Ask HN: How does your SaaS product handle sales tax?

[softwarefounder]

I'm a one-man startup building a SaaS product for my LLC in Wisconsin, and I'm fumbling around with how to handle sales tax for the subscription based model. Being a SaaS product, there is nothing "tangible" to it and it's kind of treated like a service, so a majority of states will not require you to charge sales tax. But some do.

It seems like WI doesn't charge a sales tax on SaaS products for the time being (https://www.revenue.wi.gov/Pages/FAQS/pcs-computera.aspx). However, this may change at some point, and more concerning is I believe there are some states that require the purchaser/customer to pay sales tax for the service, because _their_ state demands it.

Ironically, there's some SaaS companies that handle some of this sales tax handling for you, such as Avalara (http://developer.avalara.com). I've seen other people mention that they're only concerned about their company's nexus (i.e. where they do-business, for me, that'd be WI), and that they'll just deal with any nuanced sales tax laws in an audit if the time ever comes.

Doing some googling around, I think it's clear that the tax system hasn't caught up with the movement to SaaS.

I'm skeptical about integrating with another product on top of my card processor that will "handle" this for me, because to me it's just another point of failure, and I'd like to know what's going on. On the other hand, I'm paranoid that I could get into some legal trouble, and now would be the time to flesh some of this out (before beta).

What have you or your company done to handle sales tax for your SaaS product(s)?

Here's some Q&A I found online that ask similar questions. - https://www.proformative.com/questions/sales-tax-saas-subscriptions-sofware - https://trustfile.avalara.com/blog/5-steps-to-determine-sales-and-use-tax-on-saas-subscriptions/ - http://blog.indinero.com/saas-business-state-sales-tax

[lastofus]

Unless you plan on paying taxes in all 50 states (you shouldn't), then collecting sales tax from customers outside of the states you are paying taxes in is moot. You generally only need to pay taxes in states you have nexus in (depending on state tax law). In this case, it sounds like you only have nexus in WI which as you mention, does not require sales tax collected.

Generally speaking, you are not responsible for sales tax for online sales, outside of the states you are paying taxes in; the customer is. They are supposed to report stuff they bought online and pay their sales tax (ya right...).