A Suite for the Sweet: Dylan’s candy bar licks taxation complexities

About the Client: Dylan’s Candy Bar

Founded in 2001 by Dylan Lauren, Dylan’s Candy Bar is a chain of boutique candy shops and candy suppliers currently located in New York City; East Hampton, New York; Los Angeles, Chicago, Honolulu, and Miami Beach, as well as in wholesale venues around the globe and online.

A Tax Solution for Rapid Growth

Dylan’s rapid expansion into new product lines and distribution channels has exponentially increased the complexity of its tax accounting. When and where is an item taxed as food instead of candy? Under what circumstances is a piece of clothing considered a luxury item? The company’s omni-channel strategy introduces even more layers of complexity, more room for potential errors, as the burden for collecting consumer-use taxes isn’t always clear.

As complexity increases, so does exposure, and that has made Dylan’s a target for auditors. The accounting team had been calculating taxes, filing in each state, and managing exemption certificates for hundreds of customers essentially by hand. Auditors found Dylan’s books such fertile ground for back-taxes, penalties, and interest that they came back every year—New York audited the company on an annual basis from 2006 to 2012.

As the business grew, so did the challenge of keeping up. And to make matters even more challenging, their systems didn’t talk to each other—GL, inventory, and POS systems were completely disconnected. With a growing number and different types of SKUs in their inventory, additional states to contend with, and more financial information to track and manage, Dylan’s needed a better way.

Lois Browne
VP Finance
Dylan’s Candy Bar

Project Highlight: The Solution – Avalara Sales Tax Suite

Having decided on NetSuite for its ERP system, Dylan’s Candy Bar quickly saw Avalara as the right choice for automating sales-tax calculations, managing exemption certificates, and filing returns. Avalara’s solution integrates with over 580 business systems out of the box—including NetSuite and Dylan’s point of sale system.

With Avalara’s AvaTax, Dylan’s is able to apply sales tax as the transaction takes place, using continuously updated rates and applying them at the point of sale. “We’re even self-assessing consumer use taxes on purchase orders now,” Lois adds, “per Avalara’s recommendation.” As the company grows, AvaTax is already prepared to determine sales tax for the new locations.

Transactional tax data from AvaTax is provided to Avalara Returns, which allows Dylan’s to automate filing in every jurisdiction. Instead of paying each jurisdiction individually—which used to take a lot of time and labour itself—Dylan’s makes a single ACH payment to a secured account, and Avalara Returns takes care of individual payments to each tax jurisdiction.

And finally, Avalara’s CertCapture helps the company manage exemptions with ease and confidence. Exemptions are only allowed in NetSuite when a valid certificate is available. Certificates are stored in the cloud and are easily searchable by line item if required in an audit. Pre-populated requests for certificates are created and sent with just a few clicks. Expirations and renewals are tracked automatically, and reports highlighting exposure from missing certificates are sent right to Lois’ inbox.

“The implementation of Avalara’s solution was really seamless and user-friendly,” says Lois. “It was a simple, turnkey process, and when we have questions, the team at Avalara is very responsive.”

Lessons Learned – Tax Automation Results

With AvaTax, Avalara Returns, and CertCapture, Lois and her team no longer spend energy on calculating and collecting taxes, filing across multiple jurisdictions, and complying with exemption requirements. Instead, the team has been liberated to focus on other automation priorities that help Dylan’s pursue its aggressive growth goals.

“Just as importantly, we have shut the door on those annual audits,” says Lois. “We answer with such confidence and authority now; the auditors have moved on to someone else. We are no longer the low-hanging fruit for them.” And that has left Lois and her team with “a sweet, lasting euphoria” of their own.

Alex Olano

CEO & MANAGING PARTNER
TRAJECTORY GROUP