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>If you want a service that does all of the VAT admin on sales, including reporting and remittance to government authorities in all relevant jurisdictions, you
by Jugurtha 5y ago
>If you want a service that does all of the VAT admin on sales, including reporting and remittance to government authorities in all relevant jurisdictions, you might want a "merchant of record" service. You mentioned Paddle, who seem to be popular and getting positive reviews among my network, though they aren't the only MoR available now.
That was my understanding after becoming aware of this, and Paddle seems to be popping up a lot.
>using a merchant of record will become the dominant mechanism for accepting online payments, at least for smaller online businesses with significant international or inter-state sales.
That's our case. It wasn't much of a problem for our consulting activities (mainly mid six-figure contracts with a few clients, mainly in Europe, often repeat business). However, we launched a product and it's surprisingly more straightforward to charge someone 250k than to charge many a few hundred bucks here and there. At least for now. VAT on a large invoice, bank-to-bank and accounting firm, it's just part of business. VAT on SaaS for a few hundred euros via a credit card? Something else, but I digress. We've been learning.
>The tax products offered by Stripe and a few specialist providers seem to offer little more than tracking some VAT rates and doing some simple calculations. I don't understand who the target market is supposed to be for these services today.
Again, you hit the nail on the head as to our situation. I had looked at Stripe "Tax" before, but I couldn't understand it really: it appeared like a landing page with a calculator behind, but that is unfair because I haven't looked at it closely and haven't tried it yet. The impression was that it was less fully-fledged than Paddle, but I'm more than willing to be wrong because it would mean that I'll only use Stripe for everything (for now, then I'll handle the problem of the eventuality of them shutting down our account or something like that and figure out contingencies / payment hot-swapping).
>Anyone who doesn't have those resources might prefer to outsource everything (including responsibility for compliance) to specialists who offer a comprehensive service.
That's my case. If you have a few contracts per year for large amounts, I can do that easily: we use an accounting firm, simple invoices, bank transfers, everything is neat. But for a large number of small amounts, I want to buy the option of not doing accounting.
That desire is so deep, that it even influenced our product. It's a machine learning platform that lets people train, track, package, deploy, and monitor machine learning on their Kubernetes clusters.[0]
Why their Kubernetes clusters? Because it's a good way to charge a flat rate instead of counting beans: if we provide compute, we'll have to meter it, or charge a flat rate and play the large numbers game (many using it less subsidize those who over use it). We wanted to have nothing to do with that metered billing, especially on infrastructure costs, and we just let users do things on their own clusters and data.
- [0]: https://iko.ai https://iko.ai
- Silhouette 5y agoI suspect many of us are in a similar situation today. It looks like my own business interests have followed a similar pattern to yours: some client work where you probably have a small number of relatively large invoices to account for, some self-service B2C with subscriptions of much smaller amounts. For the subscriptions the pain of updating our payments infrastructure so often for new payment service APIs and regulatory requirements has been considerable in recent years. When I was working on a pre-launch SaaS for a different business recently only the new generation of payment services where we could outsource everything were being seriously considered. My existing companies basically treat the split responsibility model used by PayPal, Stripe and similar services as legacy technology now and our plan is to phase it out completely when the opportunity arises. Everything will be either direct funds transfers from a client's bank account to ours, for high value clients who are worth the effort, or completely outsourced, which means again we just see one large transaction from time to time that is easy to account for.
- Jugurtha 5y ago>* or completely outsourced, which means again we just see one large transaction from time to time that is easy to account for.* Which service are you currently using to achieve this, and could you say more about your experience with them? My contact information is in my profile if you would rather address this via email.
- Silhouette 5y agoWe aren't using such a service yet at any of the established businesses I work with but the intent is to shift at the earliest reasonable opportunity. Migrating is not trivial if you have an existing customer base who are already signed up via other payment service providers. A merchant of record will typically need all end customers to sign up personally and thereby enter into a sale contract with them and not with you. That means you can't just transfer existing payment details and authorisations the way you can between different PSPs processing card payments for you. And if you don't migrate everyone, you still have to handle all the relevant tax admin anyway and lose much of the benefit of working with a MoR. So the new SaaS I was working on was planning to use a MoR from the start, while the established B2C business will probably wait for convenient opportunities like launching new products and retiring old ones to make the shift to minimise churn. I don't know if a final decision has been made about which service the new SaaS will use. Among my personal network Paddle has had positive feedback and I think that's probably what that business will end up going with. I know there were some concerns about the legal arrangements and Paddle's terms and I don't know if they've been addressed yet.