Build Your SaaS

Sales tax compliance: nobody in SaaS wants to talk about it. Jon and Justin tried to do something about it and it turned into a nightmare. According to Stripe Tax, there are about 90 different regions that software companies may have to register in, and then calculate, collect, and remit sales tax on their behalf. But in North America, many SaaS companies don't seem to care: many that we looked at weren't collecting sales tax at all, while a few had just started collecting in the US states.
  • (00:13) - Welcome
  • (01:54) - Benefits of podcasting for a small business
  • (03:44) - New Year's update
  • (05:59) - Patreon integration feature
  • (10:23) - Dear listener... a request!
  • (10:50) - Exciting! Sales Tax! Discussion!
  • (29:01) - What have we tried
  • (40:12) - A new issue that we can't make progress on
  • (47:00) - Thanks to our Patreon supporters

If you've been wondering about how sales tax applies to SaaS, listen to this episode.

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Creators & Guests

Host
Jon Buda
Co-founder of Transistor.fm
Host
Justin Jackson
Co-founder of Transistor.fm
Editor
Chris Enns
Owner of Lemon Productions

What is Build Your SaaS?

Interested in building your own SaaS company? Follow the journey of Transistor.fm as they bootstrap a podcast hosting startup.

Build your SaaS: Nobody in SaaS wants to talk about this
===

Justin: This is Transistor fm.

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.

Justin: And I'm Justin Jackson. So happy to be back with our first episode of 2023. I do product and marketing and thanks for following along as we continue to build transistor.fm.

Jon: It's been a while since we recorded.

Justin: Yeah. The last episode was three or four months ago, I think, with the whole team after our team retreat. Yeah. What are we gonna do about this? Are we gonna, we do, we just need to say, you know what, we're gonna jump back on the horse or, I, I, I'm always confused what to do with this show.

Yeah, I think we should, yeah, I

Jon: think we should try to do it at least twice a month.

Justin: Okay. Listen. , if you're still here with us, first of all. Hey, thanks. Um, we're on Mastodon now. You can reach out on Mastodon. Say hi. I'm still on Twitter. Uh, you can still say hi there. Are you still on Mastodon? John, are you, are you, are you,

Jon: um, yeah, I, I poke around.

I haven't used it much, but yeah,

Justin: I, okay, well go follow Jon Buda on Mastodon while he's still, I'm still on Twitter, but I public,

Jon: I deleted all of my history and basically don't use it.

Justin: before that, before Elon shut off, shuts off the API. So you can't delete your tweets anymore. , that's probably a whole podcast too.

But it is, I, I actually think, I mean, we could record more often because I think now that once we got on the pre-call, I was like, man, there's actually some stuff to talk about. Plus, I think the nice thing about podcasting, which we've said from the. is that it? It forced you and I to get on a call together and I think it's just so easy, especially at this stage for you and I to not touch base even though we should be touching base and

Jon: we keep, we keep saying that and we never do.

Yeah. . I have other friends who run a company and they're like, they hop on a call I think once a week and just like do a walk and talk for like an hour. We

Justin: should do more walk and talks too.

Jon: No, it's gotta, it's gotta warm up here soon, but

Justin: sooner. Yeah. First I'm, I mean, I'm walking every morning, so I'm, I'm, I'm out.

Um, one thing that actually we did, we did implement that I think has been good, is we have this once a month meeting where we just go through our books. But that's been a nice one because we end up talking about other stuff and even if it's just a 15 minute call to. You know, clean up our accounting and do some admin work.

Uh, talk about sales tax, which we're gonna get into today. Uh, yeah, that's been good. Yeah. So listener. , we're gonna try and record more episodes. We'll put it in the calendar as a repeating thing. Yeah, we used to have one of those. Yeah, we should just, we should just do it . We should just have it in there.

Maybe we should record on Tuesdays and then just release it the following Tuesday. That's kind of a nice, yeah, that could work. Uh, I'm gonna be on the Mixer G Podcast tomorrow. It will be kind of a big deal cuz that's one of the podcasts that got me into podcasting. Oh, nice. A really popular business show from a long time back, Andrew Warner.

So that'll be kind of fun. I'm waking up at, well, I have to do that one at 8:30 AM How you feeling? How's work? What, what? What's our New Year's update?

Jon: I'm good. Yeah, it works. Been good. I think, you know, I think the year ended really well. Um, we definit. I had a bit of a slowdown over the holidays work-wise and just holidays and everything.

Um, yeah, it's been good. I think it was hard for me to get back into the, into the swing of things after the, after the new year, like, uh, and then I got sick for like 10 days or something. Oh yeah. Had a, had a bad cold that was going around. Um, but yeah, it was like slow getting back into and like trying to get back into, so,

We haven't really worked on any big features yet. Like we've been finishing up some stuff that I, you know, we had started in the, in the previous year. But, uh, yeah, it was like, it wasn't like I just wanted to jump back anything. It was like kind of had to slowly ramp back up and Jason and I had been working on different things and he's been working on some like, you know, features that aren't necessarily front facing that users will see your customers.

So it's, I mean, overall I think it's been great. I still love it, obviously. Yeah, love, love working with the team and everyone and, but I think Jason and I want to try to tag team some more features after, like we finish up what we're doing now and like, cuz we did a couple of those and they were definitely more fun, right?

We're working on the same thing, going back and forth and

Justin: yeah, it's just like that energy you two have when you're both working on the same thing is there's something about that. . Honestly, I, I put this in my, my urine review, but I, I've been jealous of it. When you guys really get going on something, it's like, oh, that, that kind of, yeah, that, that the fire burns hotter when, you know you're both on the same thing, and we haven't

Jon: really made it a point to do that, and we haven't been necessarily great about planning and shaping a feature beforehand.

Yeah, it's been a while since we did, I think it was like maybe the dynamic audio stuff that we did. It was the last one we really worked on together at the same time. Um, but yeah, it, yeah, it'll be good to

Justin: get back into that, I think. And right now you've been working on this, this new, can we talk about that, this patriot future?

Sure. Yeah. Yeah. So we are, we had this big, we wanna add monetization to transistor. We just, , we've, we've noticed when podcasters are earning some revenue from their show, they're more likely to do it even like you and I. The reason, one of the reasons I want to record the show is cuz there's still people supporting us on Patreon, right?

And it feels like, oh, we gotta like do it for our fans. You know, we gotta, we gotta do it For the people that love the show and have been kind of supporting it from the. So we wanted to give that same energy to other people. And so we've got a really cool Patreon feature that allows you to integrate with Patreon more deeply, I guess, right?

Yeah. Like we're gonna pull, like automatically pull your supporters from Patreon. into your transistor website. They'll be listed there on your website automatically in your show notes. Um, in your show notes. Yeah. Yeah.

Jon: And that, I think that's a starting point for monetization. Like there's a lot of our customers who use Patreon, but there's no great way for them to have a list of supporters like we do every week or every, not every week, but every episode with, you know, yeah.

Who's still supporting the show and yeah. That'll be, that should be out soon. I mean, it's live on. to build your SaaS website now to test it out.

Justin: Yeah. And there'll also be this little widget that allows people to set their goal for the month and, uh, with a call to action on there. So we're going to be giving podcasters the tools to, you know, have more calls to action for people to support.

I have a little, uh, progress indicator. I'm actually really excited about this one. I think once we release this, it's gonna give us. A lot of energy. Yeah. And, uh, yeah, I'm feeling good actually. I, I've been, I've been, um, I've hired Josh Anderton as a contractor to do a bunch of work with me on the marketing site.

Mm-hmm. . And, uh, I have found that v really invigorating. Like he just, I get him to just book a bunch of days with me on my calendar and, cause I found, like I was just getting into this habit of. Work was just kind of happening to me, you know? Mm-hmm. , like I'd show up, go through all of our support messages, go through all my emails, go through Slack, then like, you know, pick off something, but the energy wasn't there and having to show up on a call.

And often Josh has been like working on shit, so he has stuff to show me. Yeah. And it's like so energizing to have. Somebody else there, you know? You know it is.

Jon: That's how I, yeah, that's how I felt before we hired Jason. Like it was, you know, COVID and we were both just kind of working remotely and it was easy to just kind of, not, some days just not do much at all.

Justin: Yeah. Even though you might be sitting. at your desk, right? I, I was definitely in a bit of a slump. Um, so it's been nice to, like, we shipped so much. I the, just that mo feeling of momentum, you know, when you get on it, like, and sometimes again, you know, the holidays happen, you have to ramp back up and, but for me it was nice cuz I, because Josh is a contractor, He's motivated to wanna book sessions.

So he's like, yeah, sure, I'll book three days with you this week. And it's like, oh perfect. Cuz I know those three days I gotta show up. And then it's gonna be energizing to be like, okay, like what? What do I need to have ready for this? What are we gonna do next? How are we thinking through this? What problems need to be solved?

It's just, um, It, there is something, uh, yeah, there's something about that that is, um, energizing. So yeah, I've been enjoying that. And there's problems that I'm working on now, like search engine optimization that I didn't think I'd like, but I'm really like enjoying solving this mystery of how to get us ranking higher and are we making changes that are actually affecting, you know, uh, the.

The site and our rank and all that stuff. Uh, dear listener, if you could do me a favor and just search on Google how to start a podcast and scroll down until you find transistor and then click on transistor. . I would love that because, um, yeah, we're just a small little company trying to, trying to compete, you know, uh, but it's fun.

We could talk about, so the one quick story before we get, I wanna talk about sales tax compliance. Actually, you know what, let's just get into it. Okay. Because it's a very exciting topic. It's very exciting. Very few people are talking about it. And especially in the United States. I. , our European counterparts have a very different point of view on this and a different sentiment about it, and a different kind of even cultural history.

Um, with V A t. A lot of them don't like V a T or you know, the other sales taxes, uh, they have in the uk and, um, but they've learned to live with it. And it's, it's culturally enshrined there as like, we just know we gotta do this, we gotta deal with. , but in the US and Canada, sales tax on software as a service is still relatively a new concept.

Yeah, so much so that when I tweeted about this back in October, 2022 and said, fellow founders, what are you doing for sales tax registration, calculation, collection, and remittance globally? Very few people responded and. The people who do respond. There's, there's kind of a, a few responses. There's people in Europe who just have this kind of idea that, well, of course you've got to, everybody collects sales tax and of course you've gotta remit sales tax to every region in the world, every province, state, country that wants you to collect sales tax for.

you need to do that for them. And this is just a part of life. There's folks that use merchants of record like Paddle and Gum Road, and most folks I think are not doing much or are have not done much and are not planning on doing much if they run a company in the US or Canada. , would you agree with that assessment so far,

Yeah, I would

Jon: agree with that. I mean, I, it's even a thing when we started talking about this and we realized that, oh, maybe we have to start thinking about this and doing something about it. Like I was looking at some of our receipts for services we pay for, and it's like all over the board. I mean, even like large corporations that we pay don't charge a sales tax, which makes no sense.

Yes. and in smaller ones, some of 'em do, and then most of 'em don't. Some of 'em have started to recently. Yeah. Uh, but like yeah, it's weird, weird stuff. Like some of the bigger corporations still don't and think they would have to, so that, that, that raises the question of like, do we need to what? Yeah.

It's just, it's frustrating

Justin: and even, uh, I was listening to the Base Camp podcast. David and Jason were talking about how they , they just recently solved this problem and it was like it cost them, I think they said $6 million or something. Yeah,

Jon: they millions in back sales taxes they had to pay that they never collected because they just didn't.

Justin: Uh, maybe I'll get Chris to play a little clip of that right here, but also should we have waited 20 years to get a proper head of finance into run things? Yeah. Okay. Maybe that was a little too far right. In fact, that is one of those examples where there's a, almost a sticker price you can put on that.

Um, several years back, maybe this is five years back or something, we realized that we hadn't been doing the right things around, um, sales tax. and that there were actually all sorts of obligations we had in the individual states because we're a remote company and you end up creating this thing called Nexus if you have employees in different states, uh, nexus being that the state has a a right to essentially tax you.

Now there's even more rules around just doing enough. Business in a given state means that you are liable for sales tax. We hadn't really followed up on that because we didn't have anyone to follow up on that. We had no one minding that risk, and we ended up spending several million dollars out of pocket to settle, um, back taxes when we realized by ourselves before getting audited or anything.

You know what, we haven't been running this. Right? So if Base Camp is just realizing now that they need to do something here, and to their credit, they they did, it cost them a bunch of. And they solved it, but the implementation in North America is all over the board. I, I even had a, I reached out to a bunch of founders in the b kind of back channels because I wasn't getting any responses publicly to this tweet.

So I'm like, okay, I gotta figure out what are people doing. and you know, I had a founder of a very well known successful indie SaaS who's doing a lot more revenue than us, and who's saying, I'd rather do almost anything than think about this stuff. I recommend you just violate tax law. and I, here's the, here's the thing again, I think European founders will look at, north Americans go, what are you talking about?

You just have to do this. This is just part of life. This is just part of running a business. Right. The government has a right to charge you. No, that's the thing. But it

Jon: hasn't been for a long time, especially with internet sales, that cross borders, it's just not, hasn't really been a requirement until in the last couple

Justin: years even.

Yeah. I mean, in the, in the US and Canada, right? Right. Us and Canada's just started this. Um, and I mean, you can go back to our v a t, like there's, there's conversations on the web about V A T, uh, that when that came out, north American software companies by and large were saying, we are not going to collect and remit sales tax for foreign governments.

Why would we do that? That's just culturally, that makes no sense here. Right. And, and even if we can just take a a, a slight detour. . I think the way people see these taxes is actually flawed. A lot of people are like, well, you have, if the government is charging your business a tax, you have to pay it. These sales taxes are not a charge on businesses.

These are a attacks on customers. So the government has outsourced, has externalized the calculation collection and remittance. and auditing and admin of sales tax. They have outsourced that to businesses and small businesses. It should be clear that this is not like an income tax that businesses are paying.

We've always paid our income taxes. We pay our state taxes, we pay our our employee taxes. Those are all taxes on employers and on businesses. This is an externality. The governments around the world have just said, the way we're gonna collect and re get collect these taxes is we're going to force businesses to do this for us.

And I think that's a mistake and uh, there's a better, more efficient way to do it. I think governments are missing out on so much sales tax revenue. Even like you said, if you look at our, the vendors, how many vendors. are not doing this properly. Right? They, my guess is if, for example, all of these governments around the world, if they made the payment processors responsible, so they're still outsourcing it.

They're still outsourcing, externalizing the costs. But if they're gonna do that, make the payment processors, the one ones who are responsible for. Calculating collecting and remitting sales tax, then instead of having to go after whatever it is, uh, millions of small businesses around the world that are e-commerce businesses and software businesses and software as a service businesses, instead of having to go after all of these companies that can sell internationally quite easily, just go after American Express, MasterCard, visa, paddle Stripe.

That list is maybe 10 to 20 people, 10 to 20 companies instead of going after millions. Right. They would instantly, instantly . They would, I, my guess is they would double sales, tax revenue. Oh, yeah. From, from these kinds of businesses. Yeah. I mean, it's kind of

Jon: insane when you know, you have some states, like I think Texas and Florida that don't have income tax and they.

They rely on sales tax to supplement that. Yeah. Or pro, I get maybe property tax, but, and they're just missing out on tons of revenue for this stuff.

Justin: If, if you want to charge our customers sales tax, , that's fine. I'm not anti sales. Tax sales taxes are, what do you call those taxes? They're, um, they're, they're consumption taxes, so they're generally pretty good.

Cuz the more a customer spends, the more they have to pay in tax. Makes sense. Right? The more money you have to spend, the more tax you can get. I'm totally fine with that. But once, I think once people understand the costs that small businesses. Like us have to take on, on behalf of the government so that we can do this work for them.

I think they would be very surprised. And yeah, the best example of this is, uh, well, there's two good examples of this. One Paddle, which is about, oh, see, I don't want to to get in trouble, but I think Paddle is what, 10% or something? Let me, let me go back up here. Paddle is 5% plus 50 cents per transac. Uh, Stripe's base rate is 2.9% plus 30 cents per transaction.

And uh, Stripe will often give you a volume discount once you hit a certain, uh, threshold. Like we pay less than that, but to stripe. So if we were gonna switch to a merchant of record like paddle, , we would be paying a lot more in transaction fees, and the only reason we're doing that, by the way, , is not because Paddle has better features or whatever, like it would, that would be an incredibly costly exercise for us to rip out Stripe and then put Paddle in.

The only reason we would do that is so that the government. The governments can collect their sales tax revenue. That has nothing to do with us. Right?

Jon: It's weird. All this time and money we've already spent trying to do this stuff is like you're just paying for the, for the privilege to collect money that you never see anyway.

Who's

Justin: privilege?

Jon: Like, yeah, I know that's not a privilege, but I mean, I say that

Justin: sarcastically, but hey, you know what? It would even be different if instead. , these international governments said, Hey, you know what? We're actually going to charge you a income tax based on the revenue you earn in our country.

That would be easier and cheaper for us, because then we just say, okay, well Lithuania, every. Every sale we make in Lithuania, we have to send them 5% because that's their income tax. And then we could decide if we want to do that. But that is way easier to just say, how much money did we collect in Lithuania?

Okay, it's a hundred dollars. Okay, we'll send, we'll send them $5, whatever. And you know, especially if there was a good api. Fine. The difference is these governments want us to track every single customer, every single transaction on their behalf. Keep records, register individually in every single state, province and country around the world, remit quarterly, often manually by logging into their mm-hmm.

bullshit website. Um, paying accounting firms and tax compliance firms. Massive amounts of money to do these things. And the record keeping that we have to do on top of this, like we have to track every charity and tax exempt, like this charity, this church is tax exempt in Illinois, but it's not tax exempt.

But churches, you know, aren't tax exempt in Lithuania. Like, we gotta track all that

Jon: shit. Pretend we have to track. Their tax exempt documentation and keep it updated like every year

Justin: and keep it

Jon: updated. And we have, we're a team of four people. We're not like, what? Who's gonna do this?

Justin: This is honestly crazy making.

It is the, the whole endeavor. And I'm surprised more SaaS companies. aren't talking about it. Now let's look at the risk sides of side of this. The, the whole reason you and I even got into this is cuz I was doing some, uh, stuff on my side, transferring my share ownership and doing some other things. And I had to employ a tax accountant at a big firm and they were just asking questions and I said, They asked about sales tax and I said, well, we're, you know, most of the states haven't started doing this yet.

And he's like, well, actually, the states have started. They've figured it out. They're starting to charge sales tax now. And I'm like, okay, but okay, well maybe we can try doing a few things, but we're never gonna, you know, remit v a t. That's insane. And he goes, well, you might wanna think about it because the risk is fines, number one and two, if you ever get acquire.

a lot of deals fall through if they, if these kinds of liabilities have not been figured out. Mm-hmm. . So that was the initial motivation. And in my head when I talked to you about this, I was like, well, Stripe has striped tax. Surely this has been automated by now. Right.

Jon: And so we, yeah, we looked into it and yeah, they have Stripe tax, you can turn it on and start collecting sales tax pretty.

but yourself were remitted on your own and registered. But Stripe also Stripe also bought tax Jar. Yeah. So we talked to them and they're like, oh yeah, we don't automatically remit in anywhere but the us. Yeah. . So we're like, uh, it doesn't really work.

Justin: That's not great. Again, this is not a tax on businesses.

this is, uh, bus, this is government saying businesses need to collect these taxes on their behalf, . And so we're like, uh, just can we just, is there an API or something that can just figure this shit out? Like we are a part of Stripes, uh, car climate program, carbon, you know, they invest in carbon projects.

Mm-hmm. . that's all automated. It's just a percentage of our revenue. They just take it away. We don't see it. We don't know where the, it's like, I mean, even if it was like, there must be something like that. Even

Jon: if it was like something like the US government was like, all right, we now have a national sales tax on internet sales.

It's 5%. Yeah. And then you send us the money and you send us information on how much money you collected in each. State and we'll just pay it. We'll do we'll do it. You just send it once a month or whatever and we'll do it. That's fine. Yeah, that'd be great. Sounds

Justin: awesome. Yes. And by the way, even for like local coffee shops and stuff at, I used to own a couple snowboard shops.

The number one reason small businesses get audited. Audited, I think is sales tax because I. Well, I'll say it. I'll say it this way. I don't know if that's That's correct. Every friend I know whose business has been audited, it's been related to sales tax. And the reason is, let's say, John, you and I start, we're gonna start collecting sales tax on behalf of these governments.

Well, some of these sales tax are 20%, so we're now gonna have in our bank, , all of this tax money that is actually not ours, right? We've just collected it on behalf of the governments and then on a Schedule A that's outlined by those governments, either quarterly or uh, you know, biannually or every year or whatever, however they want it.

We then have to remit that to them. Talk about a cash flow. Uh, headache right there. . All of a sudden we have to, we have to be managing how much of this is not our money? How much of this is the government's money? Like that is bonkers to me. Mm-hmm. . And it's not just like, it's not like a flat tax. It's like in the UK it's 20%.

Here's something even crazier in the uk if you sell to consumers. As opposed to businesses, your prices need to be sales tax inclusive. And so when I've talked to sales tax compliance experts, their best practice for a business like us is for us to just eat the tax. So if you charge a hundred dollars a month to a customer, instead of showing that customer 20% on top,

Most businesses just keep their prices the same. Like our price for whoever it is in the world is $19 a month, $99 a month, but let's just say a hundred dollars a month. That's been our price from the beginning since we launched. We don't wanna increase it for people. The advice is for us to just take 20% out of our revenue and send that to the British government.

That seems crazy. That's the best practice founders in the, in Europe, what are you doing? Like what are you doing? You're giving away 20% of your margin to the government just be, that's, that's your money. You know what I mean? Like right. This is not a tax on you as a business, a tax on the customer. Right.

On top

Jon: of that, they probably pay income tax if they're based in the uk, right?

Justin: Yeah. Yeah. And. It's, it, it, I just, this whole, this whole thing is a train wreck and so we've tried a few things , so yeah. When

Jon: we, we've been talking about this for a while, I think. Since, since the middle or early spring of 2022, we started talking about this.

Justin: Yeah. I was like, I started getting concerned about it. I talked to you about it and we, we, we were kind of like, okay, well we wanna do the right thing. It's not like we don't want governments to be able to collect taxes. Like we're, that's fine. Collect your taxes. . And so yeah, we looked into Stripe, like you said, we looked into tax jar, we had calls with tax Jar.

Then we talked to, we thought, well, maybe we can just hire some accountants to do this on our behalf. And so we, we had phone calls with accounting firm and they said, well, in terms of automated payments and registration and all that, we don't , we don't do that. We recommend you look at, you look. You know Tax jar.

Yeah. Or one of these sales tax compliance companies and they named another one that will not name cuz we're , we're gonna say bad things about them. Uh, and we're like, okay, well I guess we gotta do some research. So we, we did more research and it seemed like the only company that would do automated registration.

Collection and remittance on our behalf as a small team of four people was this one company. Yeah. And so John, bless his heart, called them .

Jon: I mean, yeah. I had, so I had a call with one of their, their reps for like an hour and a half. This is before we even signed anything or signed up with them. Mm-hmm.

And it was honestly great. Like it was reassuring. I had a good call with this. Yeah, he explained everything that we had to do and like, you know, it's a lot of stuff, but I don't know if he was a salesperson, but, you know, they make you feel good that yeah, they can be able to take care of all of it for you after you fill out a number of documents.

Yes, and, and provide like some revenue, you know, proof of revenue in certain places.

Justin: The promise was we came to them with all of this angst and. Worry. And the response we got back was, yeah, we're gonna take care of all that for you. It's gonna be easy. It just, it takes, we onboard you, we do everything. We hold your hand.

I mean, I don't think we realized how much it was gonna be because people kept saying, whoa, that company is expensive. But we're like, it seemed cheaper than going with something like Paddle. Yep.

Jon: And less time consuming eventually, once everything's ironed out and working all that. So we, we did eventually.

We did eventually sign up in, I think, November. Yes. So we signed up and we're like, all right, all right. The ball's gonna start rolling. This will be

Justin: good. . Yes. Then mysteriously, well, a few things happened, so we signed up in November and we start paying, it's our, our first payment. was,

Jon: it was like five or $6,000.

Justin: We're not ta we're talking about for a small company, this is a significant amount of money. Our first payment on November 3rd was $8,800, $8,800, almost $9,000. And we're like, okay,

Jon: well, and that's not, we're not, that's not us paying sales tax to someone that's just like, fees for

Justin: this company. No. That's our payment to the sales tax compliance company that's gonna help us and make our lives.

So that's our first payment, November 3rd. Then we waited and waited and waited and is like, we're like, what's happen? Like what happens next? And yeah, meanwhile we're getting

Jon: charged monthly for services we're not using

Justin: yet. So I, I reached out and the person we're supposed to talk. Is not there. ? Yeah, they're on

Jon: vacation.

Yeah. Well, one, the guy that I talked to left the company.

Justin: Yeah. Well that, that happened later. So it was like we signed up right before Thanksgiving. I think. So. Okay, sure. Thanksgiving is busy. Whatever. Then we, we contact them at the end of November and say, okay, we're ready. And then we hear nothing. We hear nothing for a week.

And then, We get an out of office reply and then I sent an email to their general box. Hey, this, this is December 7th. Hey, this guy's, we got an out of office reply, even though we emailed him a week ago. Didn't hear anything, didn't hear anything until December 20th after I sent two more emails saying, Hey, we, we've paid you guys a bunch of buddy.

We still have not heard from anybody. Finally hear back from. . They say, oh, we're, you're gonna get somebody, you'll hear back from a colleague right away. , this December 20th, did not hear back from somebody until January 8th. Yeah, they

Jon: were on vacation for three weeks. Right. or something. Yes.

Justin: And then meanwhile we're like, we're trying to find somebody that can help us.

We, we've paid this company almost $10,000 and we're like, we haven't, nothing has happened. So we contact that original rep that you talked to. Gone. Nobody told us , our representative is no longer at the company. I tracked him down on LinkedIn and he's like, oh yeah, we had massive layoffs, uh, in December.

Tons of people got fired. Meanwhile, we,

Jon: we, I think we had an account manager. We just never heard from them. They never reached out and was like, Hey, we're here to help and this and that. We just got like automated emails of like, Hey, sign in here and like fill out this document of all this information, which we had questions

Justin: on.

Yeah, we had questions about we, part of that initial money we paid was for this, this assessment in Illinois. After we signed up, I looked at this and I'm like, it just Illinois doesn't have sales tax. For SaaSs, why do we have to pay $3,500 for this assessment? And , nobody's answering. Nobody's answering.

They're like, just BU you, you've got the assessment call coming up. Just so we get on this call, he's getting us to download Excel so we can load up their fucking document so we can paste in our transactions and about an hour in it. I'm like, listen, you guys still have an answer to the question? Why are we even doing this assessment in the first place?

if Illinois sales tax is not, is not taxable. He said, well, uh, I'm not sure about that. You're not sure about that. You're the expert. You're doing the assessment with us. He's like, and we've been on the call for an hour now. Then he is like, let me check with my colleagues. Checks with his colleagues. I don't think we heard back again for another week or whatever, right?

We have to like, keep, respond, keep responding. They book, they say, Hey, we're gonna need to book another call with somebody, book another call with somebody, get on the call with her, and I'm like, I'm just trying to figure out what's going on here. We were charged $3,500 for an assessment that it looks like we don't need, and I just want a clear answer.

And she's like, oh, okay. Well let's check into that. By the way, I figured out that I'm, I, I'm here in the Canada, I don't know anything. US tax law or whatever. It took me five minutes of Googling to realize, I don't think we need to do this assessment. I don't think we need to pay tax here. These are the experts that we've paid $10,000 to know this stuff.

So another hour phone call with her and then she's like, oh yeah, you don't need to pay this assessment. and now we're gonna refund it for you. It's like, so if I had never brought this up, you guys would've just done the assessment and kept our money and wasted all of our time. And meanwhile,

Jon: like as this is happening, we've been like, we keep getting like the same emails that are like these onboarding emails, the same thing, but it's like a different person.

We're like, ping ponged around. Or like, different teams handle different things. It's like, oh yeah, we, we don't know about that. We got our other team is.

Justin: Yeah, talk, talk to our other team. It's like you're supposed to be the experts. You're supposed to make this easier for us. And so finally I got fed up and I I, I just said, I sent them an email saying, this is unacceptable.

And the, the thing that actually, that tipped me over the edge is I said, okay, you've already charged us $3,500 for something we didn't need. I need to know, cuz they give us a quote. Filing in eight regions. Mm-hmm. , just so folks at home know, in Stripe tax, stripe tax monitors almost a hundred different tax regions in the world where you, where theoretically SaaS companies need to calculate, collect and remit on behalf of these governments.

So, About a hundred regions. This company that we were wor that we paid $10,000 to, the quote they gave us was only for six or eight regions, I believe. Mm-hmm. . And that was a loan, $500 a month just for kind of like regular maintenance. That's it. Plus the amount we paid up front, so minus the $3,500. So plus this five grand, de five grand.

So I, I said, how is this going to scale if it costs us $500 a month for this? But that's only six regions. But theoretically, We will eventually maybe need to be collecting and remitting for a hundred. I just need to know what, how are these costs gonna scale? And they all have, all of these places have, you know, X number of invoices per month.

You get charged for, and then X number of regions. And then they've got this proprietary calculation and it's all very enterprisey. I said, I just need to know, let's say 5,000 invoices a month, 55 regions, how much is that gonna cost us? and they could not give me an answer. So I, I think you can all hear how frustrating this is.

Here's the problem, is that it's easy to belly ache about this because it's, it's ridiculous, but we have to decide what we're gonna do. Yeah,

Jon: yeah. I mean, it has consequences either with, either way we

Justin: do it, it has consequences no matter how we do it. Now, am I, do I really. The e countries in the EU are gonna go after small SaaS companies and, and levy fines against them.

Probably not. Like that's, it's probably not a big concern, but we wanna do the right thing. That's our inclination. We want to do the right thing. But nobody's making this any, even if it was like, , um, uh, we're not opposed to difficult work either. We're also not opposed to paying, even though I think it's ridiculous that we have to incur costs so the government can collect and remit their own, collect their own taxes.

If it was as easy as just like, we're gonna sign up and there's gonna be a monthly fee for us, it's gonna cost us more. In accounting. We get all that. , but this is a problem for John and I, I think that's frustrating because really this is the first time we've hit something where you and I could not just make progress.

Right. And

Jon: it's, yeah, it's something we get really frustrated thinking about and talking about, and then we just like, Don't talk about it because it's so annoying and we're like, we wanna actually do things that help our

Justin: customers. We wanna build things for our customers. And

Jon: every time we think about it, it's just like, oh God, this is such a headache.

Justin: First of all, the other thing about merchants of record is because they're the merchant of record, they've exceeded the threshold in every tax region, so you automatically just have to start remitting taxes for every tax region in the. So automatically it's, it's more for your customers and theoretically more for you.

The, the additional cost to switching to something like paddle and the additional cost of having our, uh, the additional accounting we would need and all that stuff. We could easily hire one person. I bet you we could even hire easily, we could hire one full-time person, probably, yeah. With the money, the extra money it would take for us to be compliant.

That doesn't even count how much, how many hours. We're wasting, doing all these calls trying to figure this out, and we still haven't made any progress. We've, we've wasted, yeah, we're right. Thousands of dollars in. Productive time.

Jon: We're in the same spot we were at last year

Justin: in April last year. , we, we, we we're just more jaded and more angry now.

Like I, yeah. I

Jon: think one, at one point we were started getting emails from this company. We signed up for it, like they were the same emails to do the same thing over again. And I was like, this is, uh, literally making me think I'm crazy because Yeah. Didn't we do this? Or it's like a different person.

Justin: I don't, yeah.

Yeah. It's, it's so silly. If governments truly care about entrepreneurship, like small companies risking their time, energy, and capital to creating value in the world, if they truly cared about that, you gotta take this off our plates somehow or make it easier somehow. Yeah. Uh, they say they

Jon: do, but they don't.

I mean, . They would also do, they would also do universal healthcare in the US so we won't have to worry about this shit and like how your health insurance is tied to a job and you can't start

Justin: your own business. This, by the way, is why business is political, like just having healthcare for entrepreneurs.

And small businesses, by the way, like healthcare for our, for you and Jason, our two American employees is still a nightmare compared to how easy it is for Helen and I cuz it's just covered. Anyway, so folks, that's our rant on sales tax. Uh, we still don't really know what we're gonna do. We've we're talking to, there's other companies.

Uh, do this that are similar to Tax Jar, that are cheaper, that remit in more areas. It's still not, it's still incredibly difficult because the advice, we basically have to query their API and then give our EU customers a specific price when they. and then somehow collect that. But then if we query their api, stripe doesn't allow us to mark that as sales tax.

We have to just add it to the overall amount. So then it just becomes this overall revenue in our account that we have to track somehow, and then remit. And it's like,

Jon: I mean we, we could, we could at some point actually turn Stripe tax collection on. Yeah, that still doesn't help. REIT it and pay it. Right?

Like, and, and on top of that, we're paying fees to Stripe for

Justin: collecting sales tax. Yeah. Stripe tax is not cheap.

Jon: And like, I mean, you know, in some hopeful scenario, Stripe Tax actually turns into something that does it for us, but it doesn't sound like that's

Justin: happening. Yeah. And honestly, like , again, if I was the Canadian government, if I was the SaaSkatchewan government, but SaaSkatchewan SaaSkatche.

SaaSkatchewan's come up a few times from friends of the show who are actually collecting and remitting tax SaaSkatchewan, as soon as you have one transaction in SaaSkatchewan. You need to register with their, on their government website for sales tax and remit sales tax. So transistor, you know, we big company, we, not big company, but you know, we've got thousands of customers.

We have a handful of customers in SaaSkatchewan if that,

Jon: like we don't have an accounting department and a tax and client department, like bigger companies. I'm sure they do. And it's just a cost of doing business for them, which I guess, I guess it would be for us too. But it's.

Justin: You're gonna, you're gonna make every small business in the world doing this kind of work.

Every E-commerce company, every software company, anybody selling anything, digital consulting over the border, anything, you're gonna make every single one of those companies, as soon as they charge their customer $50 for a digital download or whatever it is. And so the tax, you know, that's whatever, that's $5 sales tax to SaaSkatchewan, you're gonna make those companies do all of that work for.

so that you can get $5 in tax revenue, right? That, that's the plan. Here's an idea, SaaSkatchewan and every other government official in tax, so if you're listening by the way, and you're, you're, I wanna hear from you. If you are with a government that collects sales tax, I want hear from you. I don't want you to come and arrest me.

I just want you to email me, , go to Stripe directly. Just go to Stripe and say, You guys are already know where everybody lives. You already know all the revenue numbers. You've already even enabled people to just turn on Stripe climate automatically and just automatically have revenue go places. Just do this for every country, region, state, province, city.

I'm looking at you, Chicago, that wants to collect sales tax on SaaS. Great. Do it. Just don't make every small. , do it. Go to Stripe, get them to do it for you way easier. And honestly, you will make so much more , right? So much more money than now. Instead of having millions of companies registering in on your crummy government website, you just need to make one deal with Stripe and you're done for the vast majority of e-commerce SaaS, et cetera.

That's me. The advice. and, uh, we don't know what we're gonna do. I'd love to hear what people are doing. John, I think we've said enough. I think we have. You want to thank our Patreons? We've got our nice Patreon page that we can now read from. It's just automatic. We know who's a current supporter. Yeah. 17 people who have stuck with us.

Who are they? Thanks

Jon: to everyone who's stuck with us through all this.

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: Giunta!!! How come Dave shows up at the end? Because Is he, he's the longest supporter? I think so.

Damn. I wonder if he feels like he could just never cancel this subscription. I dunno. I should ask him. tell Dave that no matter what, even if he cancels, he is an honorary. He will be. Get shouted out every episode, . Friends, thanks so much for listening. We will see you again soon. We're gonna put it on the calendar.

Tell your friends, and yeah, we'll see you next time We record.

SaaSkatchewan. SaaSkatchewan. SaaSkatchewan. SaaSkatchewan. SaaSkatchewan. SaaSkatchewan. SaaSkatchewan. To SaaSkatchewan. SaaSkatchewan. SaaSkatchewan.

SaaSkatchewan,

SaaSkatchewan.

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