Item 8.01 Other Events.



In connection with the Avalara, Inc. ("Avalara") 2021 virtual analyst day, on
May 27, 2021, we disclosed changes to the methodologies by which we calculate
Core Customers and Net Revenue Retention rate. Additional information regarding
the virtual analyst day, including a link to the webcast and the full slide
deck, are available on Avalara's investor relations website.

Core Customers



We believe core customers is a key indicator of our market penetration, growth,
and potential future revenue. We use core customers as a metric to focus our
customer count reporting on our primary target market segment.

We define a core customer as:

• a unique account identifier in our primary U.S. billing systems (multiple

companies or divisions within a single consolidated enterprise that each

have a separate unique account identifier are each treated as separate


          customers);




  •   that is active as of the measurement date; and

• for which we have recognized, as of the measurement date, greater than

$3,000 in total revenue during the previous twelve months.




Currently, our core customer count includes only customers with unique account
identifiers in our primary U.S. billing systems and does not include customers
that subscribe to our solutions through our international subsidiaries and
certain legacy and acquired billing systems that have not yet been integrated
into our primary U.S. billing systems (e.g., recent acquisitions and our lodging
tax compliance solution). As we increase our international operations and sales
in future periods, we may add customers billed from our international
subsidiaries to the core customer metric.

Prior to May 2021, revenue from our Streamlined Sales Tax solution (SST) was not
included in our calculation of total revenue during the previous twelve months.
This meant customers that would have otherwise met the definition of a core
customer, with inclusion of attributable SST revenue, were excluded from our
core customer count as well as our disclosures on the percentage of total
revenue attributable to core customers. In May 2021, we revised the methodology
for core customers to include revenue from SST.

We believe these changes improve the usefulness of this key business metric,
which is to measure both the growth of existing customers into core customers
and the acquisition of new customers of a certain size.

We also have a substantial number of customers of various sizes that do not meet
the revenue threshold to be considered a core customer. Many of these customers
are in the emerging and small business segment of the marketplace, which
represents strategic value and a growth opportunity for us. Customers who do not
meet the revenue threshold to be considered a core customer provide us with
market share and awareness, and we anticipate that some may grow into core
customers. In addition, we have numerous enterprise-level customers that only
utilize our services for small segments of their business, providing
opportunities over time for us to extend our relationship and make them core
customers.



                               Mar 31,      Dec 31,      Sep 30,      Jun 30,      Mar 31,
                                 2021         2020         2020         2020         2020
Core Customers (as reported)     15,580       14,890       14,180       13,560       12,940
Core Customers (revised)         15,730       15,020       14,300       13,640       13,000


Net Revenue Retention Rate

We believe that our net revenue retention rate provides insight into our ability
to retain and grow revenue from our customers, as well as their potential
long-term value to us. We also believe it reflects the stability of our revenue
base, which is one of our core competitive strengths. We calculate our net
revenue retention rate by dividing (a) total revenue in the current quarter from
any billing accounts that generated revenue during the corresponding quarter of
the prior year by (b) total revenue in such corresponding quarter from those
same billing accounts. This calculation includes changes during the period for
such billing accounts, such as additional solutions purchased, changes in
pricing and transaction volume, and terminations, but does not reflect revenue
for new billing accounts added during the one-year period.

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Our net revenue retention rate includes only customers with unique account
identifiers in our primary U.S. billing systems and does not include customers
who subscribe to our solutions through our international subsidiaries or certain
legacy and acquired billing systems that have not been integrated into our
primary U.S. billing systems.

Prior to May 2021, SST was not included in our reported net revenue retention
rate. This meant that revenue expansion from existing customers adopting our SST
solution was not included, while revenue contraction from customers replacing
one or more of Avalara's other solutions with SST was included. In May 2021, we
revised the calculation methodology for net revenue retention rate to include
revenue from SST. In addition, professional services revenue is no longer
included in the revised calculation methodology, as these services tend to be
more one-time in nature.

We believe these changes improve the usefulness of this key business metric,
which is to measure our ability to retain and grow revenue from existing
customers over time.



                                            Mar 31,        Dec 31,        Sep 30,        Jun 30,        Mar 31,
                                             2021           2020           2020           2020           2020

Net revenue retention rate (as reported) 107 % 104 % 

    108 %          107 %          109 %
Net revenue retention rate (revised)             113 %          115 %

116 % 114 % 117 %

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