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).
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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)
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.
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
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 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
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.
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.
Can you elaborate on your bad experiences with Paddle?
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.
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?
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.
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.
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?
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.
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..
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.
Sounds like you need an accountant.
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.
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.
What if you just…did nothing. What would happen?
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 might want to check out https://www.commenda.io/, they are working on this exact problem.