Developers December 2, 2020

SaaS Taxes & Bookkeeping

Liam Mclaney @tidze

Hey! Anyone running a SaaS platform, how do you handle global taxes e.g. all the different VAT rates across Europe or the sales tax in each US state?

Are you using anything like TaxJar to keep track of how much you owe? I'm finding it such a minefield and TaxJar gets expensive beyond 200 orders per month.

Also, what do you use for bookkeeping - keeping track of your income and expenses (including attaching receipts). I'm looking for something super simple and easy to use. Quickbooks and Xero are so cumbersome and do too much.


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    I've been researching this myself recently. The easiest solution is to probably use Paddle as merchant of record. They'll handle all VAT and U.S. state taxes.

    If you want to use Stripe, then it probably makes sense to use a tax calc integration like Quaderno. TaxJar's API does both U.S. state taxes and VAT calcs, but their reporting is only for U.S. I haven't done enough research to know which tax calc provider is the best. ( But you will have to manage state/country registrations and payments. TaxJar has an autofile service but it costs extra (

    I believe (but not 100% sure) that all U.S. states and EU countries have a threshold before taxes kick in, so you probably won't have to worry about it for a while. My sense is that most indiehackers don't worry about sales tax until they get much bigger.


    I'm looking at this from the U.S. perspective. VAT rules may be different for UK businesses, I don't know.

    I'm torn between Paddle and doing something like Stripe + Quaderno. I probably would not integrate Quaderno until much later down the road if/when I start crossing the thresholds. The three things I don't like about Paddle:

    1. billing/invoices will come from Paddle and not your company – I don't think you can brand/customize invoices
    2. from what I heard, developer experience, docs and API for stripe are much better than paddle. stripe has a test/dev mode while paddle does not.
    3. somewhat more expensive than stripe + tax calc... depends on your average transaction size. but I do think paddle's pricing is very reasonable

    That said, the idea of paddle handling everything tax-related sounds great.

    It's a very hard decision because once you pick a solution, it would be very difficult and potentially customer-churning to switch providers.

    Hope this helps!

    1. 1

      Thank you for the detailed response! You've basically summarised the response I've had from other forums with the mentioned services.

      Paddle looks great, the 5% transaction fee would be worth it to not have to worry about tax. But there's all the engineering and migration time to consider.

      We're going to investigate Quaderno more as it integrates with Stripe. TaxJar looks good too, shame its limited to the US.

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        Yeah, I don't think I would use TaxJar because their VAT support is limited to their API and they don't have reports for non-U.S. taxes.

        There seem to be a lot of happy paddle users, but I've also seen some people complain about the dev experience, and one person said that paddle wasn't flexible enough for their needs so they had to go with stripe.

        Good luck!

    2. 1

      You haven't by chance looked into FastSpring? Maybe they're pretty similar. That is a bummer about the lack of customizability but I guess it makes sense.

      edit: actually Paddle seems better just from looking at the site at a quick glance

      1. 2

        I did see FastSpring in my research, but they seem much more expensive (5.9% + $0.95 per transaction vs. Paddle's 5% + $0.50 per transaction). Users say FastSpring is older and therefore maybe more stable than Paddle, but the dev experience and API are also more clunky and dated. So between the two, I think Paddle is probably the better solution, but I would need to do more research to be sure.

        Paddle is VC-backed and just raised $68 million and is UK based. FastSpring is private-equity owned (Accel KKR) and based in the U.S.

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          Thanks yeah I think I'm definitely going to work with Paddle for small stuff until I actually get somewhere. I haven't even hit the "get above $0" mark yet.

  2. 2

    Paddle has been great for my B2C SaaS product (launched 7 months ago).

    Some gotchas to be aware of:

    1. No test mode like Stripe, so transactions show up in the main account history and you have to purchase with a real credit card (although you can use a discount code).

    2. Reporting is limited, so you if want to separate out different product lines you need to handle it externally or consider using a separate Paddle account

    3. Account creation: the process has recently changed and they now require up-front "vetting" of your site/product. That creates something of a chicken and egg situation where you're building the site and want to work on payment integration with Paddle, but can't without an account, but you can't get an account without mocking up payment pages and the rest of the product. I can't believe they're not actively thinking about how to solve this (e.g. easy dev-only account creation, two stage approvals (soft, final) etc.).

    However, support is excellent, payouts are made promptly, and the dev experience (while not at Stripe's level) is pretty decent (but you'll need or similar, in all likelihood while integrating).

  3. 2

    For one of my SaaS products I use a custom-built solution which I've implemented on top of Braintree. For the others I rely on Chargebee to handle all invoices and taxes for me. Chargebee + Braintree works really well together and after you set everything up (takes a while!) it works like a charm. Implementing your own solution is not that hard esp. if you're based in EU where you don't have to deal with any US taxes on sales coming from the US.

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      It was my understanding that selling digital goods into the US could create an economic nexus depending on the state the customer is from - therefore you could reach a point where you do owe sales tax in that state. That's why monitoring now is important.

      The suggestions of Paddle, TaxJar and Quaderno are actually all that I expected and had already come across. Neither work in my use case for various reasons. Think we'll be building our own solution too.

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        Yes, EU users are technically on the hook for U.S. sales taxes. I suspect that if you are small enough, most U.S. states will never know if you don't pay. But if you're large enough you will get their attention. Same goes for U.S.-based companies and EU VAT.

      2. 1

        Why does Paddle/TaxJar/Quaderno not work for you? You haven't mentioned anything in your original post which would make people suggest alternatives.

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          I missed a key detail, a lot of our income comes from Stripe Connect 'application fees' which Paddle obviously can't support. The other two could in theory support it, but we'd quickly be on their expensive Enterprise plans.

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            What size do you anticipate your application fees to be for an average transaction? If your application fees are small, then I can see your dilemma on pricing. You may need to do this in house. You may want to reach out to Quaderno's team and see if they can help you out. I've seen the Quaderno CEO in MicroConf channels – he seems genuinely interested in helping entrepreneurs. Maybe he knows a better solution for small transaction sizes.

            I'm not sure what Paddle's pricing is. Some people say 5%, others say 5% + $0.50. If the latter, then Stripe may be better. You may want to also reach out to both Paddle and Stripe to see if their pricing is different for application fees.

            Last, if you do decide to go with Stripe, I would not worry about building state sales tax compliance until you are much larger. No state is going to come after you for a few thousand dollars in taxes, and if they do you'll just have to pay some fees and penalties and it'll be fine. You're only going to be in trouble if you owe hundreds of thousands of dollars in state taxes, then the penalties will obviously be meaningful in size. (Caveat that I'm not a lawyer or tax attorney, and I'm not providing official legal or tax advice, just speaking from common sense on how tax agencies work). Focus on growth first then worry about taxes later. That's what it seem EmailOctopus did: ... they also do EU taxes in-house with their own tax calcs using Stripe.

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              I'm sure you've already thought of this but maybe you need to aggregate fees until they are large enough to invoice? Similar to how Amazon Affiliates doesn't pay out your affiliate fees until you reach $10 (I think that's the threshold)

  4. 2

    open a company where they have 0% tax 😎

  5. 2

    I just use for billing and they handle the taxes/VAT too.

    I was using Gumroad before, but the platform is too limited and a bit dodgy compared to paddle .

  6. 2
    • Xero for book keeping.
    • Book keeper to keep on top of it.
    • Currently building something with 'Dynamic Tax Rates' from Stripe. It's a minefield, and probably the worst part of indie business.
    1. 1

      Thanks Rosie! Maybe, I just need a better accountant! :)

  7. 1

    National taxes and VAT is a complexity that you can completely outsource if you select a payment processor like Paddle. This kind or processors, I believe they are called "Merchant of record". Using a Merchant of record will also simplify to the minimum, your accounting and book keeping.
    I did my market review, specifically for payment processors specialized in selling software. I published my findings and my criteria for selecting them here
    for any other developers who want to see the benefits of each type of payment processor. Please let me know if I am forgetting some important point of view in these criteria.

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