So you've been working for months on exciting new features for your SaaS, and you're just about ready to launch. All you've got to do is integrate Stripe to take payments and ... oh yeah, there's also tax to think about. What a nightmare. That's pretty much the situation that we are in, so I've been doing some research and thought it would be useful to share.
Everyone knows that taxes are complicated, but if you want to sell SaaS to consumers globally, you'll be surprised just how complicated. Many countries are implementing taxes on digital services that apply to SaaS, no matter where your company is based. Depending on the country, this type of tax will be called VAT (value-added tax), GST (goods and services tax), sales tax, etc.
Luckily some countries have thresholds that need to be exceeded before VAT/GST/Sales tax needs to be paid. So if your revenue is less than $75k in Australia, you're not liable for GST there. But some countries — like India, South Korea, Indonesia, or Albania — have no thresholds, so as soon as you have a single customer in one of those countries, you're liable for VAT/GST.
There are several steps in dealing with VAT/GST/Sales taxes:
How to simplify or automate this mess? Here are some options I've identified and that we're considering (in order from least effort to most effort):
We're not big fans of the MoR option, because we're not sure we want a middle man in between us and the customer. The outsourcing option is tempting but surely expensive (exploring this) and potentially not tailored to the needs of a startup. The DIY solution would probably work as long as customers are concentrated in a few countries, but could easily get overly complex. It seems like we're tending to option 3.
Surely, many of you out there have experience with this and can share your experience?
Note: I am not an accountant or tax advisor. I'm just someone trying to figure all this out.