As I move towards a SaaS soft launch, I have been greatly frustrated by the apparent lack of standard advice and practices in the area of complying with consumption taxes (a.k.a. sales tax, VAT, GST, etc), which SaaS operations have become subject to in recent years. Even worse, many accountants simply won't touch the issue, especially if one is or is planning on offering services at a truly worldwide scope.<p>In talking with a number of successful SaaS founders, I've found that typical practice buckets out to three different options:<p>1. Mostly ignoring the problem outside of your immediate jurisdiction (i.e. where your corporation is domiciled), which is probably just fine if your operation is small and is likely to stay that way (thus [hopefully] not exceeding each jurisdiction's taxation thresholds).<p>2. Cobbling together a solution using something like Stripe Tax or Quaderno or Avalara to ensure that you're <i>collecting</i> tax properly, but then having to schlep stuff like per-jurisdiction tax registration and filing. Yes, taxjar exists, but is itself a cost, and only really covers the U.S.<p>3. Using a <i>merchant of record</i> (like fastspring or paddle) as your exclusive worldwide reseller, which then takes on all the work of collecting <i>and</i> filing <i>and</i> remitting consumption taxes (usually on a truly worldwide basis, i.e. covering 80+ countries). Of course, the fees associated with this are somewhat higher (but tbh, not <i>that</i> much higher than e.g. stripe + stripe tax + stripe billing + filing and remittance costs), and these platforms are outside of the stripe ecosystem and are their own things, so developer experience and third-party integrations are somewhat spottier.<p>#2 seems to be the most popular option by far, but often ignores a large portion of the world (e.g. stripe tax only covers ~35 countries), and can be very costly even ignoring registration and filing (i.e. Avalara is wildly expensive for what it does).<p>I'd love to hear from more founders about how they've navigated this, and why they've made the choices they've made. Thanks!
I went with option 3 using Paddle for my solo app (<a href="https://checkbot.io" rel="nofollow">https://checkbot.io</a>) and don't regret it even though it didn't seem nearly as popular as Stripe. I receive a single invoice a month that I declare as income on tax returns and that's it - I can sell worldwide and don't have to worry about county specific tax issues. Gumroad and Fastspring are similar I think but I haven't used them.<p>Option 1 sounds like asking for tax trouble to me and especially if you're small option 2 sounds like a lot of work where you're likely to make mistakes if you don't have a good idea of what you're doing and have the bandwidth to keep up with changing regulations. Selling for a year then finding out you've done the taxes and VAT collection wrong sounds like a world of pain to fix to me.<p>Willing to be proved wrong but I'm glad I ignored suggestions at the time that I could have saved a few % per transaction doing it myself. Getting good tax advice within my own country has been difficult enough so the merchant on record approach feels easily worth the cost for me.
I was actually the PM at Avalara for their flagship product. Now as a founder (of a tax software business, too), we're just at the point of needing to address transactional taxes, too. Unfortunately, there are no good options here that are better than #2. I actually built global tax registration products too, and those are painful.<p>My POV now is that the entire system needs to be disrupted to make this lower friction. By doing this, we can unlock huge amounts of macro economic potential by just eliminating friction.<p>Transactional tax is so broken that technology can't make it much easier than the solutions you pointed to above. I'm focused on more fundamental disruption to address this, but it's not going to solve your challenges in the near-term.