An open source and transparent Merchant of Record
We take on the liability of international sales taxes globally for you. So you can focus on growing your business vs. accounting bills. Leave billing infrastructure and international sales tax headaches to us.
Payment Service Providers (PSPs)
Stripe and other Payment Service Providers (PSPs) offer an accessible and convenient abstraction to faciliate transactions on top of underlying credit card networks & banks.
Merchants of Record (MoRs)
Merchants of Record offer yet another layer of convenient abstraction to facilitate digital orders on top of the underlying PSPs and transactions. E.g Polar is built on Stripe (+ more PSPs in the future).
What should you choose?
Ship with what you feel comfortable with vs. others tell you to
Just like in programming, abstractions are super helpful to ship faster with fewer low-level concerns, but in exchange for reduced flexibility and higher costs. So what’s the right level of abstraction for you? As always, it depends (tm).
Go with Stripe (PSP) if…
Go with Polar (MoR) if…
tl;dr We take on the liability of international sales taxes globally for you. So you can focus on building your passion. Leaving billing infrastructure and sales tax headaches to us.
So how does Polar offer a Merchant of Record (MoR) service and handle international sale taxes? All other Merchants of Record simply state they handle it internationally - don’t worry about it. We do too.
But we believe in transparency and don’t want to scare customers into thinking it’s impossible to manage it themselves. So below we’ll share how exactly we go about doing this.
Most countries, states and jurisdictions globally impose sales taxes on digital goods and services (VAT, GST, US Sales Tax etc). Regardless of whether the merchant (seller) is a resident there or not - they’re doing business there.
For example, a $10/month subscription should cost $12.5/month for a Swedish (25% VAT) consumer, but $10/month for a Swedish business with VAT registration (reverse charge).
Merchants are responsible for 1) capturing & 2) remitting sales taxes to the local tax authorities. What does that mean in our example?
Many jurisdictions, however, don’t require this until you reach a certain threshold in terms of sales volume. But others require registration even before the first sale - or after a very low threshold. In addition to having different rates and rules on which goods are taxable and whether they’re deductable or not for business customers.
For example, United Kingdom and EU countries require upfront registration for international companies, but Texas (United States) does not until you’ve sold for more than $500,000 🇺🇸🦅
In short: It’s complex and hard. Even large and well-known businesses don’t do it perfectly. Arguably, it’s almost impossible and at least highly impracticle and expensive to comply perfectly upfront. Many companies even delay compliance as a calculated risk, i.e focus on validating & growing their business with the risk of paying back taxes + penalities later.
PSP (Stripe)
MoR (Polar)
Merchants of Record (MoR) handles sales taxes, e.g US Sales Tax, EU VAT, Canadian GST etc. However, you’re always responsible for your own income/revenue tax in your country of residency.
tl;dr We support global payments and are liable for all international sales taxes. We continuously monitor and work with our accounting firms to expand registrations as needed on our end.
Global Payments & Tax Liabilities
As your Merchant of Record, Polar is liable for tax compliance globally on all sales internationally via our platform, hosted- or embedded checkoutsfrom payments anywhere in the world.
Current Polar Tax Registrations
No Merchant of Record (MoR) or business registers upfront in all global jurisdictions. Since it would be 1) unnecessary in case of thresholds & 2) incredibly expensive with uncertain return on investment (ROI) in all markets.
We work with global accounting firms specialized in registering, filing and remitting taxes in all countries. So we can easily scale registrations and remittance as needed. Below is our process and evaluation for expanding registrations.
Expanding Registrations
Below are the fees the global acounting firms we work with charge us - on average per market:
So on average 1,200 therafter for each market at a minimum. Businesses (and you if you handle this yourself) therefore need to ask themselves: Do I anticipate more in sales from a given market vs. costs of operating there?
Let’s imagine a country with 20% sales tax.
Our customers are selling mostly in the US, UK & EU. Given US thresholds and our current registrations, it’s therefore a non-issue.
In markets we’re not registered, we still have the liability and take it on (#1) to assess the potential for our customers and us long-term. In addition to being comfortable betting on markets a lot earlier than it becomes profitable for us (#2).
However, in case of neither we reserve the right to block payments from such countries in the short-term until the opportunity for our customers and us changes in the given market.
Want to do this yourself?
Selling a lot and want to handle this yourself, i.e worth the ongoing costs? Feel free to reach out and we’d be happy to introduce you to our contacts at the accounting firms we use.
We consider MoR a key value-add to Polar, but not the sole reason for Polar to exist. Our ambition is to be the easiest way to monetize for developers. However, we’re never going to be the right solution for all use cases. But we’ll always salute and help anyone who ships software - regardless of billing platform.