Super Fun SaaS Sales Tax (Part Deux)

Last week's episode hit a nerve! "The idea that
every small software company in the world will be able to be in
perfect compliance will every foreign federal, provincial, state,
and municipal government that imposes a sales tax is ridiculous.
It's an impossible task.


(00:11) - Follow up to previous episode

(02:32) - Responses we got about sales tax

(06:20) - A brief history of sales tax

(08:56) - Many vendors aren't collecting sales tax

(10:41) - What about Stripe Tax?

(12:35) - It's new to North America

(16:12) - How it affects subscription based businesses

(19:30) - It's not clear who's liable

(24:28) - Make it easier and gov't make more money

(27:58) - What about Merchants of Record?

(30:28) - Where is Stripe going?

(35:17) - What are going to do now?

(44:45) - Patreon supporters


Broadly, there were a few different camps with the responses we
received: North American SaaS companies who have been using
Stripe:  "Yes! Sales tax compliance for SaaS is
brutal."European SaaS companies that have had to deal with VAT for
a long time (many of whom use a Merchant of Record).Smaller North
American solopreneurs and companies who had no idea they needed to
collect and remit sales tax internationally.North American
companies who have one-time sales and use Merchant of Record
services.

Responses from indie hackers:



European: “Once again, I notice that the indie
hacking community has a somewhat naïve approach to what running
a business actually entails. As a European, not having a plan
for sales tax is... mindboggling.”

Cooper: “I think it might be a European perspective; we are
dealing with VAT from day 1, so it's just one of the parts of
running a business from the start, it can't really be neglected.”

Edwin Saraccini: “To clarify, [for Canadians] this is
absolutely new territory (Debated in parliament for years) and
recently put to legislation in 2021.”

Daniel Vassallo: “It's impossible to be compliant everywhere.
The Kingdom of Tonga could tomorrow come up with an internet tax
and require you to remit 25% of your sales to the tax office in
person in their local currency. And they won't tell you about it.
It's just a cost/benefit analysis.”

Derrick Grigg: “How can they enforce tax collection on a
business they have no jurisdiction over? Governments are shaking
businesses down. I’m all for collecting and paying properly where
you physically operate but collecting and remitting outside your
province never mind nation is a stretch.”

Derrick Reimer: “Dear Stripe: We SaaS founders are desperate
for a full-stack global tax compliance solution without having to
leave you for a merchant-of-record. Are you planning to solve
this?”



Did you know...
"There are actually several different types of sales tax
systems in use throughout the United States. The biggest difference
is whether the seller or the purchaser is the main taxpayer. In
some states, the tax is imposed on sellers, who then have the
option of passing the tax along to their purchasers. In other
states, the tax is imposed on the purchaser, with the seller being
responsible for collecting the tax and remitting it to the state.
And then there are other states where the liability for the
tax is shared by sellers and purchasers." 


(Source)





New thoughts on Sales tax compliance


I still haven’t heard from anyone who has successfully
migrated a “mature” SaaS from Stripe to Paddle or LemonSqueezy.
These are no-gos:

Can’t cause more churn.

Can’t require customers to re-enter information.

Can’t change our checkout experience.



We might consider Paddle / LemonSqueezy if:

Their fees were more affordable (compared to our existing
fees it would be ~$63K year more, $5,250 per month more)

Their dev experience had a better rating from the folks
we know.

I had heard from anybody who was at our
stage and had actually migrated successfully.



A few folks suggested Revin, which promises “simple global
sales tax compliance for Stripe for only $499/month,”  but:

They have to “create a new Stripe account for your
brand.”

Do they own your Stripe account?

You’ll lose your historical stats and revenue analytics




The current solution we’re considering is
Stripe Tax + TaxJar (and start with US and Canadian tax
remittance)



Thanks to our monthly supporters


Pascal from sharpen.page

Rewardful.com

Greg Park

Mitchell Davis from RecruitKit.com.au

Marcel Fahle, wearebold.af

Bill Condo (@mavrck)

Ward from MemberSpace.com

Evandro Sasse

Austin Loveless

Michael Sitver

Colin Gray

Dave Giunta



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