Use Cases
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We spoke with FastSpring’s Senior Director of Tax Rachel Harding about why having FastSpring serve as your merchant of record greatly simplifies your relationship to managing indirect global taxes.
She recently assisted a European software company that was contacted by African taxing authorities inquiring about an unpaid tax liability.
It became complicated quickly, but by partnering with FastSpring as a merchant of record, we were able to simplify it back down for them.
Check out some key highlights from our conversation with Rachel below.
FastSpring is a merchant of record that can help you easily grow your business internationally. We provide an all-in-one payment platform for SaaS, software, video game, and other digital product businesses, including VAT and sales tax management, payment localization, and award-winning consumer support. Set up a demo or try it out for yourself.
FastSpring Knows the Answers Because FastSpring Knows Tax
FastSpring:
What happened initially that kicked off this story?
Rachel Harding:
A customer reached out, sharing their recent correspondence with a taxing authority that had gone south, with frustrations ensuing on both sides.
It was clear the customer had incorrectly explained their operations and strategy on indirect taxes, resulting in a flawed conclusion from the taxing authorities, mandating the customer provide proof of registration and tax collections from that country.
They knew the seriousness of the situation required technical expertise so they contacted my team.
FS:
To assist with the inquiry from the taxing authorities? What kind of help were you able to provide?
RH:
You are never going to completely eliminate risk when doing business globally. However, there are ways to mitigate or greatly reduce risk by understanding the landscape and proactively managing any communications with taxing authorities that might arise.
In this instance, after reading the email exchange it was clear where the conversation went askew. Tanzania, the inquiring country was asking about their direct consumer sales, while the customer was trying to articulate the selling arrangement through FastSpring.
I was able to effectively pivot the authorities attention to FastSpring’s compliant operations in Tanzania, instead of the customer’s noncompliant direct to consumer sales. And also separately, speak with the customer and recommend direct sales transition to FastSpring’s platform to limit any exposure – which they did.
Note that FastSpring doesn’t provide tax advice; but we know quite a great deal of tax and are always willing to help when it is prudent to do so.
There is a level of skepticism that you want to use when communicating with taxing authorities, enough to satisfy the question but not too much to provoke additional inquiries. The taxing authorities at the end of the day are people too and liaising with them in a respectful manner while understanding the technical considerations can go a long way in navigating any correspondence.
Without intervention, it’s likely that Tanzania would have opened a full multi-year audit, and result in back taxes, and interest and penalty payments for the customer.
What could have been a long and expensive process for the customer, was handled in just days by FastSpring’s tax experts, and all part of the MoR service when you partner with FastSpring.
FastSpring Is Already Woven Into Your Business
FS:
You’ve said that we are a tax party partner, and so asking us these questions is free of charge. If you went to a tax consultant, even one time, inquiries are going to be really expensive. Could you talk about that a little bit more?
RH:
Having access to any subject matter expertise without additional upfront fees will always be beneficial to a customer. It’s like asking your doctor friend if an injury you sustained is serious and requires further attention. That initial confirmation can be the difference between a hiccup and a large financial liability.
Most of our customers are small businesses and don’t have in-house tax experts. Complex or serious tax questions must then be outsourced to 3rd parties, and usually come with a hefty price tag. And as most know, any tax outcome is dependent upon the facts and circumstances, which articulating can be a herculean task in itself.
Because we specialize in selling digital products globally on behalf of small businesses we understand the burden that tax complexities can bring.
With years of market experience, we can anticipate potential tax issues small businesses might face, and help them manage it proactively.
FS:
So you mean our customers are able to leverage an experts global tax strategy without lifting a finger.. And even if they know nothing about tax?
RH:
Correct. It’s all included as part of the MoR offering.
When working with a payment service provider directly, like Stripe, they’ll warn you of potential tax pitfalls and compliance obligations, but ultimately leave you to develop and implement your own global tax strategy, which can be overwhelming for small businesses.
When you choose FastSpring as your MoR, you gain access to a world-class tax strategy developed by experts. They handle all the complexities, allowing you to focus on growing your business.
FS:
That’s awesome.
RH:
You get the benefit of a robust global tax strategy without needing any upfront tax knowledge. FastSpring’s tax team thrives on helping small businesses achieve compliance, making it a win-win situation for everyone.
How FastSpring Can Help
Are you looking for a merchant of record that will partner with you to grow your business internationally? FastSpring provides an all-in-one payment platform for SaaS, software, and digital goods businesses, including VAT and sales tax management, payment localization, and consumer support. Set up a demo or try it out for yourself.
This interview was edited for length and clarity.
