Legal, Tax, and Accounting July 8, 2020

Should I add tax to my prices?

Jan Ś @jeandesuis

I'm not sure if I should show prices without tax on the site and then show price with added tax or should I show up front full cost? What is the standard thing to do here?

  1. 2

    Since you are B2B: Pricing without taxes is the standard.

    I'm in France and I don't know how it works in Poland (it should be the same as us in theory) but we do not use anything like Chargebee because basically you have to collect taxes only for Schengen countries.

    Here is what our accountant told us and what we did:

    • Put pricing without taxes
    • Charge taxes only for EU (Schengen) countries
    • Pay these taxes only for French incorporated companies
    • Keep the extra tax income from other EU incorporated companies (Since the EU will be notified by the French state that we collected taxes on behalf of the French government > They have somehow some kind of agreement between states).

    This is for French companies (like us). But, you should ask your accountant what are the laws in your country and what you should do.

    1. 1

      Because outside EU, the company will declare on its side the tax correct?

      1. 1

        Because you don't have to charge tax from companies outside the EU.

  2. 1

    I'd show prices without tax... but would mention that the prices are shown without tax.

    1. 1

      Yes, that sounds like an idea. In the chat below with @frankspinnl seems like it will be the easier way to use Paddle instead of Stripe to handle all the taxes. Do you maybe know where to look for it more regarding to SaaS?

      1. 1

        If you’re already using Stripe, I’d just contact their support team and ask them directly how this is handled

        1. 1

          I contacted them and that's what they told me:
          "Hello there Jan,

          I see you have questions about Stripe and Taxes within Stripe. I'm more than happy to help you with this.

          Sales tax requirements vary by region, so we recommend checking with a qualified accountant to understand your business’ setup and any required taxes you should be including in your charges.

          Use Tax Rate objects to apply taxes to invoices and subscriptions and to report the tax amounts you’ve collected. When applying tax rates, Stripe calculates the total tax amount per tax rate, summarizing it in a table of the collected tax rates and amounts, and ultimately, into exported tax summary reports.

          https://stripe.com/docs/billing/taxes/tax-rates

          To collect taxes on a subscription, either set tax rates on the subscription, or set the tax rates on invoices as the subscription cycles.

          https://stripe.com/docs/billing/subscriptions/taxes

          You can assign tax rates:

          • On individual invoice-items (recommended).
          • On the entire invoice’s subtotal.

          You need to create tax rates before you can use them on invoices. See our creating tax rates documentation for instructions.

          https://stripe.com/docs/billing/invoices/tax-rates

          Another option you have is also to apply a third party plugin, which you can find here on our works with page:

          https://stripe.com/partners/apps-and-extensions/tax-calculation

          Thanks so much for your patience and cooperation. If any questions arise in the meantime, please don’t hesitate to let me know!"

  3. 1

    It depends on your target audience. Are you in the market for B2C or B2B?

    Here in Europe you must communicate prices including tax when your main audiences are consumers. If your audience is B2B I would display prices excluding any taxes. Most companies can reclaim taxes, so they are only interested in your base price.

    1. 2

      I'm in B2B market (but I plan to also have B2C products as well). I'm based in Europe and I read a lot about taxes here so I want to get to know more about it.

      1. 1

        Something like Paddle can help you with collection taxes. That is what we are using with UptimeMate

        1. 1

          Yes, I've red about them. How they differ from ChargeBee that is as often mentioned in other threads? I'm trying to differentiate them as I am now using Stripe. Have you tried other solutions before settling for Paddle maybe?

          1. 1

            Stripe, chargebee and Co all dont handle your tax.

            Only paddle charges the correct tax and also pays forwards them to the legal departments. And you get paid out by paddle with your real income.

            With Stripe etc. you have to care about forwarding Taxes on your own

            1. 1

              By "forwarding taxes" you mean adding them to the prices or having a dedicated accountant to pay taxes to specific countries (may sound dull, but I don't know how it works).

              I'm curious about situations where companies use Stripe instead of Paddle. The latter seems so much easier - so there is some sort of threshold when using Stripe is better or Stripe is not that much suited for global business?

              1. 1

                Paddle (and others) act as the Merchant of Record meaning they are responsible for paying taxes, whilst you need to handle taxes when using Stripe (and others). If you are below thresholds then you do not need to register in another country to pay tax locally for remote sales. I assume being part of Paddle means you will be above threshold as I guess they aggregate sales. So, for below threshold sales standard payment processing is cheaper but you need to handle and manage taxes. Because it's all so complicated then discharging everything to a merchant of record just so you can forget about it and focus on other things can make sense for a 5% fee.

              2. 1

                Stripe is more interesting if you sell larger quantities. Stripe takes out 2.5% a 3% off every sale. Paddle sits around 5%.

                If you are talking about large quantities that's a lot of money you can save with Stripe. But then you must implement your own tax handling or outsource it to an accountant or bookkeeper.

                I would suggest going with Paddle for you mvp. And when you hit a x amount then implement your own solution with Stripe.

              3. 1

                Stripe is a payment processor. It's great for global or local, Stripe doesn't handle your business, but only payments.

                As far as I know - Paddle, in short, is your reseller. You have a product, Paddle is your middleman, handles taxes, and gives you your share. Theoretically, you have only one client – Paddle.
                Correct me, someone, if I'm wrong.

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