SaaS Software · Saas

Handling Sales Taxes for SaaS Business

Ryan Moody

July 13th, 2020

My SaaS startup is just gearing up to start charging for our product. We have our integration withStripe Billing ready to go, but have come to the realization that Stripe still mostly leaves you on the hook for figuring out how to deal with sales taxes. Does anyone have experience setting up a SaaS business to accept payments across the world and apply the correct sales taxes, and making sure everything is tracked and filedcorrectly? In terms of specifics, do you have advice on any of the following?

  • Pros and cons of going with a "Merchant of Record" like Paddle or FastSpring, vs sticking with a gateway like Stripe and adding on a third-party services like Quaderno, TaxJar, or Octobat
  • If sticking with Stripe, advice on the best third-party add-on (Quaderno, TaxJar, and Octobat seem to be the front-runners for us at the moment)
  • Is it worth it to have a service that does the actual filing for you (like TaxJar seems to do at least in the US), or is it not a huge deal to file yourself as long as you have good reporting?
  • Quaderno and Octobat seem to emphasize the importance of sending tax-compliant invoices, and the complexities of these requirements varying across countries. Is this as big of a deal as they suggest, or difficult to implement on your own with Stripe invoices?
  • Any other big factors we should consider, pitfalls to be aware of, or general advice for navigating this issue?

rms _ 123

November 20th, 2020

ChasePaymentech website is made with cheap 15$ template and handshake stock photos looks very scammy. FirstData looks better, but most pdfs are from 2012, presentations still in Flash, technology that don't even exist lol, that's what you call real payment processors? Paul?

Rakesh Shah Finance Director / CFO for startup companies

July 14th, 2020

Hi Ryan

I am based in the UK so it may well be a little different over in the US, although I have filled returns in US when I was a Director of a entity over there.

I recently helped a client in the Adtech SaaS industry setup what you describe.

We use Stripe also, as our payment gateway.

However the billing is done via Chargebee, which integrates with Xero (our financial system). Chargebee also integrates with TaxJar.

Finally, Chargebee integrates with various SaaS metric platforms such as Profitwell and Chartmogul.

Paul Garcia marketing exec & business advisor

July 18th, 2020

Unfortunately this is a question to discuss with your accountant not CFL. Stripe is not a serious platform for business in my opinion. You need a business-oriented payment processor, not some home-brewed company that was built for solo-preneurs in a semi-retail setting. If you aren't using a company like ChasePaymentech or FirstData, not only are you looking cheap to customers, you're also not getting the support a B2B company should receive.

Your accountant is going to have to deal with your sales tax filings across state lines anyway. Don't make it more complex by adding multiple processing components when a total solution that integrates with your accounting software is available.

Yes, I understand that the monthly minimums are really annoying when you're just starting out. But changing accounting and billing systems once you have significant revenue is way worse.

I say buck-up and get a real payment processor that has robust systems. Save Stripe for when you're selling cupcakes at street fairs.