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

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

#51

Post by omnimus »

nik736 wrote: post #49
jwr wrote: post #17

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,…

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.

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

#52

Post by omnimus »

jwr wrote: post #17

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,…

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.

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

#53

Post by omnimus »

pimterry wrote: post #19

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 + Anglo…

This is the way. Transition the customers gradually.

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

#54

Post by omnimus »

shibel wrote: post #9

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.

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.

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

#55

Post by omnimus »

snide wrote: post #25
papaver-somnamb wrote: post #18

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 (continuin…

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

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

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

#56

Post by omnimus »

encoderer wrote: post #26

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.

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

#57

Post by omnimus »

senordevnyc wrote: post #33
mingabunga wrote: post #32

Earlier quoted context omitted.

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 anythin…

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?

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

#58

Post by pjc50 »

jongjong wrote: post #16

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…

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

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

#59

Post by senordevnyc »

omnimus wrote: post #57
senordevnyc wrote: post #33

Earlier quoted context omitted.

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 anythin…

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 “…

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.

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

#60

Post by alexanderchr »

rnewme wrote: post #45
andrewrea wrote: post #42

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/fra…

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…

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.

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