How do you handle sales tax when selling digital goods outside of Europe (US, etc.)

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#1

Hi,

I have a question to all of you who sell digital goods (outside the European VAT MOSS scheme) to countries such as US, Canada, Russia, Norway, India, Australia etc.

In some of those countries, you can not sell at all without registering in their jurisdiction:

  • Belarus (B2C)
  • Colombia (B2C+B2B)
  • India (B2C+B2B)
  • Russia (B2C)
  • Serbia (B2C)

In other countries there is a threshold. If you exceed certain sales, you need to charge sales tax and register or do some reporting in those countries:

  • Australia = above 75000AUD (ca. 47.500€) in global sales to B2C in a 12 month period
  • Canada = above 30000CAD (ca. 20.000€) in global sales in the last four consecutive quarters
  • New Zealand = above 60000NZD (ca 35.000€) towards B2C in New Zealand
  • Norway = 50000 Norwegian Krone (ca 5.000€) towards B2C in Norway
  • United States = In certain states digital products are taxable. So if you have a physical presence (or also economic nexus) you need to comply with the sales tax requirements of that state:
    • Nebraska = Threshold: sales into Nebraska exceeding $100,000 or sales were made in 200 or more separate transactions in the current or last calendar year
    • New Jersey = Threshold: sales of $100,000 in New Jersey, or more than 200 transactions in the state in the current or last calendar year.
    • Washington = Notice & Report Threshold: Sales of $10,000 or more into the state
      etc.

Do you simply not sell to those countries or do you sell and once you’ve reached the threshold you just stop selling there?

What if you sell to US customers but just not in certain states where there is a digital sales tax.
How do you block those specific states?
Do you also block the credit card coming from such states?

How are you dealing with this and does anyone know any services that can help with this?

Thx a lot!

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#2

A great question, and something noticeably missing in Stripe’s marketing materials about how easy they make it to collect payments. I’m really keen to see your answers!

#3

The question is rather, how is it possible that almost every other SaaS business, big or small, almost always lets you choose every possible country in the world?

It is hard to believe that every business registers in every jurisdiction if they are required to do so by making for instance just one sale.

Or do businesses simply don’t care and won’t say?

#4

I suspect that for many businesses this is the case. I’d bet this includes the overwhelming majority of companies who use Stripe directly.

For other businesses, they use a full service payment processor such as FastSpring or Paddle, and rely on them taking care of the issue.

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#5

There are two more full service payment processors I’m using and they handle global taxes well - Avangate, now part of 2Checkout, and MyCommerce (ex Share-It).

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#6

I’d also want to mention BMTMicro, been using them for years now and I’m really happy with them.

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#7

The US State tax situation is evolving after the 2016 “South Dakota vs. Wayfair” case allowed South Dakota to impute an “economic nexus” based on total revenue. Now most states charge sales tax by imputing an “economic nexus” if your sales in the state cross a particular threshold (typically $100,000 but varies). You may also be liable tor state income taxes as a result. Note that even if you are based in countries like the UK that have a tax treaty with the US, the treaty is between UK and US and you will be assessed State Taxes as the States are not a party to the treaty.

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