Hey y'all 👋
Question this week: Where and how do you pay your taxes?
Death and Taxes: EU Edition 🇪🇺
As a online course creator I have the following goals:
- Build the best educational product for my customers
- Capture value from my customers to keep the business alive
- Stay in compliance with the Law
It feels like this is a zero-sum game.
Let me explain...
This tweet is part of a public documentation of me troubleshooting this problem 👇
It gets complicated quickly:
The challenge is that I don't want to write invoices manually.
Rather, I'd like to have a software solution check (a) the location of the client, (b) apply the location-specific VAT rate to the invoice, and - ideally - (c) remit the tax to the local tax authority.
I know... I'm dreaming. 😢
I'm currently using the following tech stack:
- Gumroad: My online course platform -> great to start, but doesn't support the features I need to grow my course offering.
- Paypal: My payment processor -> I really don't like them
Gumroad takes care of compliance with tax laws (#3) by applying the location-specific tax rate but it doesn't support email marketing (#1) and it's payment processor - Paypal - is taking a criminal cut of my revenues (#2).
Here a couple of alternatives I looked at:
Teachable takes care of local tax (#3) but doesn't offer certain features I want (#1). The fees are not as steep as with Paypal, but they still take a 5% on all transactions (#2).
Podia offers a great product (#1) and doesn't charge any additional fees on the transactions (#2). Yet, their integrated payment processor - Stripe - doesn't take care of EU VAT (#3).
There's other services like Paddle & Quaderno who focus on tax collection and remittance but those either (a) don't integrate with the software solutions I'm looking at or (b) are an on-top plugin for Stripe.
Bottomline: there's no perfect solution.
Next Step: What to Do Next?
A couple of thoughts:
- Short-term: It looks like the EU is offering a VAT exemption for qualifying goods (i.e. educational products/services). The exemption is tied to localized revenue thresholds. In Germany it's €17,500.00 per year. Currently I'm <€1k so I should be good for this year. // BUT I'll do more research and see if this actually applies to me.
- Mid-term: Stripe acquired TaxJar. Stripe is finally listening to its customers and is working on a built-in feature for localized tax collection and remittance. A boy can dream 🙏
⭐ASK: If you have any expertise and/or pointers, please let me know.⭐
This is a big problem for solo creators and a lot of people would benefit from an elegant solution.
Come on! Be a hero!
House of Cards: Infrastructure on top of Infrastructure
Today, I discussed the tax topic with my friend Spencer.
We riffed on the idea and came to the conclusion that there's a set of "legal infrastructure" businesses who benefit from piss-poor governmental infrastructure.
- Remote.com - a payroll provider for remote companies - helps employers to hire across multiple legislations without having to set up a local subsidiary. Remote employs the talent and invoices the actual "employer".
- Wise - formerly Transferwise - helps businesses to save foreign exchange rate fees (0.15% instead of 5%+) per transaction. They do it by having bank accounts in all countries and making sure that the pool of funds is balanced per currency without actually making an international transfer.
Neither business solves the root cause: Outdated legal/technical infrastructure.
We are building a House of Cards. And everyone's having a party.🥳
Customers are intermediated from the original problem through multiple layers of abstraction.
Here's an example from a typical payment stack:
In the good old days I gave you a coin if I wanted to buy ice cream from you. 🍦
Now there's many people in suits who are taking a cut from my coin before it reaches your pocket. 🤵
That's a lot of mouths to feed.
Incentives in Complex Systems
An outdated infrastructure (e.g. non-harmonized local legislation for tax/employment/etc.) incentivizes companies to build solutions to fix.
Functioning solutions (e.g. Quaderno; Remote.com; Wise) reduce the pressure for governments to improve the infrastructure.
This looks like a reinforcing loop. 🔁
Anyway, not quite sure where this is going but wanted to throw out this idea.
If you have any thoughts, feedback, critique, please let me know!
Shoutout: Paul LeCrone
A quick shoutout to my new homie Paul, who interviewed me for his podcast.
He's a damn-fine conversationalist and here's a 1-minute snippet of his upcoming course:
Our episode was scheduled to go live on Monday, but Youtube had other plans.
Next attempt: this Friday.
Cross your fingers and toes. Stay tuned.
As always, stay happy, stay healthy.
I would enjoy hearing from you. What's up on your end? What's good? What's bad?