EU VAT for Digital Products & SaaS: OSS, MoR or Stripe?

You’re based in the EU and you sell digital products (PDFs, ebooks, templates, courses) or SaaS subscriptions. Most of your customers are in the UK, US, Canada and Australia. Should you sell through Stripe and track tax thresholds yourself, or pay a Merchant of Record (MoR) to handle it?

We’ll take a typical case: a business in Portugal selling £2.99 teaching PDFs and £13.99 bundles to consumers. The same rules apply to a €9/month SaaS tool. Where SaaS is treated differently, we say so.

TL;DR

• EU customers: you charge your home country’s VAT until your cross-border EU sales pass €10,000 a year. After that, you charge each customer’s local rate through one OSS return at home. This is the same for downloads and SaaS.
• UK customers: no threshold for overseas sellers. E-books are zero-rated, so an e-book-only seller can apply for an exemption. SaaS is 20%: register from the first sale.
• US, Canada, Australia: all have thresholds ($100,000 per US state, CAD 30,000, AUD 75,000).
• Two ways to handle it: a payment processor (Stripe) plus tax compliance software like GoodVat to track thresholds and file, or a Merchant of Record that does it all for a bigger cut of every sale.

Where your customers are	Threshold for an EU seller	What you do once you’re over it
Your own country	Your country’s small-business limit, if it has one	Charge home VAT on your normal return
Other EU countries	€10,000 a year, all EU countries combined	Charge each customer’s local rate via the OSS
United Kingdom	None (e-book-only sellers can apply for exemption)	Register with HMRC, file quarterly
United States	$100,000 per state in most states; 200 transactions in some	Register in that state, if it taxes what you sell
Canada	CAD 30,000 in 12 months	Simplified GST/HST registration
Australia	AUD 75,000 a year	Simplified GST registration

Selling to other EU countries: the €10,000 OSS threshold

This is the one rule that favours EU sellers. While your sales to consumers in other EU countries stay under €10,000 a year (all countries combined), you charge your home VAT rate on all of them and report them on your normal domestic return.

Pass €10,000 and you switch to charging each customer’s local rate. You don’t register in 27 countries. You file one quarterly One Stop Shop (OSS) return at home and your tax office passes the money on.

• Digital products: many EU countries tax e-books at a reduced rate. Templates and other downloads usually pay the standard rate.
• SaaS: always the standard rate. Many SaaS customers are businesses, and a sale to an EU business with a valid VAT number is reverse-charged: no VAT on your invoice. Check numbers with the free EU VAT number checker.

Read next: EU One Stop Shop (OSS) VAT guide · EU digital goods VAT risks

Selling to UK customers: no threshold for overseas sellers

The UK’s £90,000 threshold only helps UK businesses. As an overseas seller you’re expected to register for UK VAT from your first sale to a UK consumer.

• Digital products: the UK zero-rates e-books and similar e-publications. If everything you sell to UK consumers qualifies, you can apply to HMRC for an exemption from registration. Resources mostly meant to be filled in (worksheets, planners, templates) are usually standard-rated at 20%.
• SaaS: standard-rated at 20%, so you register from your first UK consumer sale. Sales to UK businesses with a VAT number are reverse-charged.

There’s also an MoR angle here. On zero-rated UK sales there’s no VAT to handle, but an MoR still takes its full fee.

Read next: UK VAT guide

Selling to US customers: state economic nexus

The US has no national sales tax. Each state sets its own economic nexus threshold, usually $100,000 a year in sales into that state. 14 states, DC and Puerto Rico also count transactions: 200 sales there create nexus even below $100,000. California, Texas and New York are at $500,000.

• Digital products: about half the states tax digital downloads.
• SaaS: fewer states tax it, and some only partly (Texas taxes 80% of the price). In states with a transaction test, every monthly renewal counts as a transaction.

These thresholds apply to foreign sellers too. A small EU seller won’t reach one quickly, but it’s worth checking your biggest states once a quarter.

Read next: US sales tax for foreign sellers · Economic nexus thresholds by state · Check yours with the free US nexus calculator

Selling to Canada and Australia: GST thresholds

• Canada: once your sales to Canadian consumers pass CAD 30,000 over any 12 months, you register under the simplified GST/HST system and charge 5% to 15% depending on the province.
• Australia: once your sales to Australian consumers reach AUD 75,000 a year, you register for simplified GST and charge 10%.

These rules cover both downloads and SaaS. Sales to businesses that give you a tax number don’t count in either country.

Two ways to handle it: a payment processor or a Merchant of Record

Option 1: payment processor + tax compliance software

Stripe, PayPal and other payment processors move the money; you are the seller. They don’t tell you when you cross a threshold. Stripe Tax monitors your Stripe sales only, and charges extra to register and file.

So you need tax compliance software such as GoodVat. It tracks every VAT, GST and sales tax threshold across all your sales channels and warns you before you cross one. It also registers you, calculates the right tax at checkout and files your returns.

Option 2: Merchant of Record

A Merchant of Record such as Paddle, Lemon Squeezy or Stripe Managed Payments becomes the legal seller. It charges your customers, handles the tax everywhere and pays you what’s left. You don’t track thresholds or register anywhere.

You pay for that on every sale. Paddle lists 5% + 50¢ and quotes custom pricing for products under $10. Lemon Squeezy charges 5% + 50¢. Stripe Managed Payments adds 3.5% on top of normal Stripe fees.

	Payment processor + GoodVat	Merchant of Record
Who’s the seller	You	The MoR
Threshold tracking	GoodVat, across every sales channel	Not needed
Registrations and returns	GoodVat registers you and files	The MoR
Cost	Card processing + a flat monthly plan (from $0) + optional done-for-you filing (our filing prices)	6–8% of revenue, more on cheap products
Best for	Products under €5, or anyone past about $100,000 a year	Starting out, or never wanting a tax registration

Which one to pick

• Low-cost digital products: from the EU, Option 1 is lighter than most people expect. Below €10,000 of EU cross-border sales you only file your home return, and UK e-book sales may need no registration at all. An MoR’s fixed fee can take 10% or more of a £2.99 sale.
• SaaS: you’ll need a UK registration from the first UK consumer sale either way. Before about $100,000 a year, an MoR’s convenience is often worth it. After that, its percentage costs more each year. See the numbers in MoR vs Stripe + GoodVat and the SaaS payment setup guide.

FAQ

Do I need to charge VAT on digital products and SaaS sold to other EU countries?

Yes, but which country’s VAT depends on the €10,000 threshold. Below €10,000 a year of cross-border sales to EU consumers, you charge your home country’s VAT. Above it, you charge each customer’s local rate and report it all on one quarterly OSS return filed at home. Sales to EU businesses with a valid VAT number are reverse-charged.

Does an EU seller need to register for UK VAT?

There’s no UK threshold for overseas sellers, so you register from your first sale to a UK consumer. The exception is e-books and similar e-publications, which are zero-rated: if that’s all you sell to UK consumers, you can ask HMRC for an exemption from registration. SaaS and fill-in templates are standard-rated at 20%, so they need a registration.

Do EU sellers have to collect US sales tax?

Only in states where you pass the economic nexus threshold, usually $100,000 a year in that state (14 states, DC and Puerto Rico also count 200 transactions), and only if that state taxes what you sell. Digital downloads are taxed in about half the states; SaaS in fewer.

Should I use a Merchant of Record or Stripe?

There are two ways to handle it. Use a payment processor such as Stripe together with tax compliance software like GoodVat, which tracks your thresholds, registers you and files your returns. Or use a Merchant of Record such as Paddle, Lemon Squeezy or Stripe Managed Payments, which becomes the seller and handles the tax for a higher fee on every sale. From the EU, the first option involves fewer registrations than most people expect.

Does Stripe track VAT and GST thresholds for me?

Plain Stripe doesn’t. Stripe Tax shows where your Stripe sales are approaching a threshold, but it doesn’t see sales on other channels, and registering and filing cost extra. Tax compliance software like GoodVat tracks every threshold across all your sales channels.