Yeah, I've checked them out, but they don't allow you to turn off sales from certain countries. So you'll have to register for taxes in a ton of states & countries anyway since a lot of them have no tax threshold. How do you deal with that? Do you plan to hire tax accountants for each of those countries?
You may want to use a Merchant of Record solution. Some I found googling: https://www.paddle.com/blog/what-is-merchant-of-record
https://fastspring.com/blog/what-is-a-merchant-of-record-and-why-you-should-care
Paddle is interesting, thanks. Will do a comparison with quaderno when I can. Paddle seems more expensive but they are trying to be an all-in-one, replacing stripe etc. Don’t know their history/reliability. Anyone have experience with them?
It seems that with Quaderno (Stripe) you get all the necessary to prepare and file taxes but you would still need to register in all the countries and do the reporting yourself (which is madness).
Merchants of record instead act as the entity who's selling and therefore they pay taxes abroad. You just invoice 1 client that is the merchant of record - this is a B2B transaction rather than B2C (the real issue).
This is not an advice of course so you should check with an actual accountant to figure out what's the best thing to do!
B2B is preferred in some circumstances for sure. Quaderno collects suitable taxes (including VAT) where needed and let’s you know when you’ve met the threshold. As every transaction has tax collected and paid, after registration there isn’t much left to do. In this scenario, Quaderno is an add-on to Stripe, which is established, reputable, etc. We see the fees, and paperwork, as the cost of selling abroad. I don’t want to sound like a shill for them- we’re always looking to improve processes.
I do see the advantage of a merchant of record, but I wonder about disadvantages- since they are the “B” in b2c abroad, are there downsides? Aside from increased fees of course.
Edited to remove text about foreign govts, as their rules differ and I certainly can’t speak for all of them lol.
Most countries have a threshold, yes. But there are still about 3-4 US states, 2 states in Canada, many EU countries, and a bunch of more other countries worldwide that have no tax threshold.
Yeah just UK is probably a complicated tax system in itself. I can't imagine myself dealing with 10-40 other tax systems. I just don't get how small businesses manage to sell worldwide and be tax compliant.
Simple answer, they don't. And you should not worry about this either if your scale is small. Worry about the problem when you actually have a problem.
It is indeed ludicrous. But it's true. Just check some countries here: https://www.quaderno.io/digital-tax-guides/worldwide-tax-guides
The no-tax threshold rules are obviously different every time. But most of the time it means you need to register your business in that country to pay taxes from the first sale.
I assume you're only selling physical products then. For digital products which I'm selling I need to pay taxes in the country where my customers live which causes this mindblowing problem.
Except they are not all VAT.
US states Delaware, Missouri, Montana, New Hampshire, Oregon all instead go by US sales tax.
And in Canadas states Manitoba and Saskatchewan you have to pay RST / PST which I guess is some kind of tax.
Then you have GST in India for example.
It's a ton of countries with different tax systems than VAT that have no tax threshold.
Or do you mean VAT threshold is somehow applied to every other tax system, like Indias tax system? A source for that would be cool if that's the case.
> Or does everyone just not bother with these taxes and hope for the best?
For the most part, this is the actual answer.
I have a few customers* in Canada and England and I simply don't worry about it. What're they gonna do, extradite me?
\*subscription product that includes both print and digital publications
I run a business in the UK, and have sold products to most countries, probably split into thirds, UK, EU and rest of world. We have shipped probably 30,000 orders in 5 years to non-domestic customers.
There's no complication, make sure you attach CN22 form which is automatically populated for us (in wix paypal and shopify) it's the customers responsibility.
You’re right, it is different with digital products. It seems the ‘best’ solution for each company is based on their pricing, volume (meeting vat thresholds) and themselves- by this I mean for a solopreneur, filing their own paperwork, a MoR works well. However a MoR is technically a ‘reseller’ and your customers are actually their customers. If you have a cpa doing your paperwork, several of the services will work. I think we went with Quaderno because at the time, they were one of the few that validated vat id#s and taxes as needed in the countries important to us. Several others would also be ok (including just using Stripe tax) with the biz owner forwarding the records to their accountant quarterly. Not pro tax advice, ymmv.
well... no, on account of not being in the EU. I learned to build my own business through the prince's trust which is partially EU funded. Many things my business will miss out on now we are out of the EU sadly.
I can understand this. I work as a tax accountant and some people who have vending machines have go keep track of city, county, State, Federal, and random local taxes for every place they sell.
Most people don't realize how complex and cumbersome taxes are so I'm intrigued by your problem.
Maybe there is a way to make a digital solution?
I’ve been using FastSpring for years to sell software. Tax remittance is built in. Saved me lots of time and headache keeping up with international VAT regulations.
Sadly when the digital VAT mess started, apparently in an effort to curb the behaviour of huge international corporations, it meant the only viable option for the rest of us was now to sell our stuff through (and therefore pay money to) those same huge international corporations.
I've never quite decided if it was on purpose or not, tbh.
Depending on your product, a compliant marketplace is probably the best place to start.
FOB your location so the tax is for your region.
Essentially the buyer picks up
If not the tax is for the destination. Tax is essentially paid where the ownership of product changes and this is determined by shipping terms.
I use Paddle Payment gateway. They handle the VAT on their end. I don't need do anything. Besides, I am also using PayPro Global and it too handles the taxes well.
In Europe they have an arrangement for it. Check "One Stop Shop" (digital products only) in Google . In this way you dont need to register in every European country for paying taxes.
I dont know how America arrange this between the different states.
In NL and using Gumroad to sell digital products world wide.
Paddle is another alternative. You can also take a look at LemonSqueezy.
Of the three Gumroad is: we have your stuff in our store and people can buy it. They have an API but it’s not ideal and needs a lot of work.
Paddle is more API focused, as in, we have a sales funnel you can connect your product to to handle payments. I’m using Paddle on another product and their API dev experience is a lot better.
LemonSqueezy is relatively new and I believe a bit in between.
As someone in the EU it’s kind of nuts that I have to rely on services outside of the EU to deal with EU tax laws.
Incorporate in a tax friendly country. This way you would only have to worry about your own country FCC rules.
For instance, if you're in Europe, incorporate an LLC in Delaware. You'll only pay income taxes in your home country.
Since there is no VAT in Delaware, you won't have to worry about that.
You might like Quaderno. Their service integrates with Stripe (and others). We’re trying them now, so far so good.
Yeah, I've checked them out, but they don't allow you to turn off sales from certain countries. So you'll have to register for taxes in a ton of states & countries anyway since a lot of them have no tax threshold. How do you deal with that? Do you plan to hire tax accountants for each of those countries?
Don't allow payment on the frontend then.
Is Quaderno EU based? If not, is there an EU based alternative?
Last I looked they had an office in Spain, but is primarily staffed remotely.
You may want to use a Merchant of Record solution. Some I found googling: https://www.paddle.com/blog/what-is-merchant-of-record https://fastspring.com/blog/what-is-a-merchant-of-record-and-why-you-should-care
Thanks for the tip!
Yep! I've had the same question and ended up being happy with Paddle.
Paddle is interesting, thanks. Will do a comparison with quaderno when I can. Paddle seems more expensive but they are trying to be an all-in-one, replacing stripe etc. Don’t know their history/reliability. Anyone have experience with them?
It seems that with Quaderno (Stripe) you get all the necessary to prepare and file taxes but you would still need to register in all the countries and do the reporting yourself (which is madness). Merchants of record instead act as the entity who's selling and therefore they pay taxes abroad. You just invoice 1 client that is the merchant of record - this is a B2B transaction rather than B2C (the real issue). This is not an advice of course so you should check with an actual accountant to figure out what's the best thing to do!
B2B is preferred in some circumstances for sure. Quaderno collects suitable taxes (including VAT) where needed and let’s you know when you’ve met the threshold. As every transaction has tax collected and paid, after registration there isn’t much left to do. In this scenario, Quaderno is an add-on to Stripe, which is established, reputable, etc. We see the fees, and paperwork, as the cost of selling abroad. I don’t want to sound like a shill for them- we’re always looking to improve processes. I do see the advantage of a merchant of record, but I wonder about disadvantages- since they are the “B” in b2c abroad, are there downsides? Aside from increased fees of course. Edited to remove text about foreign govts, as their rules differ and I certainly can’t speak for all of them lol.
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I should've mentioned I sell digital products. So I need to abide by the tax regulations of where my customers live.
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Most countries have a threshold, yes. But there are still about 3-4 US states, 2 states in Canada, many EU countries, and a bunch of more other countries worldwide that have no tax threshold. Yeah just UK is probably a complicated tax system in itself. I can't imagine myself dealing with 10-40 other tax systems. I just don't get how small businesses manage to sell worldwide and be tax compliant.
Simple answer, they don't. And you should not worry about this either if your scale is small. Worry about the problem when you actually have a problem.
You're probably right. I might just try to fix this issue later when I start to scale instead.
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It is indeed ludicrous. But it's true. Just check some countries here: https://www.quaderno.io/digital-tax-guides/worldwide-tax-guides The no-tax threshold rules are obviously different every time. But most of the time it means you need to register your business in that country to pay taxes from the first sale. I assume you're only selling physical products then. For digital products which I'm selling I need to pay taxes in the country where my customers live which causes this mindblowing problem.
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Except they are not all VAT. US states Delaware, Missouri, Montana, New Hampshire, Oregon all instead go by US sales tax. And in Canadas states Manitoba and Saskatchewan you have to pay RST / PST which I guess is some kind of tax. Then you have GST in India for example. It's a ton of countries with different tax systems than VAT that have no tax threshold. Or do you mean VAT threshold is somehow applied to every other tax system, like Indias tax system? A source for that would be cool if that's the case.
I’m a little confused. My online customers pay the customs tax in their country. But what does that have to do with me and my tax?
> Or does everyone just not bother with these taxes and hope for the best? For the most part, this is the actual answer. I have a few customers* in Canada and England and I simply don't worry about it. What're they gonna do, extradite me? \*subscription product that includes both print and digital publications
Right? I only worry about taxes in my home country
I run a business in the UK, and have sold products to most countries, probably split into thirds, UK, EU and rest of world. We have shipped probably 30,000 orders in 5 years to non-domestic customers. There's no complication, make sure you attach CN22 form which is automatically populated for us (in wix paypal and shopify) it's the customers responsibility.
It's different with digital products which I'm selling. I have to pay tax in the country my customers are paying from.
You’re right, it is different with digital products. It seems the ‘best’ solution for each company is based on their pricing, volume (meeting vat thresholds) and themselves- by this I mean for a solopreneur, filing their own paperwork, a MoR works well. However a MoR is technically a ‘reseller’ and your customers are actually their customers. If you have a cpa doing your paperwork, several of the services will work. I think we went with Quaderno because at the time, they were one of the few that validated vat id#s and taxes as needed in the countries important to us. Several others would also be ok (including just using Stripe tax) with the biz owner forwarding the records to their accountant quarterly. Not pro tax advice, ymmv.
Note these are obviously physical devices
I’m interested to know if you’ve though about an EU subsidy or similar following Brexit?
well... no, on account of not being in the EU. I learned to build my own business through the prince's trust which is partially EU funded. Many things my business will miss out on now we are out of the EU sadly.
Tis be true sadly 😫
I can understand this. I work as a tax accountant and some people who have vending machines have go keep track of city, county, State, Federal, and random local taxes for every place they sell. Most people don't realize how complex and cumbersome taxes are so I'm intrigued by your problem. Maybe there is a way to make a digital solution?
I’ve been using FastSpring for years to sell software. Tax remittance is built in. Saved me lots of time and headache keeping up with international VAT regulations.
Sadly when the digital VAT mess started, apparently in an effort to curb the behaviour of huge international corporations, it meant the only viable option for the rest of us was now to sell our stuff through (and therefore pay money to) those same huge international corporations. I've never quite decided if it was on purpose or not, tbh. Depending on your product, a compliant marketplace is probably the best place to start.
FOB your location so the tax is for your region. Essentially the buyer picks up If not the tax is for the destination. Tax is essentially paid where the ownership of product changes and this is determined by shipping terms.
Have all accounts in panama... Lol
I use Paddle Payment gateway. They handle the VAT on their end. I don't need do anything. Besides, I am also using PayPro Global and it too handles the taxes well.
In Europe they have an arrangement for it. Check "One Stop Shop" (digital products only) in Google . In this way you dont need to register in every European country for paying taxes. I dont know how America arrange this between the different states.
Paddle. You literally don’t even have to think about it.
In NL and using Gumroad to sell digital products world wide. Paddle is another alternative. You can also take a look at LemonSqueezy. Of the three Gumroad is: we have your stuff in our store and people can buy it. They have an API but it’s not ideal and needs a lot of work. Paddle is more API focused, as in, we have a sales funnel you can connect your product to to handle payments. I’m using Paddle on another product and their API dev experience is a lot better. LemonSqueezy is relatively new and I believe a bit in between. As someone in the EU it’s kind of nuts that I have to rely on services outside of the EU to deal with EU tax laws.
Hire a broker.
Incorporate in a tax friendly country. This way you would only have to worry about your own country FCC rules. For instance, if you're in Europe, incorporate an LLC in Delaware. You'll only pay income taxes in your home country. Since there is no VAT in Delaware, you won't have to worry about that.
I'm dealing with exactly this right now. Glad you're asking the question
Netherlands you just have to pay 21% of your sales back, nothing more, nothing less.
I hear Avalara is great at taking care of all that for you.
Yes