Lab-grown diamonds start-up gets clarity on sales tax rates

Lightbox Jewelry is a leading producer of laboratory-grown diamonds, on a mission to make the sparkling stones more accessible. It was launched in 2018 and sells predominantly online as well as within department stores and independent jewellers. 

The trend for lab-grown diamonds is growing rapidly in the jewellery industry. They are optically identical to mined diamonds and although their production requires highly sophisticated technology, the manufactured stones are significantly more affordable than conventional diamonds. 

The largest market for lab-grown diamonds is the US, so when Lightbox was setting up its ecommerce website, the finance team looked closely into the matter of sales tax compliance in the US. They were keenly aware of the Wayfair ruling of 2018, which impacts distance sellers like Lightbox. 

Mark Avery, Financial Controller at Lightbox, says, “I was familiar with VAT and Australian GST, but the US sales tax landscape is very different. Instead of having one or two standard rates to apply, US rates differ widely between states and within states – even within zip codes. Plus, the rules and rates change regularly. It was obvious that trying to manage our compliance manually would be complicated, onerous, and simply not feasible.”

With a complex supply chain, ambitious growth plans, and only a small finance team, it was clear that a software solution would be required to automate sales tax calculation and filing.

Lightbox had decided to partner with Shopify to power its ecommerce website, and so adding AvaTax and Avalara Returns to its Shopify Plus plan was the obvious choice. 

AvaTax has a pre-built integration with all the major ecommerce applications, and it can be activated from within the Shopify Plus account in a couple of quick steps. AvaTax provides more accurate sales tax calculation than Shopify’s built-in tax engine, which bases calculations solely on tax registrations or on location. With AvaTax, sellers have access to real-time tax rates for more than 12,000 tax jurisdictions. 

Mark continues, “Sales tax went from being an issue to a non-issue. We just switched AvaTax on and it worked. Set-up was quick and easy, so there was no implementation period as such.” Since it launched, Lightbox has seen a sparkling rise in the sale of lab-grown diamonds. The business is currently registered for sales tax in six states but Mark believes that the Wayfair ruling will continue to have a ripple effect on businesses and it’s likely that registration in more states will be required in the future. 

Fortunately for Lightbox, using Avalara Returns eliminates the hassle of filing tax returns with each state’s website, so expanding the business and meeting growing compliance obligations will not be a problem.