An All-In-One guide to SaaS Tax Software: Options Questions, FAQs and More --

It is a huge amount of time, money and staffing for SaaS firms to deal with VAT tax, GST, sales tax (and any other form tax indirect) in-house. It is important to think about:

• No matter if you're required to collect and pay indirect taxes (SaaS firms didn't have to have to remit indirect taxes, however, many countries have newly enacted tax laws targeted at non-resident software companies).
• The amount of indirect tax is it that you must be collecting and remitting (figuring this out is rarely straightforward as it usually needs to be handled by a tax expert).
• How you will pay the proper amount of tax and the appropriate type at the time of purchase (there is software to help you collect tax on sales tax (assuming you're able you can properly configure your system to maximize your tax collection and meet the requirements of the greater than 10,000taxing authorities across the US) However the majority of software are not adequate to collect GST, VAT, and other forms of consumption tax.
• No matter if there are any additional requirements to staying compliant (e.g. Certain countries require you to file income tax , in the same way as the indirect tax).
• What you'll do to pay the tax (this isn't always as simple as filling out the form and then making a payment; some countries have additional requirements for example, having a representative located in that country handle your tax liabilities) ...

... to for each state as well as the provinces and countries which you have business with.

This is why a majority of firms use tax software or tax consultants to help them manage indirect tax.

In this guide, we talk about the different aspects of collecting and remitting indirect taxes that tax software and tax professionals can and can't help you in. In the next section, we'll explain how our program takes care of all aspects of collecting and paying indirect taxes for you.

 Table of Contents

•   What tax software can Help You With
•   Benefits and disadvantages from Tax Software
•   How Can Tax Advisors help you with?
•   Disadvantages of Tax Consultants
•   : Tax Software + Tax Consultants and More
•   Conclusion
•   Frequently Asked Questions

Be aware that the information included in this article are not intended to be taken as tax guidance.

What Tax Software Can Help You?

Most tax software solutions offer tools for:

• Automatically calculating tax rates for each product during the time of checkout.
• Filling out forms to remit taxes on indirect income.
• Registering your business in each tax-related country.
• Knowing when you've reached the liability threshold for specific areas and you must begin collecting and submitting taxes.
• Plus ...

Benefits and disadvantages of Tax Software

Advantage #1: You Need to manually assign Tax Codes and configure Your Checkout

In order to understand the primary flaw of tax software, we need to have a look at the way to utilize tax software in order to calculate taxes.

 Tax amount that needs to be gathered at the time of checkout is determined by a range of elements:

• It's the kind of item you're selling
• The type of client
• What is the amount of revenue you've made from customers in a given location
• When products are packaged together
• The places where your business is connected
• And there are many and many

If even one of these factors changes in any way, it could affect the amount of tax you need to pay and when. As an example, software that is sold by subscription but hosted on a cloud-based server could be taxed in a different manner than software that is sold on a subscription basis however hosted on the seller's physical, private servers.

Tax software seeks out the most commonly used combinations of these factors and labels them with a tax code (most tax software can provide hundreds of different codes). When using the software it is necessary to locate the correct tax code for your products and configure your shopping cart to utilize the correct tax code for every item you add to the shopping cart. Then, the tax software calculates automatically the correct tax rate (based upon the tax number that you have gave and other information you collected at the time of checkout, such as the buyer's location) and applies the tax rate to the price displayed to customers.

 It can be difficult to select the correct tax code.

For example, let's say you sell digital blueprints to build an DIY deck. With the blueprints, you can also download a PDF that contains recommended designs for landscaping around the deck. Tax software provides you with two tax codes that seem to fit:

• A0002: For designs and plans that are sent to the client through electronic channels only.
• A3001: for blueprints that are sent to the customer by electronic method only.

Are you required to apply tax code A0002 because both the blueprints and the landscaping plans could be classified under  the category of 'designs and plans'? Or do you use the combination of the two tax codes? Do you utilize the A3001 code for blueprints and offer landscaping plans for a free bonus? or something else entirely?

 The majority of companies require the services of a tax expert to handle assigning the right tax code to each product.

Then, you still have to perform the manual task of setting your shopping cart to utilize the correct tax code for every item you add to your shopping cart(which typically takes hours of installation and regular maintenance).

Disadvantage #2: You're Held as a liable party

A common misunderstanding is the tax software companies are accountable for making sure that the correct amount of indirect taxes are paid at the time of checkout. However, that is not the reality. Tax software typically includes one similar to one below:

" While we try to make our tools as accurate as possible, please remember that it is your responsibility to determining the appropriate tax codes." -- Avalara

Which essentially means that when the incorrect amount of tax is collected for whatever cause and you're held accountable, then you're responsible.

Even if the tax software is unable to calculate the correct amount of tax, or have a malfunction in their system and stop collecting taxes completely in a certain area, the software does not have to pay for these taxes. Instead the money will be paid out of your own pocket.

(The same is true if you mistakenly assign the incorrect tax code or your checkout is set up incorrectly, and isn't paying the correct quantity of taxes.)

In addition, if you get caught up in an audit, you're entirely on your own. Some tax software businesses will send you reports on demand and assistance documents to help with audits, but it's ultimately the responsibility of you to think of an answer.

Finally, if you have questions about how to optimize taxes, whether you qualify for tax reductions, or any other tax-related issue, you'll probably be told to consult your tax advisor or read the articles on help.

Disadvantage #3: Most Tax Software is Not Suitable to collect VAT, GST, and Other Foreign Consumption Tax

Although there are some good options for calculating sales tax rates within the United States, most are not enough to collect indirect tax on transactions that are not in the U.S. There are many SaaS companies run into situations in which their tax software is calculating the wrong amount of VAT or GST and is unable to calculate taxes for the nations they plan to conduct business, or does not offer the tax codes needed to their products in the majority of countries. This is why a majority of SaaS businesses end up having to calculate indirect taxes outside of the U.S. on their own.

Disadvantage #4: You're Limited by the Tax Codes they Give You

Tax software usually provides hundreds of tax codes that cover various variations of goods and services. As a result, most businesses can locate a tax code that matches their item. However, if you have an item or service which isn't covered under an tax code, then it's your responsibility to collect the applicable tax.

What Tax Consultants Can Help You With

Tax consultants can help you:

• Keep up-to-date with the tax laws in each state you do business in.
• Provide recommendations about the appropriate time to begin making tax payments in a certain area and the best way to take the necessary measures to comply.
• Make sure you pay indirect tax in the time that is appropriate. (Keep that in mind: not all tax professionals will provide this type of service. You might also require your own accountant.)

Note:Some tax consultants specialize in sales tax compliance in the U.S. or tax on tangible personal property, but aren't necessarily experts in tax law for electronic products as well as international trade. Therefore, it's important to choose your tax consultant carefully -- many SaaS companies need multiple tax consultants to cover all the bases.

Benefits and disadvantages of tax consultants

Tax professionals can help you stay up-to-date on laws and regulations, but you have to decide which actions to take based on this information. Very few tax consultants offer clear guidance on how to handle specific situations. Instead, they'll typically inform you of the rules and regulations and also what other firms have done in diverse situations previously. If they offer any advice, it's often very conservative.

For example, let's say that the country where you're conducting business passed a new law requiring consumption taxes on certain digital merchandise sales. The guidelines don't seem to be very clear so you don't know what qualifies your product or isn't. Tax experts will probably suggest you go ahead and file tax returns even though it's likely that your product won't qualify once the rules are defined. If you do decide to file but later discover that you did not have to, then the tax you have already paid is gone and won't be reimbursed.

Certain companies prefer to take the risk and not file in this situation, however, very few tax consultants will recommend that course of action. Whatever the case, it's completely the decision of you which option to take based on the information your tax consultant offers, and then you'll be the person who is held accountable.

: Let Us Handle VAT, Sales Tax and GST Liability on Your behalf

The issues mentioned earlier with consulting and tax software are among the main reasons we created our solution .

 Specifically, as MoR, we

• Take on tax liability
• Help you assign tax codes
• Calculate tax rates
• Remit and collect sales tax, VAT, and GST
• Take the lead on audits
• And much More ...

The product you sell is in your control. the checkout experience, and the branding. We provide an entire payment system as well as take care of sales tax, VAT, as well as GST.

    "The decision of moving to a different location was an arduous one. One of the key factors was that it reduced our administrative burden in terms of the management of VAT and tax in general as well as the volume of invoices we had to file."  

--- Ovi Negrean is the Co-Founder and CEO of SocialBee

In the following sections, we dig into what it looks like to be the MoR.

Find the Tax Codes You Need to Every Product

Our tax experts determines tax codes for all your items so that your staff does not have to. Tell us the details of your product , and we'll take care of all the rest.

Like we said earlier, many tax softwares have a limited number of tax codes. If your product or services doesn't fit into one of those tax code descriptions, you'll be on yourself to determine the appropriate tax rate.

We solve this issue by providing customized tax codes that are custom. We can design a unique tax code for each product or service in just the time of a few minutes.

Calculate and Collect Tax At Checkout Using a Minimum Setup

Our staff ensure that the right amount (and type) in indirect taxes are paid at the point of purchase -- we also handle tax-free transactions in the U.S. and 0% reverse charges when they are allowed in international markets.

Even though we calculate and pay indirect taxes for you however, you'll retain full control of the appearance and feel of your check-out. Here's a brief outline of the options you'll have for your checkout:

• Three ways to set up:You can have your checkout page appear on your site or embed it into your site. Customers can be redirected to a web storefront run by .
• Visual customization options: You can change the look and feel of your payment process using CSS overrides and custom brand tools.
• Create a buyer's journey that you can customize. 's JavaScript Store Builder Library allows you to include elements (e.g., buttons) to steps leading up to checkout. It lets you control upsells, cross-sells and more.
• Localization: automatically converts prices to local currency, and also translates texts to local languages based on the buyer's location (you can also let the buyer choose their preferred language/currency).
• A myriad of payment methods that have been favored around the world. partners with payment gateways that specialize in global transactions so you have the ability to provide a variety of options for payment (and make sure you have high authorization rates).

    "At DaisyDisk, we're obsessed with the user experience. We picked it because it offers the most convenient, personalized purchasing experience to every client, everywhere. handles all the details -and we don't have to consider it."

-- Oleg Krupnov, Founder and CEO at DaisyDisk

Make sure you are fully tax-compliant in Every Jurisdiction You Do Your Business in

Our team remits indirect taxes for you and ensures all the procedures required are in place to ensure compliance.

Over 20 years of working with tax authorities to file more than 1200 tax returns every year we are aware of how to remain legally compliant throughout the world. It is tax-compliant in 52 countries as well as 13 provinces and all 45 U.S. states that collect sales tax (five states don't have sales taxes).

If you'd like to expand into a new area, simply contact us, and we'll begin the process to ensure conformity in the region.

    "Thanks for  you, we have entered the market of international trade and have been able to receive payments from our customers all around the globe."  

--- Paul Mit, Co-Founder and Chief Growth Officer, FlowMapp

Note: Some countries have been sanctioned by The United States Government which means that any transactions in that country are not permitted. adheres to these laws.

Supported by Tax Experts around the World

We not only have an in-house team of experts with over ten years of expertise, we also establish and keep connections with tax professionals all over the world. It ensures that we're well-aware of tax laws and regulations as they evolve.

When it comes to audits, we take the initiative. If a country or state asks you questions about tax compliance, our team will often provide copy-and-paste responses.

Manage Indirect Tax as well as Your Complete Payment Platform in One Flat-Rate Fee

Solutions are available for the complete process of payment. This includes:

• Global payment processing
• Controlling subscriptions
• Checkout
• Digital invoice (for B2B transactions)
• Reporting and analytics
• Plus much and more ...

All solutions are offered for the same flat rate, based upon the number of transactions you traverse through our platform. There are no hidden costs and you'll not be charged until an actual transaction occurs.

    "We were focused on not just finding an online platform that worked but also on building a relationship and a partnership. This is something I believe is very important. It is not a good idea to purchase an item and be left alone. There must be a solid partnership. At the end of the day, we selected them because we could tell they wanted to be a true partner."

--- Frederic Linfjard, Digital Commercial Manager at Capture One

Conclusion: Tax Software. Tax Consultants vs.

is the only solution in this article that addresses your tax liabilities for indirect taxes. Additionally, we can automate all the steps of calculating the tax, collecting it, and then remitting indirect tax.

The tax software as well as tax advisors are a great option if you're set on handling indirect taxes on your own, but you must be prepared to devote a lot of time and money for the job.

Commonly Asked Questions

What Are SaaS Tax Requirements for States?

While there are some generalizations that could be drawn but each state will have specific tax laws regarding the way they tax SaaS products -- and these sales tax laws are constantly changing. Furthermore, each zip code of the state could be taxed in a different manner (resulting in 12,000+ taxing authorities across all of the U.S.).

Here's a brief overview of sales tax obligations by state (at the time when this article was written).

SaaS is taxable within Alaska, Arizona, Hawaii, Kentucky, Louisiana, Massachusetts, New Mexico, New York, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Washington, and West Virginia.

SaaS is not tax-deductible SaaS is tax-free in Arkansas, California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Maine, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Jersey, New Hampshire, North Carolina, North Dakota, Oklahoma, Oregon, Vermont, Virginia, Wisconsin, and Wyoming.

Some SaaS could be tax-deductible (depending on whether the service is intended for personal or business use) In Connecticut, Iowa, Maryland and Ohio.

SaaS is partially tax-deductible in Texas.

Is SaaS Taxable internationally?

Yes. While not all countries tax the sales of digital goods however, more and more nations are passing laws targeting nonresident software firms to ensure that the level of competition is equal for local firms (who suffer if their overseas competitors do not have to pay tax).

How do you avoid the risk of ignoring VAT, Sales Tax and GST?

The risk of ignoring the sales tax, VAT as well as GST, will differ depending on the company and location. However, here are a few points to be considered:

1. There is a chance that you could be left with huge fines and penalties.
2. There is a chance that you will be prohibited from doing business in the state, country, or province.
3. You could end up paying years worth of indirect taxes. (If you pay indirect taxes in the right amount, you won't have to pay anything. However If you don't collect indirect taxes, those taxes will be paid out of your pocket.)
4. It could affect the valuation of your company. (We've witnessed million-dollar price changes because a tiny software company wasn't complying with tax laws that apply to indirect companies.)
5. Your business may be placed on the public blacklist, which is designed to exhort people not to do business with the company.

What is "Nexus"?

Nexus thresholds are what determine whether or not you are required to collect sales tax in the state of your choice. state. In the past, companies needed to be physically presence in the state (i.e., an office space or remotely located employees) in order to fall under that state's sales tax authority.

The United States Supreme Court's decision on South Dakota vs. Wayfair in 2018 changed that. Now, each state can consider revenue earned when determining nexus. In many states, the threshold for economic nexus is $100,000. If you generate more than $100k in sales within the state, then you'll be required to pay sales tax, regardless of whether you have any physical presence within that state.

What's to come in the near future regarding indirect tax requirements for SaaS?

Many countries that didn't tax sales of digital products have passed new laws to are targeted at non-resident SaaS companies. In addition, many nations are finding ways to enforce their tax laws more strictly.

Additionally there is the fact that the EU will be introducing electronic invoices by 2028 (many countries have already enacted this requirement in place for business with legal entities within that country). All businesses -- resident and non-resident to send electronically invoices at the time of each purchase. This will not only help them enforce the VAT law, but many countries will likely be following suit.