JOSEPH OLSON: Lights are bright up here. So, just wanted to introduce myself. I’m Joseph Olson. I’m a Partner at PwC. I have had the distinct pleasure to work with Stripe for over a decade in varying capacities, mostly in tax historically, but also extremely focused on business and helping partners and helping Stripe ecosystem overall. So, pleasure to be here. I think this is my seventh Sessions overall. But yeah, they asked me to talk on taxes. I assured them that nobody would be interested in that, but they insisted. So yeah, again, Joseph Olson. I would say I’m a tax partner through a series of poor life decisions. Had a background in biotechnology, found my way to business and accounting, and bounced around the US a little bit, and service mainly technology companies, and really kind of passionate about Stripe and what we do here and how it serves the startup culture, how it facilitates the ecosystem here, and what it can do for a variety of companies.

So with that, maybe I’ll ask a question as like, how many people started a company because they’re like super passionate about sales tax returns? Oh, we got one. I think it was a sarcastic one, but yeah, I kind of expected that.

It’s like nobody does this stuff because they like taxes. You do this stuff because you don’t want to do my job. I think most founders think of tax as an evil necessity—at best. At worst, they’re like, “Oh my God, that’s the worst thing ever. It’s a horrible big beast of things that I don’t understand. I don’t want anything to do with it, but then maybe I do have to have something to do with it when notices start coming in.” That approach is super common. It’s maybe not the ideal approach, but it is approach. I think when you think about a tax function and how you deal with it from a company, it’s really like a house. You’re building a foundation. You don’t start out building this like 50-foot skyscraper. You got to deal with the stuff on the ground. You have to facilitate where you’re headed as a business, and you need to kind of plan and support for where you’re going to go. What you’re doing from a startup perspective also applies to your tax function. You don’t go immediately to scale.

What works as a scaling company as you’re growing into multiple countries, different product offerings, et cetera, doesn’t work at the startup phase. And tax is just like that. So at each of these stages—I’m going to go through startup, scaling, enterprise—and I’ll try and give you a view into like when do you invest in people for each of these? What processes do you need to build, and how technology and automation can help you at each of those stages? So this is about making your tax function grow with you, not ahead of you. And then if all goes super well and I don’t get like a bunch of questions or lose my place or anything, I’m actually going to leave a little bit of time at the end because I know there’s a bunch of folks here that are super focused on growth stage and startup. I’ll give you a couple of horror stories at the end that’ll make you lose some sleep. And then in true consultant fashion, maybe I’ll leave you with a little kudos at the end to say, “OK, maybe not the world’s, not such a bad place after all.”

Stage one. This is like the foundation stage. This is a startup. You’ve got a super good product. You’ve got your customers, like your focus is on survival, number one, growth, number two, I think maybe in that order. And your finance team as it will: it’s maybe a founder that knows how to use Excel. Maybe you have a bookkeeper, maybe you’ve got a CPA that does your income tax return or gives you some advice every once in a while. Like you don’t have a team. Y’all are getting together and like, “Well, what do we do with this tax stuff? I got a note in the mail.” At that stage, your challenge is like, “How do I do the easy stuff to facilitate my business?” Classic example is sales tax. Again, I know you’re passionate about it, but not everybody is. Your biggest challenge, it’s operational. This is not strategic.

This is like with the Wayfair decision, it used to be like if I had a physical presence in a state, I needed to go file a tax return there. With Wayfair, it’s like, no, no, no. Economic activity. You have $100,000 of sales in South Dakota? I use that because that’s where my family’s ranches are. You’re now a tax collector for the state of South Dakota. You now have to file tax returns, and you got to do a bunch of stuff. You now have a tax obligation there. You’re dealing with it. So yeah, it’s not a strategic risk. It’s operational. Getting it wrong leads to a bunch of notices. You’ve got tax authorities calling you. You’ve got penalties, interest, massive cleanup, if you don’t do it wrong, or don’t do it right from the start. And you’re dealing with years of impending or comprehensive adjustments from everywhere else and dealing with that. Now I acknowledge that statements like that are what makes me super popular at parties, but it’s the reality. The right approach here is not going out and hiring like your first tax person. That’s like further down the road. That’s like when you’ve actually got the house and you’re like doing things. This is not dedicated hire time.

This is where you take business, the folks in the business, you establish clear ownership. Do you have a controller? Do you have a cofounder? Someone has to be responsible for like making sure things get done inside the company. You rely a ton on external advice. You’ve got folks that you outsource to. For process, it’s keep things super simple. Track your sales. And again, I’m going to continue to use sales tax example. You got to track your sales by jurisdictions. You’ve got a process to make sure the taxes you collect are remitted. You’re actually filing your returns, and you’re like paying your tax bills. It’s just really simple kind of stuff. That’s really it. Probably the most important piece here is technology. This is where you like focus on automation. There’s a bunch of tax tools and tax engines available in the market, including a bunch of several Stripe native solutions.

And I can’t name all the names, but I’m happy to talk about them afterwards. But the Stripe native solutions, like there’s things here that can make your life easier. It’s a small investment, solves enormously complex problems for a startup business in a way that doesn’t really like drag on you as founders, teams, et cetera. It tracks your next thresholds, can file returns for you on some of these. It’s all about using this technology to facilitate. Goldilocks rule here: automate what you can, outsource the rest. Use technology to handle the high volume stuff, low complexity work, the investments in software and tools, not salaries.

At that point, let’s move on to, I would say, like your scaling or your growth stage. You’ve survived, right? You’ve got, let’s call it $10, $20, $50, up to $100 million in revenue. Like you’re a big company at this point. You’re expanding in new countries. You’re hiring employees all over the world, remotely or not. You’re launching new product lines. Maybe you’re looking at M&A transaction. This is where the beast gets super complicated. And at that point, your challenges are not compliance. It’s, “I’m launching in the UK. What’s that mean for VAT and corporate income tax purposes? I’ve got R&D developers in three different states. Do I have R&D credits available? What’s my profile there?” The super fun one: “Just got our first notice for an audit. How do we respond? Who’s going to deal with this?” That’s where our kind of outsource model ownership really starts to break down.

Your external firm might be great, especially if it’s PwC. Might be a little biased there. But they’re not in the day-to-day strategic meetings. They’re not helping set the business objectives. They’re not kind of the stakeholder at the table as you’re kind of navigating this. That’s where tax starts to become a bottleneck to your growth. Or even worse, it’s like, kind of like a pit of despair or unforeseen risk, like this foreboding tax topic that everybody loves to think about. And that’s really the inflection point. That’s where we say, “No, no, no. I need an in-house person. I need somebody within the company that’s going to focus on me, focus on the strategic decisions.” That first person generally is a dedicated hire generally. I would say there’s some exceptions to this, but I would say generally it’s a tax accountant. They’re a master of all things tax.

They know federal income tax, they know state income tax. They’re going to know some sales and use tax type stuff. They’re going to help understand. They’re going to have some knowledge of like global tax structure. Master of all is how you want to think about that person. And most importantly, they’re going to do two things. One, seat at the table to handle the strategic discussions within the company. Number two, they’re going to continue to manage the outside advisors and tax specialists that you bring in because you can’t en masse onboard a whole tax team that you might need access to. For process here or for people, well, that’s people, sorry, for process. It’s all about starting to standardize the processes. You got to get a master tax calendar so you don’t miss deadlines. You need to start documenting your tax positions so that A, you don’t lose the kind of tribal knowledge of it. And B, when a tax authority or somebody starts asking questions, you’re like, “Well, why did I make that position in South Dakota? I have no idea. I don’t remember. That was like three acquisitions ago and like a bunch of chaos.” It’s starting to build that muscle memory of, how do I actually operationalize taxes as a function and how do I build the rigor around it?

For technology, this is when the first kind of layer of that technology becomes less important and it’s more about the integration of all your tools. Does my sales tax engine speak to my ERP? Do I have clean data from an ERP that works into my income tax reporting tools and/or my compliance tools? Data cleanliness, right? All these things need to be super, super clean, super reliable. You need the ability to pull from your data sources from a single source of truth so that people aren’t like going through things repeatedly to sort of repeat a bunch of work.

Yeah. Goldilocks rule here? It’s hire a leader, not an army. Empower that person to be your kind of internal resource, to have the seat at the table from a strategy perspective, and then enable that person to hire outside firms and/or individuals with more specialized knowledge, whether that’s international tax transfer pricing, like the stuff that starts to get M&A, the stuff that starts to get super complicated at this level. Yeah. That gives you the ability to have the world-class expertise that you want, but maybe not kind of like the full score cost of a giant tax department of like 50 people.

Enterprise. Yeah, we’ve got the skyscraper at this point. You’re large, you’re multinational, you’re public. You’ve got stakeholders, investors, not VCs, but like other folks that are like looking at all of your operations on a quarterly basis. You’ve got quarterly earnings, they’re coming through them, you’ve got lots of critiques. This is like a big company at this point. You’re scrutinized by all those folks. At this scale, tax is not compliance. It’s strategic risk management, optimization for value perspective. This is like having tax help drive the value of the business. Questions at this point are, “How do we legally and ethically, both, manage our global effective tax rate? How do I manage transfer pricing risks between entities in Ireland, Singapore, and the US? How do they all work together? How do I put a system over around all that? How can we automate our global compliance in a way that allows our tax team to actually spend more time from a strategic perspective?” Because that compliance is important, but I would say all of the tax people in the room—I know there’s at least two of us—we’re actually thinking about, like, “OK, how do I not focus on that and how do I really spend time on the strategic?”

And freeing that up from a resource perspective is super important. Underinvesting tax at this point is a huge mistake, right? Cost of the errors and thousands of dollars. It’s tens of millions in back taxes. It’s public restatements. It’s reputational damage. I know, Debbie Downer, life of the party, got it. I’ll stop. It’s bad. Your approach here is you build a world-class and technology-enabled function. For people, you need a full specialized team. You’ve got a head of tax that’s a VP. You’ve got a international tax expert. You’ve got a transfer pricing expert. You got somebody that manages all of your indirect taxes. You’ve got a tax technology professional whose entire job is just to automate all of these systems and processes in a way that makes it more efficient.

For process, it’s global governance. You’ve got formal risk protocols. You conduct some barrier planning around changes in tax law. Your tax team is deeply integrated within your M&A function or corporate development function. All these things are like taxes, got somebody in FP&A, like your embedded functions throughout the place. From a technology standpoint at this point, it’s best-in-class tax technology stack. Enterprise grade software for tax provisions and compliance. You’re using AI and RPA to handle repetitive tasks. You’re using data analytics to form insights. You’re using AI to also coalesce the data to give you like, OK, what am I doing next? How am I dealing with this pivot? What it is? At this stage, investment is significant. ROI is pretty clear. You’re protecting the enterprise and creating shareholder value. At least that’s what I like to tell myself. My wife thinks it’s less interesting.

So with all that, I think that’s a pretty fast journey. We started the foundation using automation, solving basic compliance needs. We move on to growth where you’re hiring that strategic leader, still leaning on the outside for the expertise. And then we ended at the enterprise where you’ve got this ginormous company with full functions and a really large dedicated tax team. If I want you to remember one thing today: let the maturity of your enterprise or company guide the maturity of your tax team and align the two together to fit the purpose. The key here is, as each of these inflection points go, you’re making the right decisions at the time to not build up too fast, but to also support the function and enable the business to do the fun things that you’re all here for other than one person who likes sales and use tax.

Getting that timing right is critical and it really starts with people. Technology is super important. When you accomplish that, like tax is no longer a cost center; it’s a strategic partner. It’s the exciting stuff. It’s a lot. I felt like I just went through that about as fast as Stripe’s growth curve over the past decade. So it’s been fun to watch.

And I’ve got a couple of other monsters under the bed for those of you from a startup perspective. First and foremost, payroll taxes. This is where startups go to die. The moment you hire your first employee, you’re a tax collector. You’ve got federal income tax, FICA, FUTA, state income tax, SUTA. A bunch of words that hopefully most of you don’t know. But if you do, or if you don’t, call somebody like me if you don’t. And if you do, great for you. What’s even more fun about this stage is like founders and/or owners of the corporation—also personally liable. Super fun, right? IRS forgives them many sins. Payroll tax is not one of them.

And a common error here is contractors versus employees. Getting that distinction right. As startups, we all love to say, “Oh yeah, I’ve got a bunch of 1099 contractors.” You know what else happens at that stage? IRS loves to audit those startups. You get it wrong, you’ve got back taxes, penalties, interest, all that popular stuff. Another one is information reporting. I like to call this death by a thousand forms. You’ve got W-2s, 1099s, W-9s, 940, 941, bunch of numbers. That wasn’t my phone number, I promise. The important thing here is there’s penalties for each of those forms and each of those forms are to an individual or an employee. So that compounds really quickly. I’ve seen a ton of operational challenges for companies that sort of ignore or aren’t real crisp on this operational information reporting aspect. And you pay for it down the road and the remediation is painful. Just the amount of forms and everything that you have to do is painful. And then on top of that, interest and penalties. So, super fun topic.

Got to leave you with some good news. There is also a host of opportunities that your tax department can drive. There’s a host of things that are great as a startup. You’ve got R&D credits, you’ve got 83(b) elections, qualified small business stock. There’s a bunch of good things here. Your tax team can help you work from an incentive standpoint to help you efficiently locate either people or processes, or kind of physical assets. There’s a lot of fun things they can do. It’s not all doom and gloom. I’m way more fun when I’m not talking about tax penalties, I promise.

With that, hopefully some of that’s helpful. Tried to go through it in a pretty fast fashion, and I’m going to stick around for a little bit. I’m going to turn off the mic, so that you can actually ask me the real questions, and I’ll just be up here for the next 10 minutes or so. Thanks everyone. Looking forward to the next 10 sessions and continuing to work with Stripe. Appreciate.