Ask HN: How do you handle VAT / Sales Tax accounting as B2C SaaS? | Hacker News Reader

Ask HN: How do you handle VAT / Sales Tax accounting as B2C SaaS?

Hey! I run a B2C SaaS and I use Stripe for all of my sales (subscriptions).

I am looking to learn how others handle their VAT / Sales Tax filing.

I know that the standard answer would be to use Paddle / LemonSqueezy / Polar.sh, but I already have a lot of subscribers on Stripe which makes quick migration non-trivial.

I am especially looking for some reliable accounting companies / accountants that can register and file Sales Tax across US, UK, Canada, Australia, etc. (It does not have to be a global solution).

It's my understanding that solutions like Stripe Tax, Alavara, Quaderno, etc. only help collect the necessary data (which I consider the easier part, at least for digital goods), but do not handle the registration & filing (though I've learned that Quaderno will support filing Sales Tax in the US on your behalf soon).

---

Some jurisdictions are relatively easy to handle (for example, one can handle whole EU by uploading a simple CSV [1] once a quarter and the CSV is easy to generate from Stripe's records).

But unfortunately there are tons of others that are much more complicated and scattered -- for example, due to the economic nexus laws in the US, I now have to file Sales Tax in each individual state where I am over the threshold (and many states have thresholds in low hundreds of transactions, so it's not hard to reach).

[1]: https://www.elster.de/bportal/helpGlobal?themaGlobal=osseust_import

[2]: If you do not feel comfortable commenting here, you can also reach out at z2qmk@pekoi.com (temporary email)

View on HN

EU SaaS solo owner here (about 10 years so far). I gave up on B2C entirely. It's just too much hassle. My accountant starts screaming in horror whenever I mention VAT MOSS. Whenever I looked into the rules, I saw a snake pit with moving snakes.

Additionally, B2C has tight margins, so eating into those hurts a lot.

Whenever I looked at companies like Quaderno, they looked great, but when I actually tried to use them, it turned out that their solutions are far from perfect and often incomplete or simply incorrect (e.g. I would not comply with local laws in my country). This is a common theme: even B2B invoicing, which is far simpler, is not implemented correctly by companies that say they do "invoicing". For example, Stripe invoicing won't do JPK_FA or KSeF in Poland (SAF-T reporting), which pretty much makes it a no-go. Many service providers are also incapable of producing bi-lingual invoices.

I ended up using Braintree (don't make that mistake) and now I'm migrating to Stripe — but for payments only. I have my own subscriptions and invoicing, and I use a local (Polish) company that has an invoicing API to produce JPK_FA/KSeF data.

If I were to even look at B2C, I wouldn't even consider doing anything on my own. I would go with Paddle, carefully considering my margins.

I realize this is not the answer you were looking for but it's a real-life data point.

Can you explain why VAT MOSS is such an issue? It saved me a lot of time so it was actually quite useful.

Me too. It solved most issues i had before it existed. Basically EU sales are easy now but the problem are other countries with digital tax.

In my experience tax accountants really are not experienced with MOSS because its quite rare topic. Only chance is to find someone who is open and willing to study it.

What company do you use for Polish invoicing?

One of the most horrible aspect of the tax system is that individuals are held responsible for ensuring that they calculate and pay the correct amounts. It's kind of messed up that not only we have to pay tax, but the government doesn't even have the responsibility of telling us how much we owe it or what specific work which it did is covered by the payment.

Every other entity on this planet who wants to obtain money from another entity needs to tell them exactly how much is owed and exactly what goods and services are covered by that payment.

But the government not only doesn't have to report what work it did to warrant the payment, it doesn't even need to tell us the specific amount which we owe it; it's on us to figure that out... Figuring that out is complex and sometimes expensive too; many people can't afford. The gig economy is creating complex tax situations even for poor people. If we calculate incorrectly, then we suffer consequences. It's oppressive.

I know some people will read this and think I'm off on a wild tangent... But my friend, I'm actually addressing the core of the issue here. It's you who is on a wild tangent addressing superficial edge cases. The superficial cases aren't worth discussing; VAT, GST, CGT, income Tax and all other acronyms... Just don't participate in this system. Sell your business, change countries, go on unemployment benefits or whatever until this issue is fixed. How can a rational person operate in this environment? I can't believe some people work for fun. It's the most rigged, boring game ever.

You're not on a tangent at all, you're 100% correct.

It's shameful (in the most absolute sense of the term) that an entire class of people who contribute nothing to the world get to dictate—at the barrel of a gun or threat of imprisonment no less—that we owe them money that they then go and spend carelessly and without accountability (and this is independent of political beliefs—every single politician and bureaucrat is guilty). It's made even worse that they can't be bothered to make it easy to pay them (which is in their best interest). They exist solely to waste time and give otherwise unskilled people something to do.

I sincerely hope that the younger generations see all of this for what it is and aggressively work to remove it. "Oppressive" is exactly the right term. It hurts the prosperity of the majority in favor of a helpless minority (and no, I don't mean the people who actually need our help like the disabled—I explicitly mean government employees).

Love how the person who did a “AI-powered code snippets manager and generator and … Mod CSS framework” just casually dismisses millions of people around the globe who ensure safe drinking water, distribution of vaccines, maintenance of nuclear warheads, provision of public health, etc., et fucking cetera, as a class of people who “contribute nothing to the world.”

Very cool - good luck with Mod. Can’t wait until it changes my life as much as living in a functional, stable society (well, at least until a couple months ago, in my case, lol).

You're cherry picking what I've worked on. I've also built a full-stack JavaScript framework that's a far better solution than the current competition and can (if utilized) solve a lot of the issues with software we see today.

To your point, all of the problems you outline are either created/exacerbated by government or would be better handled by private industry.

That you reacted emotionally to my comment means I'm far closer to the truth than you might be willing to admit.

Strawman nolifer.

The reason for that is two-fold. Firstly, there’s a tax accounting lobby in some countries (ahem, TurboTax). Then there’s the fact that when people are afraid they could make a mistake, they tend to pay more, and generally might not even think about what they are paying for in the first place.

Is this one of those American complaints about not having a working PAYE system because certain factions keep the Federal government deliberately non-functional?

It's kind of messed up that not only we have to pay tax, but the government doesn't even have the responsibility of telling us how much we owe it or what specific work which it did is covered by the payment.

This is wrong. The IRS isn't allowed to tell us how much we owe, because a certain party currently in power has spent several decades preventing it from doing so. The IRS would love to have a system like they do in other countries, because it's way simpler than what we currently have, and for most taxpayers they already have all of the information they need to do it. For the remainder of taxpayers (including especially gig workers and other independent contractors): the IRS doesn't have all the information it would need to calculate income tax correctly; so these taxpayers would have to stick with the current self-calculation system even if the IRS were allowed to switch to the IRS-calculated system.

And on that second note: if the IRS disagrees with how much you claim to owe, they tell you how much you owe based on the information they have. It's then the taxpayers' responsibility to correct them by providing additional information. If it comes to an audit, the IRS will tell you in exacting detail exactly how they determined your tax liability, even citing the specific laws and regulations for any items in conflict.

We use Sphere ( https://www.getsphere.com ), and it’s the only good solution I know of for international VAT that handles everything end-to-end (registration, calculation, filing, and remittance).

We use Stripe Billing, and we actually use Anrok for US sales tax compliance. They’re solid domestically, but they don’t do international registration, filing, and remittance; they only do calculation.

There are also firms like VAT IT (vatcompliance.com) that can do this if you want to work with a more traditional service provider.

Hey, just curious, since you actually might know about this. My country (Norway) has extremely strict import rules. All items must have the VAT paid on them, and if they don’t, you have to pay the VAT plus an administrative fee in order to pick up the item. However, there have been plenty of times where I paid VAT to the store, but then I still get charged VAT upon pick up. According to the postal service, this is because “the company didn’t register their VOEC number electronically for the shipment” and then they tell me to get the company to refund the VAT, and I guess go fuck myself for the administration fee.

Leaving aside the utter garbage that is the Norwegian postal system, do you know what that means? Is that something that just happens as a matter of course when using Sphere? Is that a common feature among platforms that offer the service? I have no clue how unique Norway is or isn’t in this regard, but I imagine countries in general want to collect VAT for imports.

This isn't really related, as I understand it.

The Norwegian VOEC system[1] is modeled on the EU IOSS system[2].

As with normal import declarations, missing documentation means you cannot claim any exceptions etc. Thus if the store forgot to register the VOEC number when they shipped the item, the one filing the declaration, say the postal service, has to assume VAT hasn't been paid.

Now, if this had been a normal customs declaration, one could simply submit a corrected declaration with the correct documentation later. However, since such low-value goods aren't declared using a normal customs declaration, one cannot do this.

They also don't want spend their resources cleaning up someone else's mess, thus they leave it up to the shop that made the error to fix the problem by reimbursing you the VAT they collected.

And yes, as a customer this sucks, as the shop often will just shrug and claim they don't know or they did the right thing.

[1]: https://www.skatteetaten.no/en/person/duties/purchases-from-...

[2]: https://vat-one-stop-shop.ec.europa.eu/index_en

Sphere looks quite promising, and I haven't come across them before. Their coverage looks pretty good as well, and pricing sounds reasonable. It looks like they have a Stripe integration. Is that something you're using?

i think this matter is confused because it contains two distinct things:

a.) accounting for the VAT owned to dozens different countries and

b.) "remitting": actually paying the VAT to the tax agencies of dozens different countries

many services help with part a.), but i haven't found a single one that helps with part b.) - you can only circumvent the issue by selling on a platform (like the different app stores or "FastSpring" or awful awful "Paddle") that do it for you because they are the merchant-of-record

our solution is to defer all payments for countries that collect VAT (EU plus UK plus like a dozen evil ones [1]) to FastSpring (which collects AND remits VAT), while selling to countries that don't collect VAT via Stripe.

this works well if you are a small company and you fall below the "VAT thresholds" in place by most countries, but if you are big and breach most thresholds this solution is less effective.

[1] AE, AL, AO, BH, BY, CH, CL, CO, CR, DZ, EC, GE, IN, KE, KR, MD, MX, RS, RU, SA, TJ, UG, VN

Can you elaborate on your bad experiences with Paddle?

the possibility of just blocking your account without warning or reason - if you only have the single payment provider you are fucked.

after they did obviously the #1 priority was replacing them and making sure to have multiple providers.

did you also notice how they just deleted their github project because it contained so many comments by their angry customers?

This happened to plenty of people with Stripe as well.

Doesn't mean Paddle isn't a good place to start - but as you get bigger, you should probably look at other solutions as well, to de-risk your payments infra. It's just that at the start it's too expensive, even in B2B, to think about multiple payment providers to spread risk.

In case someone thinks this stuff is simple and you can go with country codes for VAT: have you heard about countries like AX (Åland Islands, part of Finland)? Do you remember that GB used to be within the EU VAT zone, but now isn't? How about handling XI (Northern Ireland) and the migration of customers from GB to XI? Or (one of my favorites) — do you realize that parts of ES are not within the EU VAT zone (for example, Canary Islands)?

This stuff is crazy. B2B sales are relatively simple, but B2C is a nightmare.

What makes B2B simpler? Let's say the product was at same price point

You basically don't deal with VAT at all: charge the net amount, mention reverse charge on the invoice and you're done.

Except when selling to your own country. But there, VAT is easy.

To expand a bit on the reverse charge procedure: It means the _buyer_ pays VAT. Which makes a lot of sense in B2B, since companies need to look into what local VAT they owe anyway. Adding the reverse charge invoices to that is easy. Not to mention that if they also sell goods or services, they'll end up paying little to no VAT anyway.

What are your issues with paddle? I found them perfectly fine fwiw.

Why is this related to thresholds if you're using a merchant of record?

You can't do this on country codes, if you're going to do this I would suggest whitelisting country's you know not to charge vat anywhere inside the country rather than vice versa.

Fastspring was amazing for exactly that. We loved em for most part.

I recently acquired a SaaS that does business with people in the EU (we bill with stripe), so I decided to continue paying VAT. I do it all by a combination of code, scripts, and by-hand.

We have custom code that determines the VAT rate to charge, and also looks up a customer's VAT number to see if they qualify for VAT exclusion. At the end of each quarter I have a script that calculates the amount of VAT to be paid to each country in the EU, then visit the Ireland VAT OSS site, input the values for each country manually (they don't allow CSV!!!!), then send them a wire using wise.com.

The current scheme is an evolution of what the former founders did. It was a nightmare to get things onto good footing after the acquisition. But once I did it for the first time, the subsequent times are pretty straightforward, and I probably won't touch it again for a long while.

I could probably move towards stripe tax, or paddle/lemonsqueezy, but the migration would be a nightmare. And it's not a good business decision to do a lot of work including risky migrations to move onto a new provider that will charge a larger percentage as a service fee, just to better handle taxes, which I've now largely figured out.

The one advantage to doing all this, is that I actually understand this stuff pretty well now, rather than it being a black box where I just pay a company a lot of money so I don't have to think about it. Open question on if that's actually worth my time. It seems like it is for now.

One opinion I'll offer, is that all these foreign tax agencies are far less organized than you might think. You could probably get away by not paying VAT, for far longer/more revenue than you'd think, and if you do want to be a proper foreign business and pay, there's basically zero verification on if you're paying the right amount, so just try your best??

Feel free to ask me for any advice around VAT/etc. matthew@improvmx.com

ImprovMX – now that’s a name I haven’t heard in a while!

Could I ask you why Ireland specifically?

Most countries in the EU have a VATOSS/VATMOSS filing system. They're all relatively straightforward, but Ireleand's system is generally the easiest to use...and also the only one in English. (This matters because it means that they'll correspond with you in English, and any tax authorities in other EU countries are on notice to correspond with the taxpayer in English.)

A few blogs mentioned that as an external US entity, you probably want to do VAT with Ireland (basically you deal only with Ireland for paying VAT, and what you pay gets forwarded through the system to all the other EU countries).

The reasons they cited were that it's in English, they have among the shortest initial application times (a few weeks vs. a few months for others), and that they're generally the most business friendly (which you can guess given how they attracted all the US tech companies as as tax haven).

In practice I've found this to be the case. I've had a few email chains with the Ireland tax authority, and they were responsive within a few days. And I got things done. Though I was surprised to find that the "best" EU tax authority was still worse than the IRS.

Things I was surprised by: 1) It takes an extremely long and complicated application form (and several weeks) to get an EU VAT number to pay VAT taxes. By comparison the IRS lets you get an EIN instantly, and you only need to fill out a few fields 2) Setting up a login to the Ireland Tax system is the worst thing in the world. I expected a simple username/password type system. Instead: you apply, then you have to remember a code, they don't give you any confirmation email, then 3 weeks later they send you an email giving you another code, and you have to hold onto that code, because you need to wait 72 hours for the database to update, before you can enter that code to create a certificate (but you don't know to use the first code or the second code), and you then need to save that certificate to your local machine, and re-upload it whenever you want to login. It's actually even worse than I describe, but I honestly cannot even remember all the steps 3) When filling in how much VAT you owe each country, you need to fill out every country and every amount manually, no way to upload a CSV or anything

If this is how bad Ireland is, I imagine other EU countries are even worse.

What a big question. With so many new sales taxes hitting rhe world its now a nightmare for us global companies, especially in the digital services and the travel industry.

We employ our own bookkeepers (in Africa) who operate a range of accounting systems for each company in the group (5 countries).

As CEO I tend to do the teaching and review but the team does the lodgement. (I am an Australian Chartered Accountant and former tax agent so get the rules fairly easily).

Most lodgements are online. The US is the exception. We also find there are free services for lodging electronically.

A lot of the accounting systems are way overpriced so we don't use many of their up market solutions.

We have built our own invoicing and Billing system this week with AI so expect we'll create more of our own apps over the coming year.

My bookkeeping team has some spare capacity so let me know if we can maybe help you out.

I lead an internal tax department at a publicly traded company.

We do sales tax, VAT, and other indirect taxes in-house. At our scale, external providers are too expensive.

At my last job, we handled worldwide VAT and GST compliance in-house, and left sales compliance tax to Avalara. Most countries insist that you begin to file as soon as you have any sales to their country. As a practical matter, you don't need to register unless (a) you're doing at least $1000 in taxable sales quarterly or (b) the tax authority reaches out to you and tells you that you need to register.

VAT and GST compliance is very straightforward in most countries: it's a 1 screen form. Payment is also easy, but can be pricey: wire transfers. Best to have your accountant do them, but if he's terrified of the VATMOSS, you need a new accountant. The VATMOSS is an extremely simple form (and the VATOSS, for larger companies, isn't much more complex).

Sales tax compliance is hard, because the U.S. has over 10000 different sales tax districts and more than a hundred sales tax jurisdictions (but you probably won't have to file in most of them). Avalara is a bit pricey for the returns ($50/each) so you may want to do those in-house or have your accountant do them.

NOTE: I DO NOT RECOMMEND AVALARA. They were purchased by a PE company and the quality of service plummeted off a cliff even as prices tripled. Use literally any of their competitors instead.

I run a B2C SaaS business. We're an EU company. We use Stripe for all billing, and we use Stripe Checkout and Stripe Tax for all of our tax calculations. We've built our own tools to generate monthly/quarterly tax summary reports from our Stripe payments data.

Luckily most of our business is in the EU, so as an EU company, filing our EU VAT is easy.

We used Avalara for 1 year in order to setup VAT registration in Norway. We chose Avalara because they do in fact provide full service solutions for VAT (registration, filing, and remittance). However, they are expensive and were AWFUL to work with: poor communication/support, no integration with Stripe, and we had to manually generate carefully structured Excel files in order to import our sales data. We cancelled our contract with them after 1 year, but were able to take over the filing account from them and now our in-house accountant does the filing and remittance (which is quick, easy, and MUCH cheaper).

We have considered something like Paddle, but it is difficult to justify the increased fees as our business grows. For the amount of money we'd be spending on Paddle in extra fees vs Stripe, we may as well just use a service provider or hire our own staff.

With Stripe Tax we can easily monitor our thresholds in other countries. There are some countries that technically require registration for even a single transaction in that country, which is ridiculous. I imagine for most companies it is definitely not feasible to register, file, and remit in all of those countries.

Same here but I was surprised to see that Stripe tax didn’t provide these monthly summary reports. Or did I miss something?

At risk of high-jacking this thread, some Merchants of Record (i.e. Paddle) require biometric authentication of company majority owners, which I find too invasive. Are there any Merchants of Record that don't?

Sure, they handle taxation amongst many other conveniences. But despite their assertions of security and safety, we identified dumps for sale on the darknet of such biometric DB data exfiltrated from (continuing the Paddle example) Onfido. It left a sour note in our mouths and a lingering feeling of distrust, especially after we were recently the target of a spearfishing campaign using data obviously sourced from such auth providers.

I don't remember seeing anything like this with Lemon Squeezy.

Because they were (are) small and dont have to care now.

>It's my understanding that solutions like Stripe Tax, Alavara, Quaderno, etc. only help collect the necessary data (which I consider the easier part, at least for digital goods), but do not handle the registration & filing (though I've learned that Quaderno will support filing Sales Tax in the US on your behalf soon).

That's right. Stripe recently acquired TaxJar which you can use to connect to Stripe Tax and file U.S. sales taxes. In my limited experience implementing sales tax I found that Avalara did not work well with Stripe right out of the box.

How about using Paddle/etc, but just for new subscriptions and just in regions where it's relevant, and handling migration later (or wait for churn to slowly whittle away at it for you)?

I've also used https://payproglobal.com/ quite successfully, which nobody else has mentioned here as a merchant of record option. They're less polished than other options, but they've been a godsend for selling outside the EU + Anglosphere markets: they've managed card fraud far far better, and have a very impressive breadth of the local payment methods that you'll 100% need if you want to sell in those markets.

Also seen some enthusiasm for https://www.creem.io/ recently as an MoR option although I haven't tried them myself.

Oh, and it's worth noting that using an MoR isn't just helpful for sales tax. It's also significantly easier for your own accountancy and local tax filings more broadly: it effectively turns N invoices into 1. Very very easy to handle, process & document.

This is the way. Transition the customers gradually.

I happen to use Paddle. Happen because Stripe isn’t available in my country and Lemon Squeezy wasn’t around / was very new back then. It’s OK but it really irks me that they don’t really fight chargebacks. (I haven’t had many but the fee they throw on you automatically is so hefty for a B2C.)

Their V1 API (not Paddle “Billing”) is…not the best I’ve used.

AFAIK fees are put by banks not the Paddle/Stripe. Stripe also 'charges' $15 for any dispute, even if won.

Agreed on the chargeback fee they really dont give a shit. I have learned to deal with their V1 API, it has a lot of weird quirks. Kinda wish they offered a better upgrade path to the new billing.

The fees come from the bank and are the same on stripe so, that part is just how the game works.

I see the 'not fighting disputes' from both sides; as a vendor it sucks, but for paddle fighting them is a loose loose game, it would cost them say 50-200$ in time to handle each one and they get some of the liability for it too, also imagine paddle gets really good at fighting chargebacks - where do you think the fraudsters will go to process payments?

Lemonsqueezy is a lot more expensive than Paddle especially if you are EU based. Hidden fees and things like they only payout USD so you are paying exchange fees multiple times.

If you’re not making at least $1 million a year — don’t worry about this yet.

I know that sounds glib but I firmly believe that the rise of “merchant of record” startups like Paddle with large outbound sales teams has scared the bejeezus out of a whole generation of founders.

Oh the US way… just break the other countries laws who cares.

This is highly dangerous. Like you made 500k in sales you are still liable for those 100k taxes it doesnt matter if you didnt get it from your customers. In EU this is pretty automated check - if you sell to any bussiness they will have to have it in their tax return.

It’s not America’s fault that Europe strangles their companies with red tape.

The main thing is to just get started, start growing, and then you can figure all of this stuff out.

Comparatively, EU VAT is less complex than the US thing, as it's on a country rather than a county basis, so I'm not sure how the EU is messing up here. That being said the rules for rates are complex but unless you're selling lots of different products that's unlikely to be an issue.

I do agree with you on the keep growing advice but if you're getting a bunch of EU sales, it's worth complying to some extent.

Also lets not forget this is special case with digital products where using something like Paddle completely solves it.

The systems are way crazier with physical products and there is no easy merchant of record solution.

This seems more like arrogance that for some people some nations are beneath them (even though they gladly take their money).

Its not Europes fault Americans want to sell there without respecting local laws.

I’m not saying you should never pay taxes, but are you seriously worried about little guys making under a million a year? Internet based companies are not using your roads or calling on your firefighters or getting protection from your police, and since the time I wrote that post the largest companies in the world have saved like a billion dollars using Irish tax shelters.

Let little guys be. The deck is stacked against ever hitting a million+. They are not a threat to your way of life.

If China passes a law that if one of their citizens visits your site, it's illegal to say anything the Chinese government disagrees with, are you going to comply?

I do not give a single fuck that some foreign jurisdiction decided to pass some law that insists I collect and remit money on their behalf, just because one of their citizens decided to come to my server, in my country, and give me money. If the EU doesn't want its citizens coming to my website and buying things, they can take it up with their citizens. Or they can block my website, or come up with some kind of trade agreement with my country to enforce it. Until then, it has fuck all to do with me, despite your protestations to the contrary.

I'm going to continue ignoring random laws from random countries that have no enforceable jurisdiction over me, and it's incredibly wishful thinking to imagine anyone will (or even can) do anything about it.

So you would rather have internet where countries can block websites?

Its not the visit thats the issue but by accepting their cards you actively get into contract with them. You are doing business in that country. As a bussines owner i am sure you know that.

You do you but it would be quite sily defense. Playing dumb claiming its the peoples fault instead of changing that supported countries list in Stripe.

I’ve entered into no contract with the German government just because Hans decides to punch in his credit card number into my website.

What I'm saying might be a silly defense to you or an EU attorney, but again, I don’t need to care unless you have some way of enforcing your inane ideas that declaring jurisdiction over me makes it so.

What if you just…did nothing. What would happen?

Exactly! Nothing if you don't ship physical goods. I've been doing this for 24 years and only collecting sales tax for users in my home country. All other countries I just say on my invoice that any sales tax is included in the price. What are the going to do about me not charging sales tax in their country and remitting it? Come and get it?

I mean, I do understand if you’re big enough to be a target, but seriously, how is Germany or Taiwan or Argentina or wherever the fuck else going to 1) even know that I (a little US-based SaaS app doing under 8 figures in revenue) exist, 2) know that their citizens are paying me, 3) know how much, and 4) be able to do absolutely anything about it?

I’m genuinely asking.

For the pearl-clutchers here, I don’t do anything for GDPR for the same reason. Pass whatever laws you want in your county. Not my problem.

Are some of your customers buying the product as their business? Because if they put it in their expenses the record is there. If then for some reason somebody starts to dig you would be liable for all those taxes going back.

Sorry but these are laws those customers countries set and its not just EU. Every other country is now considering similar system because digital products is huge outflow of unpayed taxes.

Btw “not your problem” it would be if you were not doing bussiness with those countries. Nobody stops you to not sell to EU. Imagine you were buying physical product from EU. Would you also expect not paying taxes on it just because they are from abroad?

It’s not my problem because I don’t live in those countries, and their citizens are coming to me and purchasing something. It’s analogous to a citizen from Germany coming into my restaurant in Chicago, and then the German government declaring that I owe them taxes. Ridiculous. I’m not going to incur any extra work or cost just because some random other country decides that they deserve a cut.

Ultimately though, it’s not my problem because there’s no enforcement mechanism whatsoever, so I just ignore it. The bureaucracy on the other side of the world can stomp their feet all they want, but unless they have a way to make me pay it, I won’t.

Not likely I guess, but not unheard of to nab you while traveling: https://news.ycombinator.com/item?id=41341353

Come on, that has literally nothing to do with a relatively tiny software company failing to collect VAT at another country's whims.

It has everything to do with breaking laws conspicuously enough to get noticed. I’m sure the guy providing encrypted messaging thought he was doing nothing wrong, and I’d tend to agree with him.

Let’s not pretend govts have no tools. A friend once had their bank account seized by the state of California due to a moderate balance after six months.

Again, if you're big enough to end up on their radar AND they have some method of enforcement, then yeah, better be compliant.

Even in that case, it's not like you're going to get suddenly arrested on holiday in the EU with zero advance warning.

I'll just continue to ignore VAT and GDPR, and I expect that there's a 99.999% chance nothing will ever happen.

If you ever want to sell your company the purchase price will be discounted by the amount of sales tax liabilities you have (source: have seen this happen). It's easier to get ahead of it and start collecting and filing sales taxes now so there isn't a growing sales tax liability.

That said, depending on how big OP's company is it might be below sales tax thresholds in most/all jurisdictions.

There are people like paddle who handle all this for you, but it's not free.

Before I've just decided to restrict purchases to jurisdictions I can easily handle which isn't great but..

I sell a physical product from the USA worldwide.

VAT and all other relevant taxes are entirely handled by the person importing it, before the product is released from customs. I don't even think about it.

Perhaps SAAS people just should physically send a "activation code" in the mail? Then the person importing it can just handle it.

Anrok is great! Anrok generates and files US returns. We still have to file EU OSS returns quarterly (based on the Reports created by Anrok), but it's manageable. Stay far away from Avalara... it's unusable and the contracts are predatory IMO. Filing UK VAT has been a mess.

I'm @ a US-SaaS company using Stripe and Quickbooks.

How does Anrok charge? is it based on a per filing basis or %age of rev? If %age can you share broadly speaking what it costs?

Taxwire.com can handle registrations and filing in US and EU. Also offers a free nexus study.

Sounds like you need an accountant.

That's exactly I am looking for. But I had some less than ideal experiences before, so I thought it might be a good idea to try to crowd-source some vetted options.

It's also unlikely that a single accountant will be comfortable filing taxes in all of the jurisdictions (or maybe I will be pleasantly surprised).

You're right. Most accountants make their money from local businesses. And global accounting firms charge the earth. It's easier to separate You're bookkeeping from your (expensive) accountants who are better set for strategic advice.

An accountant that will quickly determine the VAT/sales-tax to charge on each transaction presented to the customer? :-)

Accounting is important, but it's not the solution to the OP's problem. There are also questions of costs and efficiency, especially since we are talking about low-margin B2C sales.

An accountant plus Stripe Tax? Or just a CSV with tax rates imported into Stripe, if you don’t feel like paying additional % per transaction.

MoR are great if you want absolutely no liability whatsoever, but especially considering there is no way for other countries to check you’re paying the right amount, I think doing it yourself isn’t too risky. (Not doing it is also a possibility.)

Sounds like bad news for new entrepreneurs building a business on the side or for anyone who wants economic dynamism.

You shouldn't need to hire a high-priced professional just to sell a thing on the internet. That kind of friction just makes everyone poorer.

Lot of folks suggesting / commenting on solutions. Wanted to add some nuance on 1. MORs (Merchant of Records) vs global sales tax providers (StripeTax/TaxJar, Avalara, Anrok) and 2. the risk / reward of actually handling these taxes at different stages of your business.

1. Merchants of record can make sense for smaller B2C companies with lots of international revenue that don't want to handle taxes or chargebacks/fraud. But the fees are extremely high and often your company would only be remitting in a few jurisdictions if you were handling this independently. Respectfully, a lot of the MORs are selling fear more than something you actually need for a lot of sellers. If you're already on Stripe, I'd stay there vs going to a Paddle. Prob not worth the fees. StripeTax is good but very expensive and you'll need something else for filing, registration remittance. A bunch of new startups have hit the space in the last couple years (several of which have been mentioned here) that can help with US and/or international calcs, filings, remittance.

Just do your diligence and don't get sold something that's overkill for what your business needs.

2. On that point, not legal advice but from a risk management POV, below a certain amount of revenue ($500k-1M in ARR), it's probably fine to temporarily punt on these taxes or to just collect & remit in your home state / country. You probably won't have nexus in most jurisdictions early on anyway. Additionally, many VAT countries don't tax B2B software so if you primarily sell remotely to other businesses (sounds like you are mostly b2c so not relevant to you) you might not need to worry about VAT in most countries, just US sales tax. Additionally, if you're based in the US, you're probably at higher risk of enforcement here than you are abroad. Washington or New York is more likely to catch up with you than a country in the EU (or vice versa if you're based internationaly). tl;dr - get PMF. And then handle your home country / states first. Don't freak out about this at a lower volume of revenue.

Full disclosure I'm the co-founder of Taxwire.com and we're a startup in this space. We do registrations, filings, remittance, and calculations in Stripe, QBO, and other billing/payment platforms for the US and recently launched VAT as well. So obviously I have some bias on solutions but hopefully the above is helpful.

Ta wire looks interesting. Let me pick your brain here for a moment, my wife is looking to start SaaS soon, she is based in EU but intends to open both EU and Wyoming llc. Wyoming llc would sell B2C, EU llc would then invoice Wyoming llc monthly so she and her future employees can get paid. Since the eu country doesn't have tax agreement with USA the anon llc would be practically invisible to EU, and additionally as foreign owned llc with no employees I believe there is no tax in USA either? What do you think about this approach? Does your advice still hold; start with stripe, do the minimum to have llc working?

Be really careful with this unless you know what you’re doing. Setting up a foreign entity that only collects revenue and pays royalties is a known trick and will be looked at very closely by tax inspectors. Worst case they will consider the foreign entity artificial and tax it as if it was a local company.

My recommendation would be to keep things simple with a local company, and start worrying about complex structures once you have enough revenue for it to make sense.

But the local bureaucracy is the problem, not the tax. I would actually pay more tax in my scheme, but not have to deal with complex tax tracking, remitting etc..

Yeah I understand where you're coming from. I'm just saying that the tax authorities might not see it that way, and you can end up in really tricky situations unless you have sveral layers that cover you from responsibility. Hence my recommendation to keep the company structure simple even if it means more bureaucracy.

I appreciate your advice, and you're right.

Stripe Tax, exporting the totals for each EU country from Stripe quarterly, manually entering the per-country totals into Ireland’s VAT MOSS (ros.ie) and they handle remitting it for all EU countries. Pretty easy.

You might want to check out https://www.commenda.io/, they are working on this exact problem.

We rolled our own VAT/GST handling. We use Stripe to bill the total amount, and generate our own invoices so we can break out the tax as an item. Doing our own tax and invoices means we're not locked in to Stripe, which is pretty good but will enshittify when they have enough of us in thrall. It also means you can do bank transfers which many customers prefer.

VAT/GST handling is not that complicated*, and our system spits out the numbers to fill in UK, AU, NZ and CA tax returns, which can all be done online.

*Except Canada... HERE BE DRAGONS! Each of the 13 provinces/territories has different rates and rules, despite the optimistically named "harmonised sales tax" (HST).

Reply on news.ycombinator.com