How to handle sales taxes for new SaaS?
I'm launching my first SaaS product soon, which will be available within the US and Canada. I'm a bit confused about how to handle sales taxes for the product.
From my understanding, you don't have to charge sales tax in the US until you have "economic nexus", but that nexus varies not only by state, but also by county/municipality. Of course, for a new product launch with $0 revenue, I don't have nexus in any state yet (the minimum that I've seen is $10,000 revenue).
As for Canada, I believe I don't have to charge GST until I have $30,000 in revenue. Also, I am from Canada and the business is currently a sole proprietorship, but will be turned into a corporation when I am required to collect GST.
Should I just not charge sales tax right now? How are you guys handling this for your products?
I don't know enough about the Canadian side to give an opinion. But for the US, I wouldn't worry about or charge sales tax until state specific revenue starts to climb up into those thresholds.
When you start to reach those thresholds, I'd recommend outsourcing sales tax compliance. Trying to find, understand, and comply with all the different state regulations is a big hassle. A company like Taxjar can handle it all so you keep on selling.
I agree with this approach. Another popular alternative is Paddle (https://paddle.com) which is a merchant of record. They handle all tax compliance for you. https://paddle.com/blog/what-is-merchant-of-record
Thank you! I was considering a solution like TaxJar/Quaderno when we get to that point.