Sales tax and VAT

Depending on the location and nature of your business and customers, you may be required to collect sales tax or VAT. EU companies doing business in the EU always have to charge VAT when selling to consumers, while VAT is not charged when selling to businesses that supply a valid VAT number.

In the United States the tax code is extremely complex because each state has different tax laws. Additionally, depending on the goods being sold, the location of the buyer and seller, there many be state and city taxes that apply. And these can even vary seasonally.

In half of the U.S. states, SaaS is exempt from sales tax, but more and more states want their share of cloud revenue so the picture keeps changing.

Bunny has two solutions for dealing with sales tax and VAT.

US sales tax

For U.S. based businesses, we recommend using the Avalara plugin, which is capable of handling all the complexities of the U.S. tax code.

Avalara tax plugin

Simple Tax

If you're based outside of the US, Simple Tax is an excellent option for calculating sales tax in EU countries and many other countries worldwide where tax rates are flat and stable for each country.

Support countries

Australia, Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, New Zealand, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, Switzerland, United Kingdom.

To configure Simple Tax, go to Settings > Plugins and select the plugin from the list to install it. Then change the Enabled option to the on position and Save.

Note that you can only use Simple Tax or Avalara. Not both at the same time.

Simple Tax plugin

For tax calculations to be applied you also need to ensure that:

• You have your billing country set on the Settings > Company section in Bunny.

• And that each of your Accounts (customers) has a billing country set.

Unless both of these countries are set the tax rate will default to 0%.

EU VAT number validation

For companies that are based in the EU we recommend enabling the EU VAT validation option.

When this option is enabled the tax numbers of your customers will be validated against the European Commission VIES VAT number validation service.

If an EU customers VAT number is valid then no tax will be added to quotes and invoices.

Alternately, if an EU customers VAT number is not valid then the tax rate of their country will be applied.

For example, a SaaS company using Bunny is based in Denmark.

1. They sell a subscription to a company based in Germany that has a valid VAT number registered. The tax rate will be 0%.

2. They sell a subscription to a company based in France that does not have a valid VAT number registered. The tax rate will be the French rate of 20%

General tax rules

When a subscription is sold by an EU or non-EU company to a customer located in the same country, the tax rate of that country will apply.

When a subscription is sold by an EU company to a customer located outside of the EU, the tax rate will be 0%.

When a subscription is sold by an non-EU company to a customer located in another country, the tax rate will be 0%.

When a subscription is sold by an EU company to a consumer located inside the EU, the tax rate of the country where the consumer is located will apply.

For example, a SaaS company using Bunny is based in New Zealand.

1. They sells a subscription to a company based in Australia. The tax rate will be 0%.

2. They sell a subscription to a company based in New Zealand. The tax rate will be 15%.

When sales tax is calculated

Sales tax is always calculated at the time of the sale. For example, when a quote is created, Bunny will estimate the sales tax on the quote, but the tax will be calculated when the invoice is produced. Similarly, when subscriptions renew, the sales tax will be calculated when the invoice for the renewal is produced.

Taxation reporting

For customers that use Avalara you will access taxation reports via the Avalara portal.

For EU based customers using Simple Tax we provide an Intracom VAT summary which can be used for monthly reporting of reverse taxation charges.