New laws across the world mean you owe sales tax on software and digital products wherever your customers are (learn more here). Here are the most painful tax jurisdictions for your team to prioritise (or you can hand it all off to Paddle).
How is this calculated
Your exact tax liability will vary according to your customer and revenue distribution around the world. Different jurisdictions will have different tax levels from low tax regions like South Dakota (4.5%) to high-tax regions like the Netherlands (21%).
This low/high estimate is based on a 80:20 distribution of your revenue in a 4.5% and 21% tax rate, over 12 months.
Low estimate: MRR * 12 * ((0.045 * 0.8) + (0.21 * 0.2))
High estimate: MRR * 12 * ((0.045 * 0.2) + (0.21 * 0.8))
The penalties estimate tends to come to about 10% of the total. This is based on a midpoint:
Penalties estimate: MRR * 12 * 0.1 * ((0.045 * 0.5) + (0.21 * 0.5))