
Ask HN: How are you handling sales tax for your SaaS sales? - salestax
The Supreme Court recently overturned Quill [1, 2], which opened up for states collecting sales tax from remote sellers.<p>The states are responding to this in various ways, but at least HI, LA, UT, and WA now claim the right to assess sales tax on remote SaaS sales when total revenue in the state exceeds $100k OR 200 transactions (the thresholds SD had set as part of the Supreme Court case).<p>1. If you bill monthly and assuming each bill counts as a transaction then you pass the second threshold after only 17 customers, even if the revenue is modest. E.g. $5-10&#x2F;mo =&gt; $1000-2000, meaning $50-200 in sales tax.<p>This is in stark contrast to the text in the Supreme Court decision [2]: &quot;The Act applies only to sellers who engage in a significant quantity of business in the State, and respondents are large, national companies that undoubtedly maintain an extensive virtual presence.&quot; - looks like the Supreme Court were thinking $100k _AND_ 200tx not OR.<p>2. With regular e-commerce you always have a shipping address, and this makes the sales tax location reasonably clear. With SaaS there&#x27;s usually at best a billing address, but with e.g. PayPal you may not even be collecting that. Does that mean we have to start collecting the location of the buyer? And what about existing subscriptions in unknown locations? Do we have to email people to confirm their locations? And what about those who don&#x27;t respond?<p>3. Sales tax rates and rules are varied and changing, so using a service provider seems unavoidable. However, they charge an arm and a leg. While developer time is mostly a one-off, it still feels like the direct cost to our business will be a significant fraction of the sales tax collected.<p>What is your SaaS company doing about sales tax?<p>1: https:&#x2F;&#x2F;www.journalofaccountancy.com&#x2F;news&#x2F;2018&#x2F;jun&#x2F;supreme-court-sales-tax-decision-201819203.html<p>2: https:&#x2F;&#x2F;www.supremecourt.gov&#x2F;opinions&#x2F;17pdf&#x2F;17-494_j4el.pdf
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cimmanom
We started doing this a year or two ago. We collect postal code (not full
billing address) and pass it through to a vendor that calculates how much tax
needs to be collected. The vendor also calculates for us how much needs to be
sent to which tax collecting entity at what times, which is handy.

We’ve always collected billing postal codes from our users, so we didn’t have
to worry about starting to do that - we just sent them an email informing them
that at their next renewal we’d begin charging sales tax.

I think for REALLY old subscriptions where we didn’t have that info we may
have just treated them as being in non-taxable locations, but don’t quote me
on that. You might want to consult a tax lawyer.

We measured the effect on renewal rates. It was difficult to tell how many
cancellations were due to the tax vs how many due to being reminded they had
subscriptions they hadn’t realized they were still paying for (our
interpretation leaned toward the latter).

