I got a customer from the UAE, so Stripe Tax showed I needed to register for their VAT. When I completed that process, the UAE immediately hit me with a 10,000AED ($2,722) penalty for not registering sooner. Now, if I'd known this would happen I would have just blocked all payments from that country and refunded the customer.
At my scale (hobbyist, $50 MRR) I can't afford international tax lawyers or these massive penalties. A little Googling shows I'll need to register and keep on top of VAT for dozens of countries once I have more customers, which isn't something I can expect to manage solo or afford to pay an expert to do.
I'm thinking of blocking all non-US payments with Stripe Radar, even though I want global customers and prefer to avoid the extra cost for Radar. But other startups seem to manage without this hassle. What am I missing? Are people just not registering for VAT?
That's the impression I got when I researched it. I found lots of post of people explaining their tech stack and payment workflows, but almost none about how they handled country specific tax and VAT.
Paddle, Gumroad, Lemon Squeezy and Fastspring all handle this for you. I went with Paddle for payments for a Chrome extension and I haven't had to think about country specific tax since.
I occasionally check Paddle's changelog (https://new.paddle.com/) to see what new countries and tax changes they're having to deal with weekly to remind myself why I went with them.
There's meant to be SaaS products that work with Stripe to help with tax but is it worth the hassle compared to refunding the existing customers and moving to one of payment the providers above? Ignoring the problem until you grow bigger and then having to correct tax errors in retrospect is an incredibly bad idea imo (fines, paying accountants to sort out missing tax filings, untangling the mess, having to contact old customers about it), that's going to get in the way of you growing your product and cause a lot of stress.
From the page: "Our team has set up entities across the world servicing millions of customers"
Yes, it sucks that it costs more. Yes, it sucks that I have more platform/vendor risk. Yes, it sucks that I can't use the platform I know best (Stripe).
But yes, it's worth it to know that if our efforts succeed and we grow a lot then we won't have to drop everything to get compliant with the 87 countries and countless local jurisdictions we've made sales in.
Charging real money is one of the problems with hobby businesses. Segmenting the market to exclude people who can’t pay real money is another. Because neither is just plain fun (because both are business decisions).
A hard lesson: building an unsuccessful business is hard work. About as much as building a successful one but with the added stress of failing.
It's an extra 5% or so, but well worth it to avoid all the work and hassle of learning about and then paying sales tax in every country and region.
If you ever move beyond the "beer money" phase, you should be able to afford the experience required to do all this correctly using Stripe.
If you’re doing international sales and not trusting a MoR service you’re 100% committing tax fraud in multiple jurisdictions.
As I see it now, I have to intentionally (and sometimes through a lot of hurdles) restrict people from buying it from some countries. And then what if they use a VPN? Or I use an MoR who keeps up with all of these tax laws just because our governance is based on geographical when the internet blurs away geographical borders.
MoR just seems like a workaround for not having global governance of a global space, but maybe that's the best way for now.
Now they have two problems.
All the time you have spent in this thread, could have been spent figuring out how to make enough money to make the problem go away. Money solves all business problems.
My advice: Segment the market to avoid problems you can't afford. Because avoiding problems is the easiest way to solve problems. If you can't afford to solve the VAT problem, avoid it.
I think, though that in this case @seabass may have suffered from information overload by subscribing to too many Stripe services. IMHO he got this notification about UAE tax and somewhat panicked. Frankly, the best thing to do was to be grateful for this customer and to move on instead of shooting himself in the foot by rushing to manually register for tax in a country he knows nothing about over a $5 sale. He didn't really have a problem, IMHO.
For most businesses that’s most people.
The mistake is only charging $5. If it were $5000, the overhead of accountants fees, would be covered. At $50k, the fine would turnout fine.
It’s a thing successful companies do. Think of all the Japanese electronics sold only in Japan.
Besides, is your stripe + company registered in UAE?
Talk to a lawyer, talk to a tax attorney. Don't take legal advice from the Internet since your situation is likely not going to match the person's who answers.
An attorney for something earning me $50 isn't doable for me right now, but I am surprised this isn't a more commonly discussed issue. The number of small-time sellers of all sorts of global online products is massive. Anyway, current plan is to get an MoR to handle foreign taxes going forward.
At the same time, how do we change the laws if we don't talk about them?
I find the governance of the internet to be absurd, especially as it relates to VAT/sales tax. I think it's mostly non-global governments trying to govern a global space.
Does anyone know of an MoR that might connect to Wordpress in a similar way to PMP? Or even how to hook up an MoR to function through PMP?
Maybe just in general, an MoR that does membership sites well?
Lastly, an MoR that does nonprofit sites?