SaaS Pricing
Selling Software Across Borders: VAT and Sales Tax in 2026
Place-of-supply rules, One Stop Shop registration, US economic nexus and the evidence you must keep when you sell digital products internationally.
By Emily Richardson · Reviewed by Legamoney Editorial Team
Cross-border digital sales are taxed at the destination. That single principle drives almost all of the compliance work — you need to know where your customer is, prove it, and file where the tax is due.
Key takeaways
- For EU consumer sales, VAT is generally due where the customer is, not where you are.
- The One Stop Shop lets you file one return instead of registering in each member state.
- Business customers in the EU are often handled by the reverse charge, which shifts the VAT obligation to them.
- US states set their own economic nexus thresholds by sales value, transaction count, or both.
- You must keep location evidence for each sale, typically two non-contradictory pieces.
In this guide
The EU picture
- Consumer (B2C) sales: charge the VAT rate of the customer's member state.
- Business (B2B) sales: verify the customer's VAT number and apply the reverse charge where it applies.
- One Stop Shop: register once and file a single return covering all member states.
- Evidence: retain two non-contradictory pieces of location evidence, such as billing address and IP country.
The US picture
Since economic nexus replaced physical presence as the test, a state can require you to collect sales tax once your sales into that state cross its threshold. Thresholds, taxability of software, and filing frequency all vary by state, so the obligation has to be tracked state by state.
Practical setup
- Decide whether your published prices include tax, and state it clearly.
- Collect and store location evidence at checkout.
- Validate business VAT numbers automatically before applying the reverse charge.
- Track cumulative sales per jurisdiction against thresholds.
- Keep invoices and evidence for the retention period each jurisdiction requires.
The two questions that decide everything
Cross-border indirect tax reduces to two questions: where is the supply treated as taking place, and is the customer a business or a consumer? Place of supply decides which authority has the claim, and customer status decides whether the tax is charged by you or accounted for by the buyer. Get those two right and the registrations follow mechanically.
- Collect and retain at least two pieces of non-contradictory evidence of customer location, such as billing address and IP country.
- Validate business customer tax numbers at the point of sale and store the validation response with the invoice.
- Keep the applicable rate as at the transaction date, because rates change mid-year and refunds are priced at the original rate.
- Reconcile the payment processor's country data against your own invoice data every quarter.
- Diarise each filing deadline separately; single-registration schemes still have their own return calendar.
Where small sellers get caught
The common failures are not exotic. They are selling to consumers abroad without registering anywhere, treating a marketplace's collection as covering direct sales too, and keeping no evidence of customer location. Each is straightforward to fix prospectively and expensive to fix retrospectively, because the tax is due whether or not you charged it.
Sources
- 01European Commission — VAT rules for digital services
Place-of-supply and One Stop Shop rules for cross-border digital sales.
- 02IRS — Small Business and Self-Employed Tax Center
Federal filing obligations, deposit schedules, and current-year thresholds for US businesses.
Frequently asked questions
Do I need a VAT number to sell to the EU?
If you make B2C digital sales into the EU, you generally need to account for VAT there — usually through a One Stop Shop registration. B2B sales handled under the reverse charge still require you to verify and record the customer's VAT number.
Is SaaS taxable in every US state?
No. States differ on whether software as a service is taxable, and some tax it only for business use. Taxability must be checked per state, not assumed nationally.
Editorial transparency
- Written by
- Emily Richardson — SaaS and fintech writer — business software and financial technology
- Reviewed by
- Legamoney Editorial Team — Editorial Team — finance, insurance, lending and consumer legal topics
- How this was researched
- Structured from European Commission VAT guidance on digital services and the economic nexus framework established for US state sales tax. Thresholds are referenced, not quoted, because states set their own.
- Corrections
- Spotted an error? Tell us and we will correct and re-date the page. See our editorial policy.
- Advertising disclosure
- Ad placements are clearly labelled and never influence editorial judgement or the ordering of comparisons.
About the author
Emily Richardson covers the software side of money: accounting and invoicing platforms, payroll and CRM tooling, payment processing and consumer fintech. Her comparisons are built from vendors' own published pricing and terms pages, dated at the time of writing, rather than from review-site rankings or affiliate placements. She works with the Legamoney Editorial Team desk.
How this article was checked
- Every factual claim is traced to a named regulator, government agency, or the provider's own published terms before publication.
- Figures that change — rates, limits, thresholds — link to the primary source that publishes them rather than being quoted as a fixed number.
- Worked examples are shown as full arithmetic so a reader can reproduce the result independently.
- Each guide is checked by the owning editorial desk before it is published, and again whenever the underlying rules change.
Covers: SaaS pricing models and total cost of ownership · Accounting, invoicing and payroll software · Payments and business banking tooling · Consumer and business fintech products
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Disclaimer
Indirect tax is jurisdiction-specific and changes frequently. Take advice from a tax professional before relying on any of this for filings. Consult a qualified professional before acting on any information here. Read our full disclaimer.