Last week's episode hit a nerve! "The idea that every small software company in the world will be able to be in perfect compliance will every foreign federal, provincial, state, and municipal government that imposes a sales tax is ridiculous. It's an impossible task.

(00:11) - Follow up to previous episode
(02:37) - Responses we got about sales tax
(06:25) - A brief history of sales tax
(09:01) - Many vendors aren't collecting sales tax
(10:46) - What about Stripe Tax?
(12:40) - It's new to North America
(16:17) - How it affects subscription based businesses
(19:35) - It's not clear who's liable
(24:46) - Make it easier and gov't make more money
(28:16) - What about Merchants of Record?
(30:46) - Where is Stripe going?
(35:35) - What are going to do now?
(45:03) - Patreon supporters

Broadly, there were a few different camps with the responses we received:

North American SaaS companies who have been using Stripe: "Yes! Sales tax compliance for SaaS is brutal."
European SaaS companies that have had to deal with VAT for a long time (many of whom use a Merchant of Record).
Smaller North American solopreneurs and companies who had no idea they needed to collect and remit sales tax internationally.
North American companies who have one-time sales and use Merchant of Record services.

Responses from indie hackers:

European: “Once again, I notice that the indie hacking community has a somewhat naïve approach to what running a business actually entails. As a European, not having a plan for sales tax is... mindboggling.”
Cooper: “I think it might be a European perspective; we are dealing with VAT from day 1, so it's just one of the parts of running a business from the start, it can't really be neglected.”
Edwin Saraccini: “To clarify, [for Canadians] this is absolutely new territory (Debated in parliament for years) and recently put to legislation in 2021.”
Daniel Vassallo: “It's impossible to be compliant everywhere. The Kingdom of Tonga could tomorrow come up with an internet tax and require you to remit 25% of your sales to the tax office in person in their local currency. And they won't tell you about it. It's just a cost/benefit analysis.”
Derrick Grigg: “How can they enforce tax collection on a business they have no jurisdiction over? Governments are shaking businesses down. I’m all for collecting and paying properly where you physically operate but collecting and remitting outside your province never mind nation is a stretch.”
Derrick Reimer: “Dear Stripe: We SaaS founders are desperate for a full-stack global tax compliance solution without having to leave you for a merchant-of-record. Are you planning to solve this?”

Did you know...

"There are actually several different types of sales tax systems in use throughout the United States. The biggest difference is whether the seller or the purchaser is the main taxpayer. In some states, the tax is imposed on sellers, who then have the option of passing the tax along to their purchasers. In other states, the tax is imposed on the purchaser, with the seller being responsible for collecting the tax and remitting it to the state. And then there are other states where the liability for the tax is shared by sellers and purchasers."

(Source)

New thoughts on Sales tax compliance

I still haven’t heard from anyone who has successfully migrated a “mature” SaaS from Stripe to Paddle or LemonSqueezy. These are no-gos:
- Can’t cause more churn.
- Can’t require customers to re-enter information.
- Can’t change our checkout experience.
We might consider Paddle / LemonSqueezy if:
- Their fees were more affordable (compared to our existing fees it would be ~$63K year more, $5,250 per month more)
- Their dev experience had a better rating from the folks we know.
- I had heard from anybody who was at our stage and had actually migrated successfully.
A few folks suggested Revin, which promises “simple global sales tax compliance for Stripe for only $499/month,” but:
- They have to “create a new Stripe account for your brand.”
- Do they own your Stripe account?
- You’ll lose your historical stats and revenue analytics
The current solution we’re considering is Stripe Tax + TaxJar (and start with US and Canadian tax remittance)

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Creators & Guests

Host

Jon Buda

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Host

Justin Jackson

Co-founder of Transistor.fm

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What is Build Your SaaS?

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Jon: Hey everyone. Welcome to Build Your SaaS. This is the behind the scenes story of building a web app in 2023. I'm Jon Buda, a software engineer,

Justin: and I'm Justin Jackson. I do sales tax compliance for SaaS companies. Follow along as we figure this shit out.

Jon: Did you get a promotion, ?

Justin: Hahaha... I don't know if that's a promotion... although judging from the number of unsolicited dms and emails from sales tax compliance professionals since our last episode that I've received, uh, it seems lucrative.

Jon: Are you gonna, are you gonna switch to becoming a sales tax lobbyist, ?

Justin: I mean, I may, I may do that. I may just become a, a lobbyist. I don't, can you become an international lobbyist? Uh, that sounds exhausting. I'd, I don't think so. That would almost be worse than sales tax compliance.

I would have to register as a lobbyist in every jurisdiction in the world. , you would . Well, folks, that last episode hit a. , uh, we talked about sales tax compliance and we got a lot of responses from all sorts of folks and, uh, there's a few different camps I think we've noticed, uh, broadly I would say folks in North America who are using Stripe and already have customers and subscription.

and for whom, uh, digital sales tax compliance is new, are like, agree with us. This is difficult. This is ridiculous. This is why, why is it built? Why is it this way? I didn't even realize we needed to do this. Uh, and then a lot of folks in the EU were, uh, uh, not as empathetic. Uh, they're just saying, well, this is just a normal part of business and.

That was, uh, I think that's PR pretty indicative of the response we got. What do you think, John? Yeah, I think, I mean, I, yeah,

Jon: I, it is an normal part of running a business, but I think in the US it's, people are just less aware of it. I mean, it's maybe harder to do as well, but it's just like, you know, people are unaware or think it's something they just need to do

Justin: later.

I'm, I'm, I'm actually having a discussion right at the same point, uh, With Adam Wain. Let's just, let's just, let's just talk about some of the responses we got here. Okay. So, uh, one anonymous European whom I, I won't credit, said once again, I noticed that the Indie Hacking community has a somewhat naive approach to what running a business actually entails.

As a European not having a plan for sales tax is mind bogg. Uh, to which, uh, Cooper replied, who is also from the eu. I think it might be a European perspective as we have been dealing with that from day one. So it's just one of the perks parts of running a business from the start. It can't really be neglected in the eu, although I just wanna take a quick aside here and say, you know, , I tested some of these EU companies checkout pages, and they are using some of these merchant of record, uh, services, and they incorrectly assigned the tax for British Columbia and Canada, where I live.

Um, so the, this, this idea I think is ridiculous and I'm gonna make an argument for it right now. , this idea. Every small software company should be in perfect compliance with every government jurisdiction in the world that decides to, um, who decides to come up with a tax. And by the way, this could mean countries.

Provinces states, and in the case of Chicago, even cities, uh, we may even get to neighborhoods. If you're in the, the, if you're in this neighborhood, yeah. You have to, you have to charge your customers, uh, 20% tax. I think Daniel Vassallo articulated this well when he said, it is going to become impossible to be compliant everywhere.

The Kingdom of Tonga. Could tomorrow come up with an internet tax and require you to remit 25% of your sales to the tax office in person, in their local currency. And they won't tell you about it. It's just a cost benefit analysis. Uh, I think there's, there's two kinds of things here, right? One, even if you're in the, in the eu, I think you have to recognize that for governments to expect.

Companies to collect a tax on customers. Not, this isn't a tax on businesses, a tax on customers on their behalf in every region in the world, including country, state, , province, and city. So soon we, it is possible we are going to go from a hundred tax regions to a hundred thousand tax regions. And expecting small businesses to be responsible for all of this.

Compliance on our side Yeah. Is ridiculous. And it's going to get more ridiculous.

Jon: On top of that, I mean, in the US if you, if you, if you buy something, I think this is how it works. If you buy something and you don't pay sales tax, you're supposed to actually file that in your tax return and pay a used tax just, just so that someone gets the tax.

But I. . I don't know that people do that. Yeah. It's just putting the, the onus on these small businesses and individuals to take care of the stuff that should be automated. I mean, it's kind of related to like actually filing your taxes in the us, which should be mm-hmm. , uh, like a, basically a one-click thing.

But then we have this tax, this whole tax industry that took it over and, and lobbies on behalf of the, their companies to basically not make it easy to file taxes in the. Yep. It's uh,

Justin: it's silly. Yeah, and I mean, I understand so many of us in business just do not want to think about this at all. I get it.

And I think understanding both and being able to see this clearly as an externality. This is an externality. An externality. This is a negative externality imposed on businesses. These sales taxes have nothing to do with businesses. These are sales taxes on your customers. Some governments actually in the US by the way, some states require, they make the, the customer ultimately responsible for the tax.

So if your merchant of record, or your vendor or whoever doesn't collect and remit the sales tax on your behalf, those states will hold you as the customer ultimately li. , and that's just, you know, a handful of states in the United States of America. Now imagine every province and state and city worldwide who decide to come up with their own rules.

Yeah. So this is a, this is a tax on customers. When governments first started collecting sales taxes, it made sense to put it on. Businesses because there's so many, so much cash and checks and, you know, credit cards weren't as common. And it, it was, it just made sense to say, well, the only way we can really collect this efficiently is through businesses.

I still think it was a mistake, cuz I think that's an unfair liability to put on on businesses when, when you're talking about this can, this can add up, you know, some of these Europeans are, are paying the tax out of. Own profit, right? So they're, they're paying the government on behalf of their customers.

It'd be like, um, I don't know what a good metaphor for this is cause it's just so ridiculous. It would be like, I, I, I can't even think of anything. It's just, it, it's such a ridiculous situation and I, I think at the very least, , uh, even self-righteous business owners that say this is just a part of business.

Yes, paying your business taxes is a part of business, but I think everyone should be able to recognize this as a really unfortunate externality. On the other hand, we gotta decide what we're gonna do about it, but mm-hmm. this to, to at least understand that this is. A really unfortunate predicament that we're in right now.

I, some people also said, I, I mentioned that, you know, here in Canada and you've checked some of your receipts as well, you know about 50% of the vendors we check from Canada and the US and Australia, um, for whom this is a new concept, are not collecting these taxes properly. Right? So when we look at our receipt, Uh, there is no sales tax imposed when it should be on many of these receipts, and someone criticized me and said, well, that's not an excuse for you to not do it properly.

That's what about them. We're, we're not, we're not trying to deflect any of our responsibility in running a business. Yeah. We're just pointing out that there are many, many businesses in the us, Canada, Australia, New Zealand. who are struggling with this. Many of us are using Stripe and, um, Stripe has not given us a solution.

Uh, we, if Stripe had a built-in solution, just like they have, uh, with Stripe carbon, you know, they automatically take, take, uh, 1% or 2% off every payment and they remit it to their, their, uh, you know, all these. Companies and nonprofits doing climate action work. If it worked like that, none of us would be complaining.

Right. And the governments wouldn't be complaining either. Right. The governments don't care who remits the tax at the end of the day, they just want the tax to be collected and remit it.

Jon: Yeah, I mean, I'm sure these states and provinces wish it was easier too, cause they would be, you know, generating more revenue.

Uh, but for whatever reason, it's. Doesn't seem to have changed. It just seems to be getting a little more complicated. Yeah. Um, and I mean, speaking of Stripe, which we can talk about more later, but like, they do have their Stripe tax product, which is pretty nice. Mm-hmm. , except it's like kind of a half measure.

Yes. And like, you know, when they announced it I was like, oh, this is kind of cool. This is exciting. Like they're gonna calculate tax and charge tax based on where the customer lives and all this stuff. And Yeah. Uh, and then you get to the point where you gotta pay it and it's like, oh, we're just collecting, what is it gonna have money sitting around?

That's sales tax money that we have to remit and then, Yeah. You know, there's the second part of that, which is filing in every state and all this stuff. So

Justin: yeah, your perspective on this depends on what stage you are at in your business, what kind of business you have, and what payment process are you started with.

So Adam Wain thinks we're crazy , he's like, why? Why are you guys even worried about this? Just go with a merchant of record and be done. , it's, that's easier said than done when you've already started on Stripe. And by the way, it, it's, it's not crazy that when we started, this wasn't a big issue for us because in Canada, this legislation just came in.

it was only put into Legisla legislation in 2021, and most of the US states, it's also fairly recent. It's happened within transistor, transistors lifetime.

Jon: Yeah. I mean, we, I didn't, I certainly didn't think about it. I was like, eh, you know, I didn't, hadn't even crossed

Justin: my mind. Even the fact that Stripe only recently created Stripe Tax, and Stripe is a very North American centric payment processor.

It shows that all of this is new. . And so this, this new legislation. Now some of the provinces had some things already before that, but the, the G S T legislation in Canada just came out in 2021 for, what do they call it? They call it the, the Cross-Border Digital Products and Services tax in the us. Uh, famously the states were very slow to impose any sort of digital sales tax, um, any, any sort of cross border.

Sales tax at all that, you know, Amazon infamously took advantage of this. That's very new.

Jon: Um, I mean, yeah, when we started, like, you know, I, I had maybe thought that we would have to like collect sales tax in Illinois or something like that, but it either wasn't, that law wasn't active yet, or I mean, they don't collect sales tax for software as service products.

And the Chicago tax is new within the last couple years.

Justin: The, the advice you used to get in North America was if you are in a state that doesn't collect sales tax on SaaS, then you don't have to collect it and remit it. And the other states had not figured out this cross border thing yet, and Canada hadn't had created a national strategy yet Again, a a little bit of empathy for those of us that are fight ourselves in this situation.

At the same

Jon: time, this makes me think of like. . I mean, the Internet's everywhere, right? Like I live in Chicago, but I could have signed up for transistor when I was visiting Oklahoma. Mm-hmm. . But if I bought something. in Oklahoma, I'd be paying Oklahoma sales tax, not Illinois sales tax, even though my credit card is linked to Illinois.

It, I

Justin: mean, why? This is where it comes in. It. I mean, technically it sh it's where your permanent residence is, right? Is where you're supposed to Right. Reflect it. But like, yeah. I actually thought of this with Estonia cuz they have, Estonia has these, uh, digital residency, uh, things you can sign up for so you can become a resident.

Of Estonia just by signing up online. And I thought that would be hilarious if, you know, theoretically, uh, there could be a country that says, oh yeah, you can become a full-time resident, quote unquote, of our country and we don't, you know, make you charge and remit sales tax here and then everybody could just became a, become a resident of that country.

And then, um, technically, would then, you know, be out outside of a lot of the, the legislation, the way it's been written. This is something else I noticed though, is that in Canada, a a lot of us in business have a US dollar credit card, but the address. and normally with a credit card, you put your home address or your office address.

So if you know these tax uh, solutions that are just pinging your credit card's address and looking for, you know, where you live are, find your home address or home zip code. But in this case it had, I was using my US dollar. Credit card, but from a Canadian bank, and it was charging me Quebec sales tax even though I'm not a resident of Quebec.

So, yeah, I, I, I think, uh, the other, the other challenge is that again, for those of us who've, who have started on Stripe and have subscription businesses, so I think this would be different if we were just selling one-time digital products. I think this would be different again, if we'd started up with.

merchant of record, um mm-hmm. . Yep. Whatever. But for however many businesses are on Stripe, I'm guessing millions for the millions of companies that are using Stripe as their payment processor and who are, and I, I don't know what percentage of those are subscription businesses. We find ourselves in a, in a real quandary, because I tweeted out.

I am just looking, and I've done this multiple times, I'm just looking for anybody who is in a similar state stage as us with a SaaS business who has thousands of active subscriptions, active credit cards in Stripe, and has successfully migrated to one of these solutions, paddle, lemon, squeezy, whatever, and didn't.

A bunch more churn. Didn't get, didn't require customers to reenter information, didn't, um, change or make the cus the checkout experience worse, uh, and didn't require a, you know, a bunch more development work on our side. And, uh, I, I didn't even hear from. Maybe one person, but it wasn't clear if they were at our stage and, and when I followed up with them, they, they haven't replied.

Maybe not that many companies

Jon: have done it because

Justin: it's, yeah, but you think, you think if this as their business, they're trying to, you know, get people to switch to a merchant of record service. The, you have to be able to give us some assurance that if we commit ourselves to doing all of the engineering work, it would take.

Tear stripe out of our , our app, and put in a different solution. You have to, you have to show us the development experience is going to be the same or better. And so far I haven't heard that the back channels of the internet are going right now. And, uh, one person replied to the, that, that actually not just one a, a bunch of people replied to that tweet and said, uh, the people they know that have switched, haven't been happy.

that the SaaS companies that have switched to these merchant of record services, wish they hadn't. It ended up being, uh, just another, a different kind of headache. And if, if we're gonna choose our headaches, , yeah, I

Jon: mean, I would be, I would be very reluctant to do that just because like, that is, I mean, that's the core of our business.

Like if that's screwed up, then like, Well,

Justin: this is everything. It's like, it's, it's, um, again, like there's some things that are just, they would be unacceptable. Like you have to get your customers to reenter their credit card information. . Well, that would, that would literally kill the business. Yeah, for sure.

There's just Uhhuh, . I, I just know it would. even like, so there's another solution that, that some folks recommended called Rein. And I mean, we are looking at it, there's a few things I'm worried about. Rein's relatively new. There's always a bit of nervousness when there's somebody that's new, you're basically relying on their team of lawyers and their team of tax experts and their, um, engineers to get all of this.

and, um, because by the way, it's still not clear who is legally liable. I got into lots of arguments about this too, and now I've dug into different states, legislations, and like I've said, depending on the state and the jurisdiction, it's not clear that a merchant of record would automatically be liable for non-compliance if they don't.

On your behalf appropriately. Remember, the governments, in some case, will hold the customer liable if they, if they haven't been paid. So they just go down the the stack and say, okay, well merchant of record, you didn't pay. Okay, well now next it's the business. Then next it's the customer. So Rev is interesting, but it's, it's part two of their three step process.

Sign up today. That sounds. Step two, setting up in Stripe, we create a new Stripe account for your brand or migrate your existing one. Yeah. What does the migration mean? I think what that means is they still need to create a str, uh, a Stripe account that's registered to their company, uh, and then they migrate all of your customers to the Stripe account that's registered to your company.

I would love to see the legal. , like, is this an official, officially supported thing from Stripe? Or if this company goes belly up, is all of a sudden our Stripe account, the property of Reven, and now all of the creditors are able to go after our right revenue and our payouts and everything else. This sounds, this.

Step two makes me really nervous. Yeah. I would

Jon: be way more comfortable if it was. API integration, web hook integration where they, yeah. Add tax to the invoice before it's charged and then know how much to remit or

Justin: something. Yeah. And they're doing this because they are a merchant of record, and so they, when you're a merchant or record, you have to be the one that collects and collects payments, gets paid into your bank account, and then pays.

Right, right. This is an enormous amount of, of, uh, trust you have to have in these. It's, it's, it's akin to having a crypto exchange where you have to trust the, the exchange is going to be , Uhhuh is going to stay liquid, is doing everything properly. Like this is another thing that's not quite clear, is that if a merchant of record is just collecting everybody's revenue, if something goes.

if they have creditors, if they get, uh, let's say that they do, they run into trouble with the government. They haven't been, they haven't been remitting to Lithuania properly, um, and then Lithuania goes after them and locks all of their accounts or something like that. How does that affect every other customer in the network?

Jon: Yeah, I mean, it's not, it could be some birdie, Madoff style, uh, Ponzi scheme where they're collecting money and paying out certain people and. . Well

Justin: now there's nothing left. I mean, it's probably fine, you know, but

Jon: Right. No, but it's, uh, that's stressful to think about. I mean, it's,

Justin: it's just one more layer between you and your customer, and it's one more layer between you and your revenue.

And just again, another reminder, you're doing all of this work, incurring all of these expenses for a tax that is not being imposed on. This is a tax governments are imposing on your customers. It's so frustrating. The other thing is this tax compliance company that we did go with that will remain nameless, I had emailed them saying, listen, like we, we haven't made any progress yet.

You haven't shown us that you know your stuff. You keep not responding to our emails, you know, a week at a time. We keep not getting straight answers from you. We, we have no idea how expensive this is gonna get over time. Yep. That's enough. We want out. And, uh, we got an email from them saying, well, you're in a two year contract one year.

A one year contract.

Jon: Yeah. One year. If we sign this thing that cancels our account, we basically have to pay upfront the remaining of balance of the account, which is mo you know, like nine months. And we still haven't done anything. So it's like, well, I mean, that's not gonna

Justin: kill us, but it also doesn't make me feel great about the company.

Like if that's honestly their model. They have these enterprise style contracts that, yeah, I mean,

Jon: they gave us a refund for the one thing they screwed up on, but like, all right, admit your mistake and then. say, all right, well we'll give you like six months back or something. You can pay us up to like six months and then we'll call it good.

Yeah. But

Justin: like, come on. I mean, again, I know there's always gonna be people that are like, well, you signed a contract to Yeah, that's true. I mean, we did. It's, it's true. We did, you're right. One thing that was surprising to me is how like, again, I would say 50, 60% at least, of people who responded were, especially from North America, especially if you're using Stripe, completely empathetic with our situation, although there's.

Percentage of those P folks that are just like, fuck this, we're not gonna do any of this.

Jon: Yeah. Like, I mean, that's one option, but also now we're talking about it and it's on record and people know we haven't been doing it, but we're trying. We're trying to, it's not like we're actually trying to like

Justin: not do this stuff.

This is the thing, this is the thing. The governments are for the people, and in this case, governments should be treating businesses as their partner. In sales tax collection. One, because if they wanna make more revenue, they've gotta make this easier. Uh, and, and two, because you're asking us to do something on your behalf, right?

If you're, if you're asking me to do something on your behalf and I don't even live in your country, some kindness would be appreciated. You know, it's like this is how partnerships work. Both government partnerships. and business partnerships and government business partnerships. You know, it's, maybe there is

Jon: one, maybe there's a country we can find out there that is like actually taking this seriously.

It has like an amazing payment portal and all this stuff. Yeah, we should find that and highlight it. Oh for sure. Like someone, someone in, someone in their government is like, we need to do this. Right? And like design an amazing website. Yeah, yeah, yeah, yeah. Make super.

Justin: Yeah. This podcast is sponsored by the province of Saskatchewan.

He makes tax compliance easy that could be used Saskatchewan. You could be this premier sponsor. Of the Build Your Sass podcast. ,

Jon: what's the deal with Saskatche? Why are you everyone's always ratting on Saskatchewan .

Justin: I just, they were the one, unfortunately, they have a a, they have a not great website. Okay.

And uh, and. there. There. Yeah. It's one of the Ohio. You have such a big opportunity to turn things around here. Yeah. .

Jon: Uh, I could talk about Ohio's websites. It's,

Justin: I mean, this is the thing. This is the thing. We're your partners. We're your partners, so you need the tax. Every government in the world needs the revenue.

We think you should be able to charge taxes on your citizens. That's what this is about. We're totally not against, not against tax. We're helping you. Ohio, Saskatchewan, collect taxes from your citizens. Okay? If you want us to do that, you've gotta make it easy. You've gotta make it painless, because if we have to navigate your website and your website's broken, which has happened numerous times, you log into some of these and they're, they just don't work.

They give you a 4 0 4. What? What do you want us to do? . And remember, you're not the only person that's asking of this of us. Like eventually it's going to also be Chicago and then Edmonton. Yeah. And then you know, London. And then it's, it's just gonna keep, this is just going to increase. So it's gotta be easier.

They, if you're a government person listening, , make this easy. Become our partner. That's why we need a, we

Jon: need one, one world government, ah, . One, one time zone, and one sales tax.

Justin: Uh, it'll be good merchants of record. If you're out there and you're still listening, and I know a lot of you are listening, we're open.

Right now the merchants of record I've looked at, it would cost 63 grand more per year, $5,000 per month. But that's only right now, if you factor in growth and we're, we serve largely prosumers SMBs, we're talking about a lot of monthly invoices, and you folks charge per invoice, and so these costs are only going to scale.

also, if we, because you take a percentage of the, the charged amount. . The more we go upmarket, so the more people we charge 200, $500 a month, the more we pay there as well. So we're talking about, mm-hmm. $63,000 or $5,250 a month right now. But that's only going to get more expensive. Right. Which

Jon: is why like with this previous company we're trying to go with like, That's why we went with them, even though we're paying a premium, because we thought this would just be like, oh yeah, we'll talk to you one time and then hook up Stripe to this platform and we'll be good to go.

Justin: Yeah. Because, uh, whatever they were forecasting, our, our first year with them was gonna be 10 grand, and then depending on how many sales regions we went with, the idea was that it would kind of scale. But we would be, for the first few years anyway. Yeah, we would be in the hundreds of dollars per month.

The thousands of dollars per month. And like at this

Jon: point, like, you know, I'm, I'm usually like pretty aware of money and we're spending and try to be pretty frugal about this stuff, but like the money doesn't even bother me anymore at this point. It's just like the amount of time we're spending on this is ridiculous.

Justin: Which I think is Adam Wain's point, which is why are you making it so difficult on yourself? Mm-hmm. . But I think the more I discuss things with those people, I think they can understand that we can't go back in. , like maybe, sure. If we could go back in time to 2018 and choose paddle, maybe things would've been better.

Right? Here we are. Uh, lemon squeezy didn't exist back then, and I think the only other merchant of record option was Gum Road, but we didn't, we were on Stripe and we registered our company through Stripe Atlas like. Yeah. Wait, it, Stripe seemed to be the best solution at the time. Yeah. And you

Jon: know, they bought Tax Jar and they introduced Stripe Tax and it's like, all right, seems like things are moving along and I have to believe they're still trying to do something about this and they're just not talking about it.

Justin: Have, have I quoted Derek Reimer yet? He's summarized it by saying, dear Stripe, we, SaaS founders are desperate for a full stack global tax compliance solution without having to leave you for a merchant of record. Are you planning to solve this? So we've, we've criticized some governments. I think Stripe deserves some criticism here.

Yeah. You know, we, you have many companies who rely on you and for them to not have a solution that works. Now, you know, they, like I said, a lot of these North American tax rules came into, came in around 20 20, 20 21, 20 22. That's plenty of time for you to figure something out. And the rumors I've heard in the rumor mill in the back channels of the internet are a, that there were people working on this and they were laid off or the project was canceled.

These are all subse. I don't know if these are true, but this is what I'm hearing. Uh, the other rumor I'm, I've heard is that they're aware, but they have nothing. That's going to be ready before 2025. I mean, I have

Jon: to be, I have to assume that's why they bought tax jars because they saw other companies doing this.

Yeah. And they wanted to get ahead of it. But all the things I've heard is that it's not really integrated at all yet.

Justin: Yeah. Tax jars just for United States right now. Is that right? US and Canada, maybe. Canada, yeah. We really are in a hard place, like I said, uh, even if. European and you think that we should, we should have just, we should just take this seriously and do it right now, or if, you know, switching payment providers at this point, um, it, it may just not be an option.

Like it's literally the difference between we could switch and lose our business or it, like switching to something Now that we have thousands of customers already in the. and all of this infrastructure built in. Like, we're also not using, uh, Stripe checkout, right? Like we built our own stuff. Um, so this is deep in the app.

This is not a simple switch. It's not like, uh, you know, if we were just selling digital, single digital downloads or one time purchases, yeah, that would do, let's just swap the checkout button. Who cares? Re. Again, I'm nervous about having to set up another Stripe account. And then the other thing is, if we set up all of our reporting that we have built into Stripe, like all of our, um, our records for M R R, churn, historic churn, all those stuff.

Yeah. We start a new Stripe account and we now lose. the lifetime of data or the value of that lifetime of data, right? Yep. Because we're gonna have a break, which again, impairs us to be able to run our business. Realistically, I don't think any government would want us to risk our business to, in order to become compliant otherwise.

Mm-hmm. , we're I'm compliant. Otherwise, we're not gonna be able to charge any of your customers sales tax and remit it for you, and you're not gonna be able to get any of the income tax. Paying through the company and through all of our employees personal income tax. Reverend, right now, I mean, if Reverend folks are listening, we would love a solution that would work for us.

Um, but starting a new Stripe account, that just seems not great.

Jon: Yeah. I mean, it must be illegal. It must be

Justin: a legal thing. Well, and I'm also wondering, legally, I gotta dig into that. Like legally does Stripe even, even. Approve of this officially. Right, right. I'm not, it's not clear. It says

Jon: there's, if they can migrate, I mean, Stripe must have a migration set up somehow.

Justin: Oh, they have a migration set up. But I'm, I'm worried, like if you choose to protect your business using Rein, you implement Rein as your business's non-exclusive authorized reseller. It's worth noting that this reseller role is performed for compliance reasons only and not to establish a new distribution.

but, but they now own our Stripe account. Like it's under their company, right? This approach. Enables us to grant our sellers limited direct access to their respective Stripe account. From a legal per point of view, we provide access in the context of the service and data process agreement, including in our terms and conditions.

The seller's task is to implement and host the checkout on the website and optioning manage billing related customer requests on our behalf to operate. Are we selling business ? This is just sounding, it's making me more nervous. The more you. Yeah, I think a lot of folks want to know what we're considering.

Now I, here's what I'm thinking. I feel like we should get out of this contract with that company. Yeah. I just,

Jon: I mean, either maybe get some money back or call it a loss and call it a

Justin: loss. Water under the bridge

Jon: feels like throwing money down the t. Th throwing money down the toilet. This is the

Justin: way I will rationalize it, is that I think the, the amount our, our, our kind patron supporters have given us over the years will likely equal that amount.

And so it's just like they have, they have invested in our learning, and now we are going to share that learning with the community at large , which is don't sign an agreement with these. Enterprise tax compliance companies. Yeah. I have been in touch with some of the smaller ones. They're great people.

There's a few reasons. It still makes me nervous. There's just, I, I, I can't really talk about it too much over here, but it's just there, there's some things that are just like, even things like multiple typos in their emails. Mm-hmm. , it just makes me nervous. I, I'm, I'm going to entrust you with this tax C compliance, so, , which is literally, I'm trusting you to dot your I for every tax region in the world.

And again, it, it doesn't make me trust your merchant of record service more or your tax compliance service more when I check, you know, your customers who are using the solution and I get, I'm seeing bad checkout forms that aren't, aren't listing the proper taxes. Right. Yeah, typos in your emails and, and even like I'm, I get put onto salespeople, even for smaller companies that don't seem to understand sas, that don't seem to understand the North American perspective, that assume that we're just going to put the tax inside our existing price points.

that just assume it's like easy to show every visitor in the world a contextual. Price based on their location and the amount of taxes we're supposed to be showing those people. Here's what I think we should do is Stripe Tax is the best solution when it comes to clearly articulating the taxes that are being, uh, collected and paid on the invoices?

Yeah, I mean,

Jon: yeah, the collection side of it. I think Stripe Techs, we haven't turned it on yet or registered in any states, but I. , it feels like they have that stuff pretty well under

Justin: control. Yeah. So, and even I, my guess is we're gonna be able to get reports. This is some of the problems with the third party compliance tools, is they just want you to add an amount to your existing, uh, sale amount so it's not broken out in the Stripe invoice.

How much of that is sales tax? Right. And how much of that is not, they require you to use their tool as a, like a third party. Generating thing. Um, and then all the reporting is in their tool. I would prefer to keep all of that in Stripe. Keep it simple. Yeah. And then Stripe just says, here's how much tax you've collected in the uk.

Here's how much tax you've collected. And then for the customer, it's clearly articulated on their Stripe invoice. Here's how much tax. Was added to your invoice.

Jon: I mean, on top of that, once we turn that on, we also probably want to communicate to the customers we have in those places and be like, Hey, like mm-hmm.

starting on this date. Like things might look a little different. Like, sorry, that's the law. If you're upset, here's a coupon I like, I don't know. Mm-hmm. , I mean, . I think most people will probably be fine,

Justin: but Yeah. Yeah. I mean, this is the other thing is that we have to manage now expectations on behalf of the government.

Um, which is like, uh, uh, you know, why did my price go up? How come you guys were charging it bef or weren't charging it before and now you are? It's like, well, yeah, this is, this is your government. This isn't us. This is, we're doing your government service here. and right now with Stripe Tax, the advice we're getting in the back channels from people with North American SaaS companies that actually have customers and recurring billing.

Some of those SaaS founders who are, again, big companies that you've heard of are like, we're just ignoring it. That's that's the opinion of some. Yeah. The folks that are starting to take it seriously, saying the advice they're getting from their accountants is, you have to start some. again, like these, there's only gonna be more and more regions that start like requiring tax, right?

So mm-hmm. , you No. Saskatchewan today. Regina, tomorrow, right? It's like, it, it's gonna just increase . Is that the, is that the title of the episode? Saskatchewan Today. Regina. Tomorrow Regina is the capital of Saskatchewan. Uh, there's only gonna be more and more tax regions. It's going to. , literally impossible to be compliant with every tax region in the world.

Um, , the other, the other, uh, uh, you know, thing I was, I was like, to what extent are people willing to, to take this? Like if North Korea decides to impose a tax on all democracies and mm-hmm. , um, uh, you know, any capitalist country, will, will you also recognize that? Well, of course not. That would be ridiculous.

uh, the, the spectrum of ridiculousness, this is all on the spectrum of ridiculousness, right? ? Yeah. Right. So of course the North Korea example is the most, most ridiculous. The idea that we would have to do any of this for a foreign government where we have new employees and we have, we don't live there, is ridiculous.

So this is all on the spectrum of ridiculousness. It's only gonna get crazier if we just, the advice we're getting is to start with United States and Canada. and just start there. That's where Tax Jar currently works, right? Stripe Tax and Tax Jar currently work there and we did talk

Jon: to them. We'll have to talk to 'em again to see if it's not a similar situation of what we got into with the other company,

Justin: but, and that's a manageable place for us to start.

We've only exceeded thresholds in 12 regions in North. 12 regions is something we can do on our, on our own. We can figure this out, we can , we can go through it. It's a place for us to get started, right? Yeah. Um, and I mean, by the way, the, your exceeded threshold, , like when you exceed the threshold in the uk, for example, is after one transaction, your exceeded threshold in Switzerland is one transaction.

Right. So we've exceeded three thresholds in Europe. and the eu, I don't wanna say . , uh, I, we have to start somewhere. I think this is what we're gonna do is just start Stripe tax, tax jar, become compliant in the countries we live in and have employees in. And then, you know, hopefully Stripe and tax jar. , get their act together and, um, become our partners in this because, uh, we're really drowning here and, um, we, we need a, an iterative solution.

Yeah.

Jon: So that's our plan, right? What, what we think is actually turn on stripe tax to collect mm-hmm. in certain regions. Yeah. Probably use tax jar, although, We still have to talk to them. Plus, I don't know if they help with registration or we have to do that ourselves. Yeah,

Justin: think, I think we still, I think, no, I think Stripe helps with registration.

Now. Tax drive you mean? Uh, let's see here. I don't think Stripe

Jon: does. They might like point you to a website. I think,

Justin: mean, the other thing is that it, it's, this isn't cheap on Stripe either, but it's still cheaper than a merchant of record. I think it's an additional 0.5% for stripe tax. So the US filing partner is Tax char and they do have European filing partners.

So we could also look into that. They'll tell you where to register. Yeah. , but again, for us to start with these 12 regions and register there mm-hmm. , I think we can do that. Mm-hmm. . Yeah. Um, and then maybe we hire someone part-time to do the admin on this. If we really don't want to like just say, Hey, you're responsible for making these payments for us.

Yep. Right? Yeah. It is a mess. But we, we wanna do, we want to try to do the right thing and so we're gonna start where we can start. Sacrificing the business on the altar of, uh, and

Jon: hopefully, hopefully not our sanity

Justin: either. And hopefully not our sanity. Yeah, yeah, yeah, yeah, exactly. There's trade-offs. It's always trade off, right?

Mm-hmm. , that's probably enough. That's 49 minutes than 13 seconds of more exciting tax compliance talk. Thanks for sticking with us. Thanks to everyone who replied, uh, even those that disagree with us. Nice to hear from you. Um, thanks to all of those who dmd me privately and said, oh, this is also a problem for me and I'm super stressed out and I wish, I'm so thankful you talked about it.

John, why don't we thank our lovely patron. Supporters who will be helping us pay off our enterprise. Bill, who are the people? We got a few new supporters too. Who are the people supporting this podcast?

Jon: Yeah. Thanks to everyone.

Greg Park
Mitchell Davis from RecruitKit.com.au
Marcel Fahle, wearebold.af
Oleg Kulyk
Ethan Gunderson
Anton Zorin from ProdCamp.com
Bill Condo (@mavrck)
Alex Payne
Ward from MemberSpace.com
Russell Brown from Photivo.com
Evandro Sasse
Austin Loveless
Michael Sitver
Fathom Analytics
Dan Buda
Colin Gray
Darby Frey
Dave Giunta

Justin: Giiiiiiuuuuuuuuunta. Nice. Thanks for listening, everyone. We'll see you next week.