Ask HN: VAT and sales taxes for small SaaS

Hello fellow HNewsers.

I would love to learn how you handle VAT (Value Added Tax – and other applicable sales related taxes) for your small (or large) SaaS businesses.

For example: the VAT rules are quite complex in the EU. The rate you pay is based on the location of the customer, rather than where you are located. In some countries elsewhere I know there to be a threshold you need to reach before you have to start paying. Additionally it seems the rules and rates keep changing.

My question to you is:

  - Do you handle this yourself? If so, how much time does it take?
  - Do you outsource it to a third party? If so to whom, and would you recommend them?
  - Do you altogether ignore it, and hope you won't be caught?

When first becoming consciously aware of the need to collect the applicable taxes myself I was quite surprised to find it wasn't something companies such as Stripe handles for you out of the box. It seems like a no-brainer service for a payment provider to handle?

There are services like Paddle which act as the merchant and deal with the taxes for you. Paddle comes at quite a hefty premium though (5% + 50c/transaction – meaning if you have a subscription price of 5EUR and sell to a customer in a country where the VAT is 20% VAT, the maths end up looking like: 5 - 20% - (50c + 25c) = 3.25EUR going to you. In other words Paddle effectively costs you 15% of the sales price...). The premium might of course still be worth it given they deal with all the bureaucracy.

Thanks for your time and suggestions!