Payment processing & taxes for a marketplace SaaS—is it too complex to build a marketplace platform?
I ran across a thread regarding payment processing in Europe yesterday. It sent me down a path of exploring the implications of handling payments on behalf of sellers in my marketplace SaaS.
The Platform: it helps the admin (including fees) for groups that meet physically. Think of someone who manages in-person training and workshops, e.g. many smaller, limited-time membership groups. My real-world starting niche is improv theaters who make a substantial amount of their income through improv classes.
I've made a couple of prototypes that I've tested with some early customers. So far, I've been using Stripe Connect to process payments on behalf of my customers. It's worked pretty well, but it's nowhere near as frictionless as it needs to be. It's not "Gumtree for classes" easy.
The big issue: for all of this to work as a business, I need to be able to do this internationally. The prototypes have been tested by a theater in Sweden (where I'm located) and a theater in the US (where I have the bigger network within my niche).
I'm charging metered billing for the use of the platform.
🇸🇪Sweden. Both mine and their tax location are in Sweden so I'll collect 25% Swedish VAT on the service I provide to them.
🇺🇸United States. I'm in Sweden and they're in the US. No taxes collected.
🇪🇺EU. This is annoyingly complex.
Good news—I can solve getting paid using something like Paddle or FastSpring.
But... what about my customers making sales? (see EDITs below) They'd need to keep track of their taxes too. I could add some simple tax settings in the platform, but I'm not going to pretend this will even begin to solve the tax challenge. And furthermore, it won't be "Gumtree-style simple", which is one of the key differentiators I want my platform to have.
In an ideal world, I'd have something like "Paddle/Gumtree for Platforms".
So...
It looks like I've stumbled upon a fundamental challenge which is too big for me to solve as someone who would like to run a small company. This might be the nail in the coffin for this particular SaaS.
-------EDIT-------
I found this Quora page and apparently TaxJar SmartCalcs API targets marketplaces (read here).
-------EDIT 2-------
Looks like Quaderno supports building apps on top of their service. That'll handle tax, invoicing and VAT MOSS for your platform vendors. Too bad it means a user will need three accounts to start using an app; Marketplace account, Payment Processor (Stripe/PayPal/etc) and Tax/Billing Service (Quaderno).
Truer words are rarely written!
I'm starting to do some planning on an event ticket system that will be doing something very similar. Interested to see if anyone else on here can help clear up tax issues!
Nothing will be Gumroad-style simple... unless of course... you decide to be the Merchant of Record and in essence become the middleman. Then your event hosts will only deal with you for tax purposes, but you'll be dealing with all your hosts' event attendees. It'll be really nice for the host, but you'll take on the burden of all the tax reporting in all the countries you're available in.
Here's a pretty good explanation why Gumroad, Paddle, and Fastspring don't want to deal with that...
https://help.gumroad.com/article/70-can-i-sell-services
https://help.gumroad.com/article/155-things-you-cant-sell-on-gumroad
If you do an event ticket system you'll probably want to check out this link for taxes, invoices... billing and so on:
https://developers.quaderno.io/#apps
I would suggest Paddle. If you don't want to deal with MOSS registration and stuff around EU VAT you probably cannot find the better choice. They're a bit more expensive than others but it's absolutely worth it.
Thank for suggesting, and I wish Paddle could work. They sadly don't support marketplace style apps. I want them to be the Merchant of Record for my customers, but they only support being the Merchant of Record for me.
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