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

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.

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.

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.

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

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

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.

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.

>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.

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.

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.

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

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.

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

Sounds like you need an accountant.

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.

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).