Nobody wants to talk about this (SaaS sales tax)

What It Covers

Transistor founders discuss the complexity and cost of SaaS sales tax compliance across global jurisdictions, revealing their $10,000 failed attempt with a compliance vendor and exploring alternatives to collecting tax in 100 regions.

Key Questions Answered

• •Compliance costs exceed value: Switching to merchant of record like Paddle costs 5% plus 50¢ per transaction versus Stripe's 2.9% plus 30¢, meaning businesses pay significantly higher fees solely to handle government tax collection with no operational benefit.
• •Government externalization problem: Sales tax is not a business tax but a consumer tax where governments outsource calculation, collection, remittance, and record-keeping to small businesses instead of requiring payment processors like Stripe to handle compliance for all merchants automatically.
• •UK pricing strategy: Sales tax compliance experts recommend UK-based SaaS companies absorb the 20% VAT for consumer sales rather than adding it to prices, effectively surrendering 20% of revenue margin to maintain consistent pricing across markets and comply with tax-inclusive pricing requirements.
• •Saskatchewan threshold trap: Registration requirements trigger after a single transaction in certain jurisdictions like Saskatchewan, forcing global SaaS companies with four-person teams to manually register, track exemptions, and remit taxes quarterly for potentially just $5 in tax revenue per region.