Nov '23 in Q&A
Tax in SaaS
Hey folks - let's talk tax!
Our SaaS plans are typically tax-inclusive. What you see is what you get; we absorb the tax and processing fees under COGS.
For our European/UK customers in particular though, absorbing the 20% VAT bill stings (vs. 10% sales tax in other countries).
Before we test it - would love to hear from you. How would you feel about purchasing a new subscription, if you - the customer - were asked to pay the sales tax on top of your plan? Would this be a deal breaker?
Alternatively, we could:
  • Increase pricing for geo regions with higher tax rates
  • Only make tax exclusive for geo regions with higher tax rates
We use Paddle for billing, for context.
Thoughts?
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• Nov '23
Is your SaaS B2C or B2B? For consumers, it’s not only desired but often mandatory to show VAT-inclusive pricing. For businesses however, not only is it normal and expected to have VAT on top, 90%+ can deduct the VAT at the end of the month so it really doesn’t matter to them. For them, you absorbing VAT is basically a discount.
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Lachlan Fea
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Tax in SaaS
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