliance. Some of these, some, you know, some of these different services like ours, you can you know, it doesn’t have to be crazy expensive when you’re getting started then. But as you get to scale, obviously that’s when it starts getting expensive. If you’re if you’re, you know, dealing with 30, 40 states. and then at some, you know, at some point there is a business decision, you know, like, you know, ideally, again, I always recommend you get fully compliant so you don’t have these risks on your books that can explode into big audits later on.
Sam Ross 00:18:33  But, you know, there’s probably periods where, you know, if you’re just over the limits, the the economic nexus limits. you know, some, some business owners decide to wait to, to deal with these things and, you know, just kind of sort of like a risk decision that you need to make as a business. again, my recommendation to stay compliant. And, you know, there’s again, yeah, I think it’s going to just be a cost to your business. And it’s a frustrating system. Like, the reason we built this is because the system is kind of unfair and unduly burdensome on small e-commerce brands. It was really frustrating for me. and so it is just sort of a broken system and I don’t there’s no silver bullet to making it like super cheap or, but, you know, I don’t neutral. The good thing with us, I guess I’ll just show our, our own, our own thing is, you know, we just charge on a per filing basis.
Sam Ross 00:19:27  And so, you know, as we as you scale, it’s not like we get some, you know, large for if you’re on Shopify, we’re not getting like some percentage of your revenue or something like that. and you know, it’s it’s only on the states that you’re registered in. So if, you know, if you’re doing $10 million a year in sales, you get that kind of eight figure mark. you’re you’re still probably only registered maybe in, like ten, 12 states, something like that. The other thing as well is different states have different laws around the tax ability of your products. Right. So in, New York, supplements are tax exempt. And so my vitamin E brand, we don’t have to pay. We don’t have to deal with sales tax in New York because all we’re selling is tax exempt products. And so you want to make sure to many categories like food and beverage are exempt in many different States apparel is exempt in many states as well. And so there’s different ways to that.
Sam Ross 00:20:29  You can you know, you can make sure you’re not accidentally doing all kind of kind of like over compliance where it’s just like you’re, you know, you’re doing things that you don’t need to be doing.
Josh Hadley 00:20:38  Yeah. Super helpful. What about those that are maybe like getting started late and they’re like, oh, maybe I’ve collected a decent sales tax bill. Are you recommending people go and do like, voluntary disclosures, or is your typical recommendation to just like, begin filing and just be compliant moving forward? What are you seeing successful that way?
Sam Ross 00:21:00  Yeah. So I think if you if you’re kind of out of compliance, you sort of have a menu of options. the first thing you want to do is just do a full analysis, understand sort of what your historical exposures are. Right. Did I cross Nexus in, Louisiana mid last year. And like, how much taxable. You know, how much how much in taxes is kind of oh you know, would potentially be owed there and then, you know, work with someone, you know, whether it’s numero or, consultant or someone to help figure out sort of what your game plan.
Sam Ross 00:21:29  So there’s kind of three I would say there’s sort of three routes that we generally recommend. One is okay, you cross Nexus last June 7th last year. We can go someone like us, you can go and register your Louisiana on that date. And then it’ll generate a whole, you know, filings up, you know, from then to now. And you have to go, you know, we go and do the tax filings like you would have collected, but you’re having to pay those taxes out of pocket, potentially some interest and penalties. And so that can obviously be expensive because you haven’t been collecting the taxes and those penalties and interest have accrued. There’s another system, similar similar to that called a voluntary disclosure agreement. And what that is, is if you haven’t been collecting in the state, you can go to the state and say, oh, hey, sorry, state. We have a client. Often we don’t even name who it is like they had a boo boo boo. They they they didn’t realize they need to be collecting.
Sam Ross 00:22:25  can you give some grant, some amnesty, and they won’t give you amnesty on the tax dollars, but they might waive the penalties in interest. And so you’re saving money on having to pay penalties and interest while still getting compliant. Now, the challenge with Vidas, and I don’t always recommend them or love them is while you’re applying for some of these rules or there’s a nuance of state by state level, but generally, while you’re applying for the visa, you cannot turn on tax collection. You have to wait. And so the pain continues to build. And this and the videos can drag on, you know, for, for months. and so often the VA sounds like really great on paper because you’re not, you know, getting these penalties and interest waive. But sometimes the cost of waiting while the VA is getting done can be more expensive than what you’re saving on penalties and interest. And so, there’s kind of a bunch of nuance here You’re around like. Each state has a different process. In general, sales tax challenges is always hard.
Sam Ross 00:23:23  Hard to give recommendations that work across the board because you’re talking about 47 different departments. but yeah, the VDA is another process that kind of again, if you have large penalties and interest and you want to get compliant, it makes sense. And then the third option. So those are like my you know my recommendation again be compliant. Pay the taxes you owe. But you know a lot of e-commerce business owners in particular are you know, they’re bootstrap businesses. It’s they don’t have a lot of cash flow. They don’t always have the money to to go and pay the states. And so they might opt to just register on we call it like a prospective basis, the register, kind of on an yeah on a go go forward basis. So yeah. You start hey, I’ll start collecting tomorrow and I’m going to start remitting all that tomorrow. And then the hope is, you know, you don’t get audited by the states. The states typically once you register the states can have a three year lookback window, so you hope that you make it three years without getting an audit.
Sam Ross 00:24:22  And then if you’ve made it, you’re kind of in the clear. You don’t have to have this all those liabilities on your balance sheet. and so that’s a more risk on approach. But again, these are, you know, innumerable we’re not the tax police. We just, you know, we’ll, you know, we’re here to like, another hopefully other service providers as well. Like, it’s, you know, you should make whoever you’re working with again, it shouldn’t be someone that’s just trying to scare you into, it’s not trying to scare you into things that you really just be giving you, like, the information to make the best decision for your for your situation in business. And so, I would say it’s not what I’ve seen across the industries. It’s not in many cases, it’s not uncommon to to register on a move forward basis. And often, you know, if you’re kind of doing the Excel math, what’s my risk here? That’s often probably the the risk adjusted, way to do things.
Sam Ross 00:25:18  But again, it depends on your goals. Because if if you go do this kind of, having started before basis and you’re trying to sell the business or trying to often raise venture funding, you know, during an audit, it will come up and they will, it’ll, it’ll, it’ll be depending on situation. You can either if you’ve seen it, you know, it kill deals like acquisitions or or just create other headaches. And so, yeah, just all these things kind of depend on your goals as a business.
Josh Hadley 00:25:51  Yeah. I think that’s a really interesting one to note. There is what are the implications for sales tax when it comes to like exit? because I’ve also heard people like, hey, you haven’t been paying sales tax, so like your, your butts on the line for all of this moving forward because like, the look back window is indefinite. so talk to me about Like what challenges are happening for those that are not compliant when they try to go to exit?
Sam Ross 00:26:19  Yeah. So this actually happened to me on my jewelry business when I went to sell it.
Sam Ross 00:26:23  There was some, you know, again, this was right around when Wayfair was coming out like or just after. We didn’t really know the rules. And so yeah, the, you know, the the buyers are always looking if during a transaction, you know, buyers always look, you know, you’re always looking for like add backs like hey how to add value. And then to my EBITDA and then they’re always looking for ways to like you know, you know especially later once you’re a little bit further along a deal stage. Like they’re always looking for ways to to cut the deal down especially, you know, a more aggressive private equity type buyers. And so they found that there had been a bunch of states we hadn’t registered. And so I had to go and basically take a bunch of money out of the deal and put it into, sort of like some collateralized account. And so if an audit ever happens like that, money is available to go and pay the states. And so it can definitely shave a lot of money off a deal.
Sam Ross 00:27:15  or hold things up. Yet not every buyer notices this. It just, I think, like smaller buyers or less sophisticated buyers. You know, it might not matter, but any buyer that’s going to do a financial audit on you, especially when you know the acquisition prices are, you know, I don’t know, in the tens of millions. it’s it’s certainly we see it come up.
Josh Hadley 00:27:37  Yeah. I think that’s it’s something that can really throw things for a whole other curveball. sounds like. So, I love that now. Is there anything else, Sam, that I’m not asking you about? Sales tax? That, you know, I should be asking you. Or what do our listeners need to know about sales tax?
Sam Ross 00:27:56  Yeah, because I think you you asked. I think a lot, a lot, a lot of the good standard questions. I would say, you know, always I’m always pitching my own. You’re pitching my own, my own thing. So I think, you know, the main thing I would say is when you, when you look for a solution here is, you know, I think often the way it’s been done historically is like you have these tools that happen.
Sam Ross 00:28:19  So there’s kind of these incumbent tools that are around for a long time, like a tax jar, like an avalanche. And if they’re implemented correctly, you know, they weren’t. They work pretty well. But the challenge is you often then need to have an expert that manages them. And so you’re hiring. You know, it’s good if you just try to use them yourself. You’re probably going to make a mistake. And so you then want to hire some type of consultant or, accounting firm to manage those tools for you. and then I think some of the newer vendors around the space, you know, like us and other folks around, you know, are trying to do an approach that’s, you know, kind of making it so you can have someone that’s like more high touch service, consultative, you know, businesses like us, like we’ll scan all the new, my gummy brand gets, I think, a couple hundred pieces of mail a year from states. It’s crazy. from, you know, we registered in 40 plus states.
Sam Ross 00:29:07  You’re just going to get into some countries, you’re just going to get tons of mail. So I guess we’ll make you know. It’s nice to have someone that scans the mail, reads it on your behalf. You’re not having to think about this stuff, because if you get it often, what’s happened to me is I was getting tons of mail and letting it pile up because I don’t want to, you know, a lot of it’s just like junk mail. I’m getting a thing in the mail. Oh, California. I have one recently. Like California is, on breast pumps are going to be tax exempt for the next, like two years. And, like, I don’t sell breast pumps, like, what is this going to go? And but then you get a really important one. Hey, there’s a line on your, you know, a filing payment failed and now there’s going to be lean on your business if you don’t pay us right away. And so you want to. So it’s challenging.
Sam Ross 00:29:47  So I see I talk to folks all the time. They come to me, they show me their stack of mail. It’s enormous and no one wants to deal with it. So you just got to make sure if you’re getting correspondence from states like make sure you’re reading it or you have somebody else that’s like, actually like reading all that on your behalf, because otherwise I’ve seen all the time clients come to us from somewhere else, and they have a lean on their business. There’s also like their bank accounts getting frozen. They have all sorts of crazy issues because they’re just like, they’re just being negligent here. Yeah, but I think the end goal should be that you should. Whoever you’re working with, you should be spending is like, you know, if you’re spending more than 30 minutes a month on sales tax, like you’re doing something wrong. Like it’s going to take work to get, you know, I’m not saying like it’ll take work to kind of get that compliance date, but that should be the ongoing state.
Sam Ross 00:30:31  Is it really is. It’s not a value add to your business. It’s pure, yeah. Just pure compliance. It’s it’s. Yeah. And so get it off your plate.
Josh Hadley 00:30:42  Yep. One of those necessary evils. And so that’s definitely one of the things that I would recommend for those listening to this. Right. If your head’s kind of spinning or like, I have no idea what I should or should not be doing with sales tax, I think, as Sam noted, one of the best things that you can do is go reach out to an actual like consultant, because every business has its own unique nuances. it’s a matter of how much you’ve actually sold into those different states. Every state is different. what marketplaces you’re actually selling on? Do those states count your marketplace sales towards your nexus? Does it not? So there’s a lot of nuances that go into this. But I love what you said earlier, Sam, where if you feel like somebody’s trying to scare you into the compliance, like probably not the best person to pay attention to, but to be able to talk to, you know, maybe like a group like yourself or it’s like, look, here’s just like, this is the lay of the land.
Josh Hadley 00:31:40  This is how it looks like. This is the way it looks for your business. You get to make your own decisions. But here’s here’s everything laid out to you in a silver platter. So I love what you guys offer in the chat. We recently just switched over to numeral, and we’ve been happy with that change because prior to that, I would agree with you. We had to hire somebody internally just to go manage the other tools that we were previously using, which then I was like, why are we even paying for these tools? If I have to go hire somebody just to manage them to make sure they’re correct. So love that. Now, Sam, let’s turn our attention maybe into more kind of optimistic, exciting conversations around marketing and growth, which is where you’ve spent a lot of your time. Talk to me about like, where do you see most ecommerce brands finding the most growth opportunities right now?
Sam Ross 00:32:32  Yeah. Good question. I would say, you know, it depends on the brand and kind of where you’re at.
Sam Ross 00:32:40  I think yeah, I think everyone’s seen a lot. There’s a lot of interesting stuff going on in TikTok shops. So that’s I think, exciting. I think you wanted the one thing to be careful of, like platforms like that is just be careful. I think it’s easy. Often the things that work well are things that are very short term, where you have something that’s cheap and it kind of goes viral and you can make a bunch of money for maybe the next, 2 or 3 months, and you’re not going to have a lot of retention. At least last I checked, they didn’t have subscription built in or things like this. And so what I’ve seen it often happens is people have these huge spikes from TikTok shops and then and then it doesn’t necessarily last. And or you, you’re kind of always banking on, okay, you know, I’m not you know, these people are going to eventually become my Shopify loyal Shopify customers. And often that doesn’t actually pan out. Now it can happen.
Sam Ross 00:33:28  I think some people have made the bridge work, but I think and sometimes, you know, just making short term cash like it’s not if, hey, if it’s enough cash, maybe it’s not. You know, depends on your goals. Maybe that’s not always a bad thing. But if you’re looking to build a durable business, you just want to make sure that, you’re not just chasing some kind of short term thing. I mean, I still think, you know, the, you know, just having success on meta, like, it’s boring. It’s just been the, the, the, the kind of bedrock of the industry for, I don’t know, a decade now know, and it seems like it’s not going away. And, you know, that’s still where most, most folks are getting the majority of, of their revenue. And I think it’s easy to get distracted with sometimes all these other channels you can get up next to. Or is it not sexism? I know there’s all, you know, you can get these like mobile ads.
Sam Ross 00:34:20  There’s all these other like kind of things come up. But, yeah, the other area, I think one area that I think is interesting growing is, what’s called like EO like app, for, for AI. So like answer engine optimization. I think that, you know, a lot of people now are starting their journey, especially, on the research side. they’re especially for, like, certain types of goods, like for things that are more research, you know, more expensive research driven, health driven, things like that. and so I think for certain product categories, if you can nail that, it’s going to work. Well, now, I think it’s kind of black magic. No one really, you know, no one’s quite cracked. Like, hey, how is it? You know, how do I how do I do after an optimization that’s different than SEO? You know, some folks are like, hey, if you get really good at Reddit and like having lots of organic content on Reddit, the the, you know, the LMS will pick up on that and start ranking you.
Sam Ross 00:35:18  So I think it’s hard to give generic advice there, but I think that’s going to continue to grow and become a bigger and bigger channel. I know, you know, OpenAI’s announced some sort of integrations with Shopify. And so I would say, you know, often when there’s these platform shifts, like there’s that means there’s probably money to be made and there’s some, you know, opportunity there. So I would keep a close up. I think to me, I would keep a close eye on that. And there’s probably some areas you can be highly successful on and even maybe and even maybe create. Like I would almost try to reverse engineer it in some ways to figure out like are there categories people are searching for that like product, you know, products don’t exist. So when I went and sold jewelry, What we figured out was the way we started with that business was we sold these jewels. You know, these little jewelry. And we attached to a card on the background. And then we’d put different text messages.
Sam Ross 00:36:07  Different messaging. But the way we came up with that idea is I saw there was tons of keyword volume in gifts. So people would search for gift for gift for mother in law, gift for piano teacher. That’s just all these long tail queries. And you look for gift for piano teacher. And nothing was actually designed for a piano teacher, right? Because it was maybe getting a thousand queries a month or less even. And so we just had one piece of jewelry, but we could just print thousands of cards and didn’t really cost us any more money to make a, you know, a card for a piano teacher or for, you know, a nurse or whatever. Like very niche category. And so I think this, you know, so we started with like what’s the what are the search queries? And let’s design a product for those search queries. And so I think there’s probably some opportunities where a lot of people are searching for certain stuff on, on, on on these the, you know, ChatGPT or these other, AI systems and, like, how do you actually design something that’s, that’s maybe designed for that? So I don’t know what that is, but I would spend I would spend a lot of time there because I think there’s going to be a lot of money made, especially for high ticket items, I think.
Sam Ross 00:37:11  I think that’s one challenge as well. It’s all like if you’re selling like, you know, eight sleep or these like, you know, that’s a client of ours where they’re selling these like multi thousand dollar mattresses. You know, you’re not just gonna like run an ad on on Google shopping for someone who’s like, hey, like, you know, mattress and someone’s like, oh great, $8,000 mattress. I’m gonna buy it now. It’s going to take lots of like, research and stuff. And so I think the research phase now, you can start tracking it better. It’s in these things. And so or even maybe you can even track it. But like, you know, you hopefully, you know, a lot of the time to where I see opportunities generally is, is, you know, things that you can easily track and measure, like a Google Ads, they’re going to there’s not a lot of opportunity because everyone will see the opportunity or Amazon as well. Like, you know, if you’re a question on Amazon, some, some seller in China is going to see that you’re crushing on Amazon.
Sam Ross 00:37:59  They get you know, they can you know, back in I don’t know easy now. And I used to use like Jungle Scout. And so that that opportunity you have is going to go is going to get just someone’s going to undercut you. It’s going to go away. But often where there’s opportunities in business is where it’s like actually hard to measure, but you’re still crushing it. So often this stuff is really hard to track because they’re not necessarily linking to your product or things like that. And so if you can find areas or it’s hard to measure, but you can but you but you can kind of see you can see results in your bottom line. Those are often like the biggest opportunities to really grow.
Josh Hadley 00:38:28  Yeah. No, I love that. And I think you hit the nail on the head with like the LMS right now. What’s going to happen is I think that this is going to be another opportunity, just like Amazon back in the day, where it’s like it was keyword arbitrage back in the early 20 tens of like, hey, lots of people searching for this and nobody offering these types of products.
Josh Hadley 00:38:47  And I think the same thing is going to happen within the LMS. It’s like find What are most people searching for when we can get that data? And then how do you create products, or how do you create answers and blogs and getting into Reddit forums? Because that’s where a lot of these are pulling their source information from is from Reddit and YouTube. So like, what are you doing on YouTube to support, like being able to answer the questions that are being asked there? I think it’s a you’re right. I think it’s going to open up another wave of opportunity. But people need to act quickly because if you don’t like the window of opportunity, I think will shrink pretty darn quickly.
Sam Ross 00:39:27  Yeah. And I think the other trend I see with these LMS is now that they have, you know, these kind of memory like concepts is you’re going to have you’re going to have they’re going to start giving more and more and more niche kind of recommendations. And so if you know, I’m someone who’s I’m making this up, I’m like gluten free.
Sam Ross 00:39:46  Like it’s going to know that I’m gluten free. And so I searched like, hey, how do you know? I need. I’m looking for, like. I don’t know why you look for pretzels. Probably because I’m looking for pretzels is going to give you pretzels. Or it knows that I love. I’m always into natural. I’m always into, like, organic and natural. And I’m like, hey, I need a treat for my dog. It’s gonna like, give me the organic, natural. So I think you’re just gonna end up, you know, you have to think. I think what are like, the certain kind of what are the certain things that AI is going to know about people and then try to give them a very tailored recommendation. So, again, instead of I think right now in Amazon, someone searches for a generic term and you’re trying to rank on that, it’s gonna really what what these eyes are looking for, they’re going to have much more. They’re going to just see like an explosion and long tail queries.
Sam Ross 00:40:32  because I’m not always adding all these things onto my search, but they are. And so it’s probably going to, you know, if you can create, especially if you can create product categories like I do with my jewelry where I had one piece of jewelry, but I found a way to rank on thousands of long tail keywords because we slightly modified the product. There’s probably opportunities like that, like how do you have your product and you? Do you have different ways to like create make it like slightly more module. You know, you had these shampoo companies like I think I can remember their names. So they they have one shampoo. They able to kind of on demand manufacturing to slightly modify the shampoo. There’s probably a lot of opportunity opportunities like that where you can take that and, you know, do some good SEO, EO and find ways to wring.
Josh Hadley 00:41:08  Yeah. Sam, I love that. I think what an exciting time to be alive in the e-commerce space. I think that it’s going to change a lot.
Josh Hadley 00:41:15  I think that we all wish we could have gone back in the day when Amazon first started and like, it was just like printing money. And it’s like, I think that time is here again. we’ve seen it with TikTok shop. I think we’re going to see it with these AI algorithms and ChatGPT. We have perplexity. There’s all of them. They’re trying to figure out how to do this, like e-commerce thing the right way. And I look forward to seeing what it does and how it impacts Amazon, how it impacts, you know, Google and those that are on the forefront of this, I think are going to be the ones that reap the dividends. So I appreciate you sharing your perspective with us here. Sam, as we wrap things up today, I’d love to leave the audience with three actionable strategies in action items that they can implement in their own business. Here are the three action items that I identified. You let me know if I’m missing something. Action item number one. First and foremost, Sam’s recommendation is like you should just be compliant with with sales tax.
Josh Hadley 00:42:18  Number one, it’s it’s a tricky thing to have to deal with later on if you’re just going to pull the the blanket over your head and say like, I don’t think they’ll ever find me. your example of somebody getting a $350,000 tax bill do I don’t care how much money you have in your bank account. That’s that’s not a fun one to pay. so making sure that when you are being compliant, I would make sure you rely on consultants to provide you tailored advice that meet your needs of your business. Don’t just listen to a podcast. Don’t just listen to what we’re saying and just go blindly follow it, but actually sit down with somebody that knows the ins and outs of your business, can ask you tailored questions. and also, I think another I would say this action item number two, if you get a letter from a state, your first your first action item should not be a disregarded or B just simply acknowledge it and in reply back to them because that that’s not good either. But actually again, going to a consultant, going to a lawyer, they can say, hey, before I reply, what? What can of worms am I about to open up? If I reply, don’t reply.
Josh Hadley 00:43:32  And I think a lot of people are getting letters like this from even like there’s like false like, suits for people, you know, not following the GDPR laws and there’s aggressive attorneys just sending letters out threatening lawsuits for that. So it’s one of those things that sometimes the best thing is to not respond, but give it to a lawyer and get their their $0.02 on that as well. And then my final tip in advice and action item here is to focus on these large language models. And where are they moving. And stay close to that a e. So I think that that agent shopping social commerce, that’s exactly where the world is trending in the world of e-commerce over the next couple of years. So don’t sleep on that and make sure that as you’re continuing to support your business on Amazon, on Shopify, like you got to still do those basic things, but make sure that you’re allocating. I would budget at least 30% of your time to dabbling into some of these newer ideas, because they are pivoting quickly and you could easily go a year from now and not do anything, and the world will completely have flipped in terms of where e-commerce revenue is being generated.
Josh Hadley 00:44:48  So, Sam, those are my three action items. Anything you think I did not cover that you think we should have discussed?
Sam Ross 00:44:55  No, I think that’s it. Yeah. I think my biggest thing on the AOE too, is not don’t just take your existing products and try to like get them to rank. It’s like actually understand how people are using them to figure out what products you should be developing or your strategies of merchandising them. So really kind of starting with those, first principles, for lack of a better word.
Josh Hadley 00:45:17  Yeah. Great advice. All right, Sam, my final three questions that I ask every guest. Number one, what’s been the most influential book that you’ve read and why?
Sam Ross 00:45:27  Yeah, I would say on the at least on the business side of things. You know, I don’t read a ton of business books. I think a lot of it’s just kind of aphorisms and things. But, there’s, you know, the kind of classic I think it’s like Robert Cialdini. I think it’s called, influence.
Sam Ross 00:45:43  And it’s I would say it’s the best marketing book by far. It just has a couple, you know, basic principles around Mark, you know, that you kind of end up it’s around like human psychology with things, you know, and around kind of how people influence things like, social proof and authority, scarcity, you know, all these concepts. It’s, you know, they’re fairly intuitive, but I think most marketing can probably be can, you know, most effective marketing kind of rolls into these things. And so just having a really good baseline, to kind of kind of draw back on, I think that book is, is, is kind of stands the test of time. It’s not, it’ll be, you know, these same principles will exist in 100 years from now. So I think so I think that, yeah, that that book is great. just just kind of like learning those principles is really helpful. yeah.
Josh Hadley 00:46:32  Love it. Question number two. What is your favorite AI tool that you’ve been using and how have you been using it?
Sam Ross 00:46:39  Yeah.
Sam Ross 00:46:39  So, I mean, to show like, numero has actually a great, AI chat bot, called right now we’re calling it nucleus. And, you know, you can use it for either asking tax questions like, hey, I’m going to launch a, iPhone case. What’s what, you know, what states or is that going to be taxable in. Or you can have questions around your your filings. How come, you know, how come this I, I this amount of dollars on my filing for here and you can actually give me really thoughtful responses. But obviously outside of like my own thing, my own, our own tool, which I love. I would say, you know, most of my time is still spent in kind of the, the kind of core gpt clods of the world, I think. But like one use case for it that I think is particularly been fun for me to do is is using it for health. So I have, you know, uploaded a lot of my DNA sequencing.
Sam Ross 00:47:32  so now, yeah, Sam Altman has a copy of that, and I uploaded, you know, I did a bunch of, you know, hundreds, you know, lots of blood panels. I was able to get, like, pretty good insights there around my health and some lifestyle changes I needed to make. and so, I think, you know, it was able to make connections between my DNA and certain blood markers. And, you know, I can go then look into different studies and try to understand my health better. So I think, there’s a lot of insights that I think your general, most doctors are not going to get. They don’t really care about and are not going to put the work into. and so I think it’s been it’s really fun to like, push it on, on health stuff.
Josh Hadley 00:48:09  Yeah, I am a big fan of utilizing it for the health stuff. I have the whoop band as well, and I’m uploading my whoop data in there. My blood results like all that so I could nerd out with you there.
Josh Hadley 00:48:22  I love it. All right, final question. Who is somebody that you admire or respect the most in the e-commerce space that other people should be following in?
Sam Ross 00:48:30  Yeah, I would post. I was like Chad Janis over at grunts, Ones, selling gummies, but I think they’re recently valued at 500 million. Something like two years in, which is pretty much unheard of in e-commerce in 2025. And I think what’s what’s interesting about them is, you know, it didn’t go and do. This is not so crazy like, you know, traditional like venture back thing where. They’re going like, yeah, we have like like like a, like a like eight sleep. I keep using where they have to spend millions on R&D and have all this stuff. Like he was just basically doing a pretty standard DTC econ play but just executed phenomenally. I think, you know, the product tastes. I mean, they put a lot of R&D into the product. If the product tastes really good and it’s there, it’s a good market.
Sam Ross 00:49:18  And then but I think just incredible marketing, incredible kind of, just, you know, different flows on their website. And, and so just like just phenomenal execution. So again, sometimes it just comes down to, to execution and like. Yeah. Chad I think is just doing a great job. So, so yeah, that’s how I would take a look at and just study in terms of, how to do things, just execute 2025 at another level.
Josh Hadley 00:49:48  Totally agree. Great recommendation. Well, Sam, this has been a pleasure. If people want to learn more about you, follow your journey or numeral, where’s the best place for them to find you at?
Sam Ross 00:49:59  Yeah, find me on Twitter at Spam Ross spam RSS or just search me up on LinkedIn. You know, we got our our LinkedIn, thought leadership there. So, Sam Ross numeral on, on LinkedIn.
Josh Hadley 00:50:13  Awesome. Well, Sam, thanks again for your time today.
Sam Ross 00:50:16  Thanks, Josh. It’s great to hang out.
MC 00:50:18  Thank you for listening.
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