Let’s be honest — when you started building your indie game or that little SaaS tool, sales tax was probably the last thing on your mind. You were thinking about pixel art, server costs, and maybe that one weird bug that only appears on Tuesdays. But then the first sale hits. Then the hundredth. And suddenly, you realize there’s a whole invisible world of tax obligations waiting for you. It’s not glamorous, but it’s survivable. Let’s untangle this mess together.
Why Sales Tax Feels Like a Boss Battle You Didn’t Sign Up For
Here’s the deal: sales tax isn’t a flat, one-size-fits-all thing. It’s more like a patchwork quilt made by a very anxious grandmother. Each state (and sometimes each city) has its own rules. And for digital products — like game downloads, DLC, or SaaS subscriptions — the rules get even weirder. Some states tax them. Some don’t. Some changed their minds last year. It’s exhausting.
But here’s the silver lining: you don’t need to become a tax attorney. You just need a system. Think of it like setting up autosave in your game — you do it once, and it protects you from disaster later.
Nexus: The Fancy Word for “Where You Have to Care”
First, you need to understand nexus. It’s a legal term that basically means “a significant enough connection to a state that they can demand you collect their tax.” For a long time, nexus meant you had a physical presence — an office, a warehouse, an employee. But then came the South Dakota v. Wayfair ruling in 2018. That changed everything.
Now, economic nexus is a thing. You can trigger tax obligations just by selling a certain amount or hitting a certain number of transactions in a state. For example, Texas starts caring if you make $500,000 in sales there. But California? Their threshold is $500,000 in sales or 200 transactions. See? Patchwork quilt.
For indie devs and micro-SaaS folks, the good news is that most thresholds are high. You’re probably not hitting $500k in Wyoming anytime soon. But you might hit it in California or New York. And that’s where the headache begins.
Where Do You Actually Have Nexus?
Let’s break it down. You have nexus in:
- Your home state — obviously. If you live in Oregon, congrats, no sales tax. If you live in Washington, well, you’re on the hook.
- States where you have employees or contractors — even a remote part-time helper can create nexus.
- States where you store inventory — like if you use a third-party fulfillment center for physical goods.
- States where you hit economic thresholds — that’s the Wayfair rule we just talked about.
Honestly, most indie devs start with nexus in just one or two states. That’s manageable. The problem is when you scale and suddenly you’re in 20 states. That’s when you need a real plan.
Digital Goods vs. Physical Goods — The Split That Confuses Everyone
Here’s where it gets tricky. Your game might be a digital download, but you also sell a physical collector’s edition. Your SaaS is purely digital, but you might sell onboarding calls (which are services, not products). Each of these has different tax treatment.
For digital goods, the rules vary wildly:
- States that tax digital goods — like Washington, Connecticut, and New Mexico. They treat it like tangible property.
- States that don’t tax digital goods — like California (for now) and Texas (mostly).
- States that tax SaaS specifically — like New York and Tennessee. They see it as a service, and services are taxable there.
And then there’s the EU. If you sell to customers in Europe, you’ve got VAT to worry about. That’s a whole other beast. For now, let’s focus on the US, but keep in mind — if you’re selling globally, you’ll eventually need to look at VAT MOSS or similar schemes.
Marketplace Facilitator Laws — The Silent Game Changer
If you sell through Steam, the App Store, or itch.io, you might not have to worry about sales tax at all. Why? Because of marketplace facilitator laws. These laws (now in most US states) say that the platform — not you — is responsible for collecting and remitting sales tax on your behalf.
So when someone buys your game on Steam, Valve handles the tax. When they buy your app on the Apple App Store, Apple does the heavy lifting. You just get your cut (minus their commission, of course).
But here’s the catch — this only applies to sales made through those marketplaces. If you sell your game directly from your own website, or if you offer a subscription through your own Stripe account, you’re on the hook. That’s where most indie devs get tripped up. They think “I’m covered” because of Steam, but then they sell a key on their own site and forget about the tax.
Micro-SaaS Specifics: Subscriptions Are a Different Animal
Subscriptions are weird for sales tax. Some states want you to collect tax on every recurring charge. Others only want it on the initial setup. And some don’t care at all.
Here’s a practical example. Let’s say you have a project management tool for indie devs (nice niche, by the way). You charge $15/month. If you have customers in New York, you need to charge them sales tax on that $15 every single month. But if you have a customer in Massachusetts, you’re fine — they don’t tax SaaS.
The worst part? You need to know where your customers are. That means capturing IP addresses or billing addresses at checkout. If you’re using Stripe or Paddle, they can help with this. But if you’re rolling your own payment system… well, good luck. Seriously, just use a payment processor that handles tax.
Tools That Save Your Sanity
You don’t have to do this manually. There are tools that automate the whole thing. Here’s a quick rundown:
| Tool | Best For | Pricing Vibe |
|---|---|---|
| TaxJar | Simple US sales tax automation | Starts ~$19/mo, worth it |
| Paddle | SaaS merchants (they handle VAT + sales tax) | They take a cut, but you sleep better |
| Quaderno | Global tax compliance, especially EU VAT | Mid-range, great for international |
| Stripe Tax | If you already use Stripe | Pay per transaction, easy setup |
Honestly, if you’re just starting out, Stripe Tax is your best friend. It plugs right into your existing Stripe dashboard and calculates tax automatically based on your customer’s location. You still have to file and remit, but at least you know what to collect.
Filing and Remittance — The Chore You Can’t Skip
Collecting tax is only half the battle. You also have to send it to the state. This is called filing and remittance. And it’s not a yearly thing — it’s usually monthly, quarterly, or annually depending on your sales volume.
Here’s the rhythm: you collect tax from customers, hold it in a separate account (please do this — don’t spend it), and then file a return with each state you have nexus in. The frequency depends on how much tax you collect. Low volume? Annual filing. High volume? Monthly. It’s a sliding scale.
And here’s a pro tip: never miss a filing deadline. Even if you owe $0, file a zero return. States get grumpy when you ghost them. Late fees and interest can pile up faster than a rage quit in a souls-like game.
What About the EU and Other Countries?
If you sell to customers outside the US, you’re entering VAT territory. The EU has a lovely system called OSS (One-Stop Shop) that lets you register in one country and file for all EU states. It’s not simple, but it’s simpler than registering in 27 separate countries.
For digital goods and SaaS, you generally charge VAT based on the customer’s location, not yours. So a customer in Germany pays 19% VAT. A customer in Ireland pays 23%. You collect it, then send it to the OSS. It’s a bit of a learning curve, but Paddle or Quaderno can handle most of it automatically.
Also, don’t forget the UK (they left the EU, remember?) and countries like Australia or Japan. Each has its own GST or JCT system. The good news? Most micro-SaaS owners don’t hit the registration thresholds for these countries until they’re making serious money. So don’t panic — just be aware.
Common Mistakes (And How to Avoid Them)
Let’s talk about the screw-ups that indie devs make so you don’t have to.
- Ignoring it entirely — this works until it doesn’t. States are getting better at finding unreported sales. Don’t be a cautionary tale.
- Assuming your payment processor handles it — PayPal and Stripe don’t automatically remit tax. They just process payments. You’re still responsible.
- Not tracking customer locations — if you don’t know where your customers are, you can’t calculate tax. This is non-negotiable.
- Mixing tax money with operating funds — you’ll spend it. Trust me. Open a separate bank account for tax collection.
- Forgetting about exempt sales — some customers (like non-profits or resellers) are tax-exempt. You need to collect exemption certificates. It