March 21, 2023 • 38 mins
Jon's back from his first real vacation in years. In this episode, we discuss how we've been removing inactive accounts on Transistor, SVB, Section 174, Revin is shutting down their Merchant of Record service, SaaS sales tax compliance:
- (00:37) - Jon in vacation mode
- (02:30) - Kicking off inactive accounts
- (04:30) - Silicon Valley Bank
- (06:06) - What is Mercury bank?
- (13:16) - Section 174 in the USA
- (19:05) - Sales tax compliance update
- (25:56) - What could we do?
- (32:13) - Patreon integration update
- (34:57) - MyPodStudios
- (36:33) - Patreon Thanks
Links:
- Matt Levin's excellent summary of the Silicon Valley Bank run
- Ian Landsman: "This is why I don't use startup-friendly banks (Mercury, etc)"
- Section 174: join ssballiance.org
- Revin has shut down its Merchant of Record service
- Flurly (another Merchant of Record) was shut down by Stripe
From the Revin email:
“The most relevant reason [we are closing] is that the Merchant of Record model is too risky for both sellers and the MOR operator. Sellers bear the risk of platform shutdown (as seen in the example of Flurly & Stripe), and the MOR operator could potentially become involved in illicit or illegal activities quickly, which could lead to all sorts of problems.Furthermore, it became increasingly clear that the Merchant of Record model primarily appeals to small-scale sellers or businesses with questionable and high-risk business models. This presents a significant challenge as we strive to move up the market.
The recent change in Stripe's risk behavior has caused us to experience issues with keeping Stripe accounts live.”
Thanks to our monthly supporters- Pascal from sharpen.page
- Rewardful.com
- Greg Park
- Mitchell Davis from RecruitKit.com.au
- Marcel Fahle, wearebold.af
- Bill Condo (@mavrck)
- Ward from MemberSpace.com
- Evandro Sasse
- Austin Loveless
- Michael Sitver
- Colin Gray
- Dave Giunta
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Jon (00:00):
And see how I don't know how long we're gonna do this,
but
Justin Jackson (00:02):
Let's aim for 30 minutes, and we'll end up
talking for an hour.
Jon (00:05):
Hour might be too much. Hey, everyone. Welcome to build
your SaaS. This is the behindthe scenes story of building a
web app in 2023. I'm JohnBuddha, a software engineer.
Justin Jackson (00:26):
And I'm Justin Jackson. I do product and
marketing. Follow along as webuild transistor data fam And
keep up to date on all thecrazy, latest happenings in the
world.
Jon (00:44):
All your all the craziest sales tax and banking related.
Justin Jackson (00:48):
It's just the financial system is melting
before our eyes. But, you wenton vacation, so you you were you
were maybe oblivious to some ofthis. How many times did you
think about the banking sectorand sales tax while you were on
vacation?
Jon (01:02):
Not at all.
Justin Jackson (01:04):
Oh, glorious.
Jon (01:05):
In fact, it was the I it was the first time I haven't
opened my laptop. Well, I wasgone for, like, 9 days. Didn't
open my laptop once. And that'sthe first time that's happened.
Wow.
I don't know. 8 years probablylike it
Justin Jackson (01:19):
Dude,
Jon (01:20):
it's pretty nice.
Justin Jackson (01:21):
That's just success.
Jon (01:22):
Do you
Justin Jackson (01:22):
think you didn't open your laptop because the
Internet was bad, or do youthink was it you're just fully
in vacation mode
Jon (01:28):
or both? Just wanted to be in vacation mode. I mean, I I
kept up to date on my phone andstuff and talked to you guys
and, but it's, you know, you cando that from the beach while
drinking a margarita prettyeasily. And, yeah, the internet
was not great. It was, you know,it worked okay, but it wasn't
like it was not great.
Justin Jackson (01:48):
Yeah. That I mean, that's a long time to,
have not kinda had a real chanceto unplug. What was was there
any other kind of how was it?Like, what was the other parts
of that? Did it feel like youreally got something back?
Did it feel renewing?
Jon (02:08):
Yeah. I felt yeah. It was very restful in renewing and
yeah. It's nice to unplug. Imean, it you know, I like I
said, I still kept in touch, soI wasn't, like, totally out of
what was going on.
Justin Jackson (02:17):
Yeah. You're still in Slack.
Jon (02:19):
Which, you know, next time I could maybe just disappear
from that too till you get frommy phone. But, I don't know. I
still like to keep up to date. Imean, it is, you know, our
company. Yeah.
I like to know what's going on,but but, yeah, it was, it was
quite relaxing. It's very nice.
Justin Jackson (02:37):
I mean, this was kind of your, the test run for,
the 6 month sabbatical we keeptalking about having. Yeah.
Yeah.
Jon (02:45):
Where Helen and Jason run the team.
Justin Jackson (02:47):
Yeah. Helen and Jason just run the company. And,
I mean, I think one thing thatis, obviously, you and I bring a
lot to the team and to theproduct and to the company, but
it is incredible to see how muchJason and Helen bring.
Jon (03:02):
Yeah.
Justin Jackson (03:03):
And sometimes they're just scheming away in
their own Slack channels justjust deciding, hey. We should,
you know, Jason just did a bigwell, Helen and Jason kind of
schemed on this together, andthen Jason went and did it where
we had basically folks that havebeen on the platform who haven't
paid in ages. Like, the cardwould fail, but we wouldn't kick
(03:26):
them off. It would just be kindof in limbo.
Jon (03:28):
Right. Yeah. Like, their feeds still worked, and maybe
they couldn't use the platform,but their everything still
worked.
Justin Jackson (03:35):
So they're essentially getting free
hosting.
Jon (03:37):
Obviously, not great, but, yeah. So Jason went ahead and
figured out and wrote a wholesystem to, like, notify people
multiple times and thenautomatically cancel accounts.
And, yeah, it worked
Justin Jackson (03:48):
out well. I I I mean, there's there's obviously
dunning systems. Like, we'vealways had a basic kind of
dunning and system, but thisthis is, like, next level for
giving people warnings atdifferent stages depending on
their status. Yeah. And, it'samazing how many people
obviously, if you're not paying,then, actually, here in this
(04:12):
coworking place, for years, wejust never got an Internet bill,
like, for cable Internet.
And it was just, like, fine. Andthen all of a sudden one day,
our Internet got turned off. Wewere like, oh.
Jon (04:24):
Yeah. Somebody found something in the system.
Justin Jackson (04:26):
Yeah. It's a good things to put in place.
Yeah. Dude, a lot's happenedthough. Let's talk briefly about
the modern day run on a bank,because it was silicon Silicon
Valley Bank.
And, that we were actually abriefly, an SVB customer.
Jon (04:45):
I don't know how long we used them. I mean, they were
what Stripe Atlas used when wesigned up and incorporated, and
they just, like, automaticallyopen an account for you.
Justin Jackson (04:55):
They were the only option for a long time.
Now, Stripe Atlas offers you afew different options, but
Jon (05:01):
Yeah. Yeah. I mean, we used them and it was like, it was a
bank. It was fine, I guess, butit was really hard. I think it
felt really hard to do stuff.
Mhmm. It's pretty inflexible. Idon't know. We used them for
maybe a year. I don't know.
I mean, we didn't we didn't makemoney for a while. We had
Justin Jackson (05:18):
to count actually used thought we should
switch right away because wesigned our partnership docs, and
I don't think I ever logged intoSilicon Valley Bank. And then
fairly soon after that, I thinkyou were like, let's get off
this Silicon Valley, and weswitched to Capital 1.
Jon (05:33):
We did Capital 1, and then they capital 1. I think they
like closed that type of accountdown or
Justin Jackson (05:40):
something happened like a small business
Jon (05:44):
account or something. Could log in to the dashboard or
something. Yeah. Yeah. And so wefound Mercury pretty early on.
Yeah. When they were pretty new,I think, still.
Justin Jackson (05:55):
Yeah. Yeah. That would have been yeah. We it
feels like we've been with themforever now. I mean, the the UX
of Mercury is incredible, but Ithink, this whole banking crisis
has made us rethink about whatis a bank.
Jon (06:10):
Yeah. Because Mercury Mercury is technically not a
bank. They are. So tell
Justin Jackson (06:13):
me what is mercury? What is it?
Jon (06:15):
Well, I saw this something online and I think it was the
guy that runs it, saidsomething. He's like, we're not
actually a bank. We're like a,we're a software platform for
your money, but we work withbanks. They have partner banks.
Justin Jackson (06:28):
Okay.
Jon (06:29):
And that's where your money goes. Right? And it can you I
think they split it acrossmultiple accounts or something.
I mean, it looks like oneaccount to you, but
Justin Jackson (06:36):
Yeah.
Jon (06:37):
It's not, yeah, it's not technically a bank.
Justin Jackson (06:41):
Yes. But
Jon (06:42):
it's all very seamless. I mean, it's, like, has worked
great. They have freeinternational wires and, like,
Justin Jackson (06:48):
The user experience is amazing, and it's
it doesn't feel like somethingthat's been taped together. It
it just, like, we we've senttons of wires. We've, you know
it hooks up to our accountingplatform well. It it feels like
it just always works. It's beenvery dependable.
(07:09):
And
Jon (07:12):
Granted, we don't have millions of venture capital
funding sitting in account,which I think, you know, I don't
know if, like, SVP was betterfor that type of company. But
Justin Jackson (07:23):
Well, apparently not. They only had $250,000 of,
of insured deposits.
Jon (07:28):
Right. Right.
Justin Jackson (07:30):
Right. I I I I think this is this whole episode
and honestly, it is awful. Idon't wanna make light of, you
know, a lot of these companieswho've received funding are
still small businesses who arerun by people like you and I.
They have employees likeTransistor and, you know, not
(07:54):
making payroll and all of thatstuff is awful. And I also wanna
recognize that not every companycan be structured like
Transistor, But it did revealhow different it is to be
running a business that is justprofitable.
Mhmm. And, we don't, keep agiant cash balance with
(08:20):
Transistor.
Jon (08:21):
No. We don't.
Justin Jackson (08:22):
Generally, it's just like every month, our our
revenue is really consistent,and it it's basically always
gone up even if it's only goneup by a little bit. And, that
has that model is calmer atleast at this stage of history.
(08:43):
That could change. But it has itit just revealed, like, wow.
Like, this whole new financialera we're in with high interest
rates and now, you know, all thethink pieces on medium and,
other places are like, how nowSilicon Valley's gotta gotta get
(09:04):
back to the basics, get back toprofitability.
You know, startups have to actlike small businesses. And, you
know, for us, it's just beenlike, well, that's that's that
was the style that alwaysappealed to us. And it I think
in most cases, especially if thebusiness you've started has a
(09:26):
good financial engine, andthat's a huge caveat. Caveat?
Jon (09:31):
Yeah. Okay. I think that's the same in Canada.
Justin Jackson (09:35):
Sometimes I read that word, and I'm like, kavit?
No. It's not kavit. It's caveat.You know, the caveat is that
it's hard finding a bit you andI have tried other businesses in
our past,
Jon (09:51):
and Mhmm.
Justin Jackson (09:52):
Transistor by far has the best financial
engine of anything we've tried.So, obviously, that really helps
and, to make it feel calm. But,yeah, it it just did feel like
and our friends that havebusinesses like that, you know,
the Ian Landsmans of the world,the Michelle Hansons of the
(10:15):
world, they're running smallsoftware companies like us, and,
I think all of us were kind ofstanding on the outside of this
going, wow. Like, yeah, if youhad a bunch of investment and
then all of a sudden you lostyou you I mean, it wasn't just
that they lost. This would havealso affected us if all of a
(10:35):
sudden our bank account gotfrozen.
Like, that would have beenRight. Not fun.
Jon (10:39):
Right. Or, you know, the the some of the providers we use
are on out of money, and thenthey can't actually run their
business. And
Justin Jackson (10:45):
Yeah. It did make me think about TransferWise
slash Wise, which is similar toMercury. I think it's just some
amorphous tech chrome on top ofa some something on the back
end. You know? Right.
It but, breaking news fromMercury. There are obviously I
(11:07):
think all the banks all thesmaller banks or bank like
things are trying desperately toretain customers because the
unfortunate, side effect of allthis is that a lot of
businesses, even including smallbusinesses, but large depositors
especially, are moving theirfunds from smaller banks
Jon (11:24):
Yeah.
Justin Jackson (11:25):
To the big banks. And you're gonna, you
know, there's, especially in thestates, you're gonna have a
situation where all the bigmoney is at Chase, and then it's
gonna make it even harder toregulate, that the the big banks
because they're gonna always allof them they're they will be
(11:45):
much too large to fail.
Jon (11:47):
Yeah. I think I yeah. Maybe. I think the government
did the right thing now and kindof Mhmm. How they reacted and
kinda prevented a bunch ofdifferent bank runs.
But, I think I think Mercuryactually got a lot of new
customers what I
Justin Jackson (12:02):
was trying to Yeah. That's true. That may it'd
be interesting to know how howthis actually shook out for them
because I see 2 trends. 1,people moving their money out of
smaller banks like Mercury. And2, I've heard that a lot of
people were switching toMercury.
Jon (12:18):
Mhmm.
Justin Jackson (12:18):
But, yeah, they just announced. We've worked
with our partner banks to offeradditional FDIC insurance. First
to 1,000,000 then to 3,000,000.Now we've gone a step further.
By Monday, you have access to upto $5,000,000 in FDIC insurance,
20 times the per banking limit.
Jon (12:36):
Yeah. I think that's something to do with how they
split your money across accounts
Justin Jackson (12:40):
Yeah.
Jon (12:40):
Behind the scenes. But
Justin Jackson (12:42):
And there's also I'm it's not clear if every
depositor gets that. The otherthing is that every time I've
had to deal with insurance, itreally sucks. So it's like,
sure. You might get your moneyback back, but if if accounts
get frozen or whatever, it stillsucks because then you you're
you've got even a week withoutaccess to your bank account is,
Jon (13:00):
not fun. Once the once the FDIC steps in, they're pretty
efficient. They're pretty goodat what they do. I don't think
it's gonna be it's not likeworking with some crappy
insurance company. Yeah.
Justin Jackson (13:10):
Yep. Yep. Yep. Yeah. So interesting.
It'll be interesting to watchthat. I think we should talk
about this next item that I'mhighlighting. Are you okay if we
talk about that? Yeah. Okay.
We've we've had some folks thathave said maybe we shouldn't
talk about it, but I think it'sbetter to talk about it than
not. Section 174. Folks, if youhave a software company in the
(13:35):
United States, you need to beaware of section 174. Basically,
it is treating softwaredevelopment costs, and there's
some confusion about this. Butthe more I've read into the US
tax code, the more it seems likeand now we actually have people
(13:58):
who are trying who who are havebeen assessed by the IRS.
So we know that these theseassessments are actually even
happening. This willdramatically increase the amount
of tax that you pay, becauseinstead of saying a development
salary is an expense, you haveto You
Jon (14:20):
have to categorize it as research and development?
Justin Jackson (14:23):
Yes. And then you have to amortize that over 5
years. Yes. Thanks.
Jon (14:29):
Yeah. Which makes your which makes your taxable income
way higher.
Justin Jackson (14:32):
The example, I'll link to it in the show
notes from Ian Landsman, is,let's say, on a $1,000,000
revenue, normally, you have devsalaries that equal 500,000, and
your tax rate would be 30%, soyour tax bill would be 75,000.
Under this new system, your newyour tax bill would be 225,000.
(14:54):
It dramatically increases. Itbasically, this legislation
makes no sense for smallsoftware companies. It is
actively harmful for smallsoftware companies.
And sometimes software companiesand small software companies, we
kinda live in this mad world ofmagical thinking, you know,
(15:15):
where, I mean, you and I arealso predisposed to this. You
know? Well, sales tax, we don'tneed to worry about that right
now. Or, well, you know, we're asmall company. We don't need to
worry about that.
This actually could have ameaningful effect on people's
businesses?
Jon (15:34):
Yeah. I mean, especially, like, you know, if you don't
last for 5 years. Because everyyear, you're gonna amortize more
and more. Right? So it piles upand it gets you'd be paying less
and less over the years, but butlike the 1st year or 2 is gonna
be like, it's massive hit.
Justin Jackson (15:49):
So Michelle Hanson, friend of the show,
she's the cofounder of Geocodio.She has started the Small
Software Business Alliance, s ssballiance.org. I'll put the the
link in the show notes. If youoh, she's actually expanded this
now. She's got a great TLDR heretoo.
(16:11):
If you have a small softwarebusiness that is incorporated in
the United States, you need togo there, Put your name and
email in there. She is going tobe kind of the central
communication hub for all thisstuff. She's in contact with
people in Washington, DC, andshe's working on some stuff
behind the scenes she can't talkabout yet. But, we we really do
(16:33):
need to make our voices heard onthis. And if you are a US
citizen, you also have anopportunity to contact your
representative.
This is I can sign up for thishere as a cofounder of
Transistor, but only John cancontact his state representative
and say, this is going to affectme. And, Michelle even
(16:56):
recommends calling them. Theyhave to they have to record
every phone call. And, there'sactually a big chance this goes
through and a smaller chanceeven if we make noise that, even
if we make noise, there's noguarantee, but at least there's
a possibility. So
Jon (17:16):
Yeah. I mean, from reading about it, it's like nobody
really wanted it anyway, and yetthey voted on it, but they
didn't maybe didn't read it.It's like they don't read this
stuff anyway, and they just voteit. They just vote it in, and
then they're like, oh, wait. No.
That was a bad idea.
Justin Jackson (17:28):
This is a classic case of it's a classic
case of just fucked up politics,and it sucks. It really does
suck. I actually I've I wasthinking about this the other
day because are are you familiarwith, Peter Lovell's, nomad
list? It's like a site wherethat you can, like, put in,
(17:49):
like, hey. I want sunshine, but,you know, I want it to be safe
and I want it to be you know,you could put all these
criteria.
Mhmm. It's almost like we need aSaaS list, which is like a way
of filtering what is the bestplace to incorporate your
company. Mhmm. Because there'sthere's all these like, if this
comes into law, that that wouldbe a subs a substantial reason
(18:12):
to incorporate your companysomewhere else.
Jon (18:15):
Yeah.
Justin Jackson (18:15):
But on the flip side, if we incorporated it
anywhere but the US, your yourStripe your Stripe fees go up
substantially. So if you're aStripe if if you're
incorporating Canada usingStripe, all of your US credit
cards, I believe, are treated asforeign. Right? They're not
domestic. And so you pay anadditional 1% or 1.5%.
(18:38):
There's all of these factorsthat make it like, maybe we
should incorporate here. Maybewe should incorporate here.
Maybe we should yeah. I wonderit it'd be nice if there's a
central place to
Jon (18:47):
Right.
Justin Jackson (18:48):
Like, if the best place to incorporate your
company is in Saskatchewan,Canada. Let let's do it.
Jon (18:56):
You're always ragging on Saskatchewan.
Justin Jackson (18:59):
That felt like a that felt like a nice a nice
thing to say about Saskatchewan.I'm like, well, maybe we should
look it there. Let's how longhave we gone now? Oh, wow.
Already 20 minutes.
Okay. Well, let's let's do alittle sales tax compliance
update because Oh, yeah. I thinkI think, that's what people are
here for.
Jon (19:14):
The exciting part of this.
Justin Jackson (19:15):
Yeah. We Chris, we need a little sales tax
jingle here. You know? Sales taxcompliance. That's the first
line.
I'll I'll I'll keep working onit. So I think the most relevant
news here is that Revan has justshut down.
Jon (19:37):
What is Revan, Justin?
Justin Jackson (19:38):
So Revan was one of these merchants of record
that was recommended to us byfolks saying, and I'm gonna
yeah. I'll I'll use my voice,but, you know, like, they were
like, you just gotta merchant ofrecords, Revan, they'll solve
your problems. Quit complaining.You know, we had concerns back
then. Now they've shut down, andI have even more concerns about
(20:02):
all merchants of record.
So here's the email that theysent to customers. No public
announcement, by the way. Veryweird. They just all of a sudden
changed their homepage. Now,apparently, they do.
If you go to get revin.com, Ithink it goes to
revin.consulting now. So nowthey're a consulting company.
Here's here's a quote from theemail. The most relevant reason
(20:22):
that we're shutting down is thatthe merchant of record model is
too risky for both sellers andthe merchant of record operator.
What are they talking abouthere?
Okay. Sell back to the email.Sellers bear the risk of
platform shutdown as seen in theexample of Fleurly and Stripe.
Now I hadn't heard of this. Whatthey're talking about here what
(20:42):
happened to Fleurly was thatsome folks were using Fleurly as
a merchant of record becameengaged in illegal activity.
At which point, Stripe sent theman email saying, there's folks
using your Stripe account whoare, who are in violation of
(21:05):
regulations and will be could besubject to substantial fines.
Examples of violations includingselling copyrighted products,
selling pharmaceuticals. Andbecause of that, Stripe had to
shut Flurly's Stripe accountdown, which included all of the
(21:25):
merchants that they were beingthe merchants of record for.
Jon (21:28):
Yikes. And that's what Revan would do too. Right? We'd
be we would have been part ofthat account. Right?
Justin Jackson (21:35):
Yeah. This is this is what would happen with
any Yeah.
Jon (21:39):
I mean, that would that would just kill our business
immediately.
Justin Jackson (21:42):
So I'm gonna put that link in the show notes. So
back to their email, themerchant record operator could
potentially become involved inillicit or illegal activities
quickly, which could lead to allsorts of problems. The problems
are that the people processingyour credit cards could say, no.
This whole account, we're justgonna shut down. Or this whole
(22:03):
account, we're just gonna put onpause.
Or this whole account, we'regoing to just think of all the
times you've seen on Twitterwhere for some reason this is
always a risk. For some reason,someone's PayPal account gets
flagged.
Jon (22:19):
Yep.
Justin Jackson (22:19):
And they're like they they send out a emergency
tweet. PayPal, please help me.Someone's my my account's been
shut down or my account's beenflagged, and I can't get it out
of here. I need to get themoney. I can't it's a nightmare
for the individual.
But now imagine assuming all ofthat risk. You're just gonna go
into a pool. It's like goinginto a email deliverability pool
(22:41):
or a, a web hosting pool whereyou're all on the same IP.
Jon (22:46):
Shared, yeah, shared server. Yeah.
Justin Jackson (22:48):
It's the same risk. And this is something I
hadn't even considered beforewith Merchant of Record.
Jon (22:56):
Yeah. That makes it much, much less appealing or not
appealing at all.
Justin Jackson (23:01):
Especially after these bank runs. It it it's like
I mean, this is a risk. Ofcourse, this is a risk with any,
credit card processing you do.Again, PayPal, Stripe, etcetera.
The difference is this is like aparty line.
Everybody's sharing the sameStripe account. And so that
(23:24):
exposes you to a risk in thesame way that if you sign up
with a merchant of rec amerchant of record, you start
paying, you you have to startsubmitting taxes and collecting
taxes for basically every taxregion in the world because
you've already hit all thethresholds. Why? Because it's
the merchant of record is isbeing treated as the business
(23:46):
there. Well, now you're alsoexposing yourself to all of that
merchant of record's customers.
Anybody else they are being amerchant of record for and that
and you have no idea who theyare. So at any point and this
could happen to Paddle. I don'tknow who Paddle and Lemon
Squeezy and these other folksuse as their credit card
(24:09):
processing. I'm guessing that alot of these services do just
use Stripe. Stripe has theirown, risk assessment people.
Jon (24:18):
Mhmm.
Justin Jackson (24:19):
And if somebody on that account fucks up or does
something illegal, it affectseverybody in the merchant of
record pool.
Jon (24:29):
Yeah. That's wild. Or, like, you know, if Fleurly or
Revan was a bad actor, they justbe like, we're just taking your
money, closing the account, andgoing to Jamaica.
Justin Jackson (24:37):
Mhmm. Back to the email because this even this
I don't again, this is just onecompany's perspective from
Revan. But, furthermore, itbecame increasingly clear that
the merchant of record modelprimarily appeals to small scale
sellers or businesses withquestionable and high risk
business models. This presents asignificant challenge as we
(25:02):
strive to move up the market.The recent change in Stripe's
risk behavior has caused us toexperience issues with keeping
Stripe accounts live.
End of email quotes. Yikes. Thisis a a big deal. Now I'm sure
especially some of the moremature merchants of record like
(25:23):
Paddle, I'm sure they have waysof mitigating some of these
risks, which I'd be I'd love tohear from them. But it shows,
first of all, that, trusting Imean, even Revans, they describe
themselves as an m v they theybuilt an MVP and to test out the
market.
That I don't want to hand mybusiness over to an MVP. Right.
(25:48):
Any company that's brand new,there's there's just something
about it that is stressful. Itfeels too risky Yeah. To hand
your business over to somethingthat's new and unproven.
Yeah.
Jon (26:01):
I mean, hand your bank account over to somebody like
that. Yeah.
Justin Jackson (26:04):
Yeah. So, yeah, we've talked we kept talking
about solutions. One solutionwas maybe we should get your
brother to help us out.
Jason (26:11):
Yeah. I mean, he
Jon (26:12):
he had listened to our episodes, and and I talked to
him for a bit. And he was like,you know, when I was in Texas
working at the capital, like, heactually worked on some
legislation when they were, theywere working on sales tax
legislation for Amazon at thetime. It was a, I mean, it was a
long time ago, but so he, Imean, he read all the
legislation and probably helpedwrite some stuff and he knows
(26:32):
people who still work there atat certain, parts of the
government are like these taxaccounting firms who know the
ins and outs of not just Texas,but basically they have to keep
up with, like, what everystate's doing. Yeah. Whatever we
decide, it might be turning onStripe tax and using tax jar for
some stuff, but then Yep.
Having someone like my brotheractually manage some of that
stuff behind the scenes and dothe payments and registrations
(26:55):
and
Justin Jackson (26:55):
I'm for it.
Jason (26:57):
Yeah. We'll see. I mean, you know
Justin Jackson (26:59):
I I I am still interested in us publishing as
much of this stuff publicly.We've got it on the podcast. But
I think it'd be nice to have ayou know, maybe something like
Michelle's Small SoftwareBusiness Alliance, and maybe
that's the platform. But to beable to publish more of this
publicly, to share ourexperience, and to share some of
(27:21):
these things that just aren'tbeing talked about
Jon (27:23):
Mhmm.
Justin Jackson (27:24):
I again, I think what's challenging about this is
if you're brand new, if you're asmall company, a lot of this
probably feels like superfluousor, you know, maybe you and I
are overreacting or complainingtoo much. But once you're
actually in it and actuallyhaving to figure all this stuff
(27:44):
out, it just becomes clear soquickly that there's no way.
It's not humanly possible, evenfor these merchants of record,
to be 100% completely compliantwith every tax region in the
world at any given moment.
Jon (28:04):
Right.
Justin Jackson (28:04):
The legislation's changing all the
time. The rules are changing allthe time. And even, like I said,
I've I've noticed errors onmultiple platforms, Multiple
merchants of record platformswhere they're making the
calculations wrong or they'reshowing the wrong information on
the receipt. It's very verydifficult to do this. And as has
(28:29):
been mentioned before, tomorrow,Moose Jaw Saskatchewan could
say, well, now any anybody whobuys SaaS products in Moose Jaw
is subject to a 35% tax.
Jon (28:41):
Right.
Justin Jackson (28:42):
Could could send emails to all all the companies
in the world. Hey, you know,hey, DigitalOcean. Hey, Amazon.
Hey, Microsoft. You are now inviolation of the Moose Jaw tax
code, section 102, section b.
And, you know, like, then andand they could
Jon (29:02):
take take a week out of your life to make it to make it,
work right.
Justin Jackson (29:05):
And and, you know, payments to the Moose Jaw
tax office must be done inperson between the business
hours of 10 and 3 PM, Tuesday toThursday.
Jon (29:13):
Please fax this form to this number.
Justin Jackson (29:18):
Please call this number and do the the male
moose, mating call, and then youwill be greeted with a 5 digit
code. Uh-huh. It's ridiculous.Yeah.
Jon (29:29):
It's a lot. I mean, it just consumes you after a while, and
you're like, I don't wanna thinkabout this. I'm just gonna
ignore it, and then, I mean, youknow, it's
Justin Jackson (29:36):
just like All the shit. You know what? It the
going through this, software isa pretty nice business to be in.
Some of this stuff just feelsoppressive. It just feels like I
know.
Some people are gonna say that'san over exaggeration. But, like,
the things that you have tountil you've actually done it,
(29:56):
until you've owned a business,some of the stuff is just feels
like why are cities, states, andprovinces, countries, and then
platforms like Stripe, why arethey making it so difficult to
be a small business? It it feelslike it's it's it's actively it
(30:20):
actively makes business moredifficult. And this is
everything. It's insurance.
I was talking to my friend whoruns a little Main Street
business here. Guess how much hepays in insurance every month?
Jon (30:30):
$5.
Justin Jackson (30:31):
No. Not quite 5 grand.
Jon (30:32):
No. 5. What's the biz I don't know. What does it do?
Justin Jackson (30:38):
It's a little shop, little little record shop,
tiny store, like, under a 1000square feet, probably 500 square
feet. Just insurance.
Jon (30:49):
Is it like insurance or inventory insurance or what?
Justin Jackson (30:52):
It's liability and some inventory insurance,
but $500 a month. And I wasthinking about it. I'm like, I
don't think I I I should look atour insurance bill, but I would
be surprised if we're payingthat much.
Jon (31:07):
Right.
Justin Jackson (31:07):
And and his like, that's more than, that's
like a significant portion ofhis expenses is just insurance.
These kinds of things, I thinkentrepreneurship is amazing. I
think that small businesses arekind of like the lifeblood of
any economy. And I I don't thinkenough people are talking about
it. Maybe because they don'twanna seem like complainers.
Jon (31:29):
Right.
Justin Jackson (31:30):
But it's hard. It's hard. Yeah.
Jon (31:32):
I mean yeah. I mean, US US certainly doesn't make it easy.
I mean, Canada, probably noteither. But
Justin Jackson (31:39):
City planning departments and and Chicago SaaS
sales tax. It's like I I couldtell you one thing that they
should all do right away isincrease your exemption limit.
Don't make it one transactionand then you've crossed the
threshold. Just increase theexemption limit and give small
businesses some breathing room.
Jon (31:59):
Mhmm.
Justin Jackson (32:00):
Anyway, that ends our sales tax compliance
section. Sales tax compliance.On a positive note, you just
released some new software.
Jon (32:17):
I did. Yeah. We we've been kinda working on this for a
while. It's an integration withPatreon, which has been
interesting. Yeah.
We'll probably have some I'msure we'll have more and more
updates as people use it andtime goes on. But, essentially
you can hook up. You can connectyour Patreon account to your
podcast, and it'll pull in allyour supporters and display them
(32:40):
on your website. And,
Justin Jackson (32:43):
show notes as well.
Jon (32:44):
Show notes and have a nice little section where it you
know, people can join thePatreon campaign and shows you,
like, you know, if you haveprogress towards a goal and how
that's going and shout out newsupporters in your show notes.
Yeah.
Justin Jackson (32:56):
Oh, yeah. Yeah. There's even a little we have
these liquid tags, that you canspecifically highlight new
supporters since the lastepisode.
Jason (33:06):
Yeah.
Justin Jackson (33:06):
Yeah. It's really cool. And then a little
widget on the bottom of thewebsite that says, this podcast
has 16 supporters or whatever.So, yeah, that that was really
cool to to roll that out. Lotsof folks have already
implemented it.
It's one of those things where,like, we announced it and that
even before we announced it,people were discovering it and
(33:27):
adding it, you know, adding itto their show. So felt cool to
be able to do something withmonetization. We think that, you
know, even earning a little bitof money from your podcast can
go a long way. So, yeah, it'sfun.
Jon (33:42):
Yeah. I think, yeah. There's, you know, there's other
features we're thinking aboutrelated to this or on top of
this or other platforms that wecan integrate with that do
something similar to Patreon or,but Yeah. We'll see see how this
one goes, but so far people areusing it.
Justin Jackson (33:57):
Yeah. Yeah. It's exciting. I'm I'm I think
monetization is one of thosethings that, we wanna be
thinking more about. And it is alittle bit more complicated.
One of the reasons we chosePatreon was because the
complications of, like, usingStripe or PayPal, it it it's
(34:17):
just a bit of a harder lift. Andthis was like, okay. A lot of
our customers already usePatreon. Let's just do this as
the initial thing to get usgoing.
Jason (34:29):
Yep.
Justin Jackson (34:30):
I've been hiring Josh Anderton to help me work on
a bunch of marketing site stuff,and we've been rolling that out.
It's been really fun to Yeah.
Jon (34:37):
It's been great.
Justin Jackson (34:38):
Have a big refresh. And, Yeah. It just
feels like every day we've gotsomething new to look at. He's
also, worked on a new podcastwebsite theme that is getting
pretty close.
Jon (34:51):
Yeah. It's been pretty close to being done.
Justin Jackson (34:53):
So that's been exciting. It's a it's a much
different theme than we've hadso far, which is which should be
cool. And, I released a littleside project, mypodstudios.com
that I'd like folks to go checkout. It's Yeah. I I'm thinking
more about my studio.
My studio's embarrassing. And,Your astroturf? Yeah. The I got
(35:16):
some astroturf on the ground,but it's just it's not for for
the amount of time I'm on camerafor Transistor, and for the
amount of time I have to show upon interviews and Yeah. You
know, like, I did that Descriptlivestream.
Jon (35:30):
You need a bookshelf back there that makes you look smart.
Justin Jackson (35:32):
I know.
Jon (35:33):
All the things you're reading. Tax compliance law.
Justin Jackson (35:39):
Tax compliance law. That I would love that. I
should just frame some taxcompliance law, and then people
are like, hey. What's that inthe background? Oh, that's
section 32 b from Moose Jaw,Saskatchewan.
I don't talk
Jon (35:51):
about read that. Just read that during lunch.
Justin Jackson (35:53):
I love it. I'm a big fan. So I've been thinking
about how to improve my studio,and I thought, okay. One way to
get inspired is to look atstudios I like. Yeah.
And, so I started this littlesite, using, Indie Hacker and
longtime supporter of the show,Val Soapy. His, he's got a
little product called BlogStatic and, just made a little
(36:16):
site and featured StephenRobles, who's got a really bunch
of cool podcasts on transistor,Apple Insider, HomeKit Insider,
Movies on the Side. Anyway, ifyou wanna see some pretty studio
photos, head over tomypodstudios.com.
Jon (36:33):
Cool.
Justin Jackson (36:33):
Alright. Well, John, now's the time to use our
feature. And thank our Patreonsupporters.
Jon (36:41):
Yeah. Thanks, everyone, as always. We have rewardful.com.
Those guys are great. Greg Park,Mitchell Davis from
recruitkit.com.au, Marcel Falaisfrom wearebold.af, Ethan
Gunderson, Anton Zorin fromproudcamp.com, Bill Kondo, Alex
Payne Ward from memberspace.com,Russell Brown from Fotivo.com,
(37:07):
Avenger Sassy, Austin Loveless,Michael Siper, our friends at
Fathom Analytics, my brother,Dan Buddha,
Justin Jackson (37:15):
sales tax compliance expert.
Jon (37:17):
Yeah. Soon to be Colin Gray, Darby Frey, and Dave
Junta.
Justin Jackson (37:26):
Junta. Junta. We need a new podcast just called
Junta, j g I u n t a. Yeah.Junta.
It's just Dave.
Jon (37:38):
It's just Dave.
Justin Jackson (37:39):
Just talking about Chat
Jon (37:40):
chats with Dave.
Justin Jackson (37:41):
Yeah. Dave, if you wanna start the Junta
podcast, let us know. We'llwe'll we'll we'll we'll show up
for that. Actually, that wouldbe fun. It just it's like
whoever wants to show up, showsup.
Dave just announces the time,shows up.
Jon (37:57):
Yep. Someone just pops in.
Justin Jackson (37:59):
That's the show. Yeah. Sounds good. Alright,
everyone. Thanks for listening.
Please reach out if you've gotcomments or thoughts. We'd love
to hear from you, And, we'll seeyou next week. Beauty.
And see how I don't know how long we're gonna do this,
but
Justin Jackson (00:02):
Let's aim for 30 minutes, and we'll end up
talking for an hour.
Jon (00:05):
Hour might be too much. Hey, everyone. Welcome to build
your SaaS. This is the behindthe scenes story of building a
web app in 2023. I'm JohnBuddha, a software engineer.
Justin Jackson (00:26):
And I'm Justin Jackson. I do product and
marketing. Follow along as webuild transistor data fam And
keep up to date on all thecrazy, latest happenings in the
world.
Jon (00:44):
All your all the craziest sales tax and banking related.
Justin Jackson (00:48):
It's just the financial system is melting
before our eyes. But, you wenton vacation, so you you were you
were maybe oblivious to some ofthis. How many times did you
think about the banking sectorand sales tax while you were on
vacation?
Jon (01:02):
Not at all.
Justin Jackson (01:04):
Oh, glorious.
Jon (01:05):
In fact, it was the I it was the first time I haven't
opened my laptop. Well, I wasgone for, like, 9 days. Didn't
open my laptop once. And that'sthe first time that's happened.
Wow.
I don't know. 8 years probablylike it
Justin Jackson (01:19):
Dude,
Jon (01:20):
it's pretty nice.
Justin Jackson (01:21):
That's just success.
Jon (01:22):
Do you
Justin Jackson (01:22):
think you didn't open your laptop because the
Internet was bad, or do youthink was it you're just fully
in vacation mode
Jon (01:28):
or both? Just wanted to be in vacation mode. I mean, I I
kept up to date on my phone andstuff and talked to you guys
and, but it's, you know, you cando that from the beach while
drinking a margarita prettyeasily. And, yeah, the internet
was not great. It was, you know,it worked okay, but it wasn't
like it was not great.
Justin Jackson (01:48):
Yeah. That I mean, that's a long time to,
have not kinda had a real chanceto unplug. What was was there
any other kind of how was it?Like, what was the other parts
of that? Did it feel like youreally got something back?
Did it feel renewing?
Jon (02:08):
Yeah. I felt yeah. It was very restful in renewing and
yeah. It's nice to unplug. Imean, it you know, I like I
said, I still kept in touch, soI wasn't, like, totally out of
what was going on.
Justin Jackson (02:17):
Yeah. You're still in Slack.
Jon (02:19):
Which, you know, next time I could maybe just disappear
from that too till you get frommy phone. But, I don't know. I
still like to keep up to date. Imean, it is, you know, our
company. Yeah.
I like to know what's going on,but but, yeah, it was, it was
quite relaxing. It's very nice.
Justin Jackson (02:37):
I mean, this was kind of your, the test run for,
the 6 month sabbatical we keeptalking about having. Yeah.
Yeah.
Jon (02:45):
Where Helen and Jason run the team.
Justin Jackson (02:47):
Yeah. Helen and Jason just run the company. And,
I mean, I think one thing thatis, obviously, you and I bring a
lot to the team and to theproduct and to the company, but
it is incredible to see how muchJason and Helen bring.
Jon (03:02):
Yeah.
Justin Jackson (03:03):
And sometimes they're just scheming away in
their own Slack channels justjust deciding, hey. We should,
you know, Jason just did a bigwell, Helen and Jason kind of
schemed on this together, andthen Jason went and did it where
we had basically folks that havebeen on the platform who haven't
paid in ages. Like, the cardwould fail, but we wouldn't kick
(03:26):
them off. It would just be kindof in limbo.
Jon (03:28):
Right. Yeah. Like, their feeds still worked, and maybe
they couldn't use the platform,but their everything still
worked.
Justin Jackson (03:35):
So they're essentially getting free
hosting.
Jon (03:37):
Obviously, not great, but, yeah. So Jason went ahead and
figured out and wrote a wholesystem to, like, notify people
multiple times and thenautomatically cancel accounts.
And, yeah, it worked
Justin Jackson (03:48):
out well. I I I mean, there's there's obviously
dunning systems. Like, we'vealways had a basic kind of
dunning and system, but thisthis is, like, next level for
giving people warnings atdifferent stages depending on
their status. Yeah. And, it'samazing how many people
obviously, if you're not paying,then, actually, here in this
(04:12):
coworking place, for years, wejust never got an Internet bill,
like, for cable Internet.
And it was just, like, fine. Andthen all of a sudden one day,
our Internet got turned off. Wewere like, oh.
Jon (04:24):
Yeah. Somebody found something in the system.
Justin Jackson (04:26):
Yeah. It's a good things to put in place.
Yeah. Dude, a lot's happenedthough. Let's talk briefly about
the modern day run on a bank,because it was silicon Silicon
Valley Bank.
And, that we were actually abriefly, an SVB customer.
Jon (04:45):
I don't know how long we used them. I mean, they were
what Stripe Atlas used when wesigned up and incorporated, and
they just, like, automaticallyopen an account for you.
Justin Jackson (04:55):
They were the only option for a long time.
Now, Stripe Atlas offers you afew different options, but
Jon (05:01):
Yeah. Yeah. I mean, we used them and it was like, it was a
bank. It was fine, I guess, butit was really hard. I think it
felt really hard to do stuff.
Mhmm. It's pretty inflexible. Idon't know. We used them for
maybe a year. I don't know.
I mean, we didn't we didn't makemoney for a while. We had
Justin Jackson (05:18):
to count actually used thought we should
switch right away because wesigned our partnership docs, and
I don't think I ever logged intoSilicon Valley Bank. And then
fairly soon after that, I thinkyou were like, let's get off
this Silicon Valley, and weswitched to Capital 1.
Jon (05:33):
We did Capital 1, and then they capital 1. I think they
like closed that type of accountdown or
Justin Jackson (05:40):
something happened like a small business
Jon (05:44):
account or something. Could log in to the dashboard or
something. Yeah. Yeah. And so wefound Mercury pretty early on.
Yeah. When they were pretty new,I think, still.
Justin Jackson (05:55):
Yeah. Yeah. That would have been yeah. We it
feels like we've been with themforever now. I mean, the the UX
of Mercury is incredible, but Ithink, this whole banking crisis
has made us rethink about whatis a bank.
Jon (06:10):
Yeah. Because Mercury Mercury is technically not a
bank. They are. So tell
Justin Jackson (06:13):
me what is mercury? What is it?
Jon (06:15):
Well, I saw this something online and I think it was the
guy that runs it, saidsomething. He's like, we're not
actually a bank. We're like a,we're a software platform for
your money, but we work withbanks. They have partner banks.
Justin Jackson (06:28):
Okay.
Jon (06:29):
And that's where your money goes. Right? And it can you I
think they split it acrossmultiple accounts or something.
I mean, it looks like oneaccount to you, but
Justin Jackson (06:36):
Yeah.
Jon (06:37):
It's not, yeah, it's not technically a bank.
Justin Jackson (06:41):
Yes. But
Jon (06:42):
it's all very seamless. I mean, it's, like, has worked
great. They have freeinternational wires and, like,
Justin Jackson (06:48):
The user experience is amazing, and it's
it doesn't feel like somethingthat's been taped together. It
it just, like, we we've senttons of wires. We've, you know
it hooks up to our accountingplatform well. It it feels like
it just always works. It's beenvery dependable.
(07:09):
And
Jon (07:12):
Granted, we don't have millions of venture capital
funding sitting in account,which I think, you know, I don't
know if, like, SVP was betterfor that type of company. But
Justin Jackson (07:23):
Well, apparently not. They only had $250,000 of,
of insured deposits.
Jon (07:28):
Right. Right.
Justin Jackson (07:30):
Right. I I I I think this is this whole episode
and honestly, it is awful. Idon't wanna make light of, you
know, a lot of these companieswho've received funding are
still small businesses who arerun by people like you and I.
They have employees likeTransistor and, you know, not
(07:54):
making payroll and all of thatstuff is awful. And I also wanna
recognize that not every companycan be structured like
Transistor, But it did revealhow different it is to be
running a business that is justprofitable.
Mhmm. And, we don't, keep agiant cash balance with
(08:20):
Transistor.
Jon (08:21):
No. We don't.
Justin Jackson (08:22):
Generally, it's just like every month, our our
revenue is really consistent,and it it's basically always
gone up even if it's only goneup by a little bit. And, that
has that model is calmer atleast at this stage of history.
(08:43):
That could change. But it has itit just revealed, like, wow.
Like, this whole new financialera we're in with high interest
rates and now, you know, all thethink pieces on medium and,
other places are like, how nowSilicon Valley's gotta gotta get
(09:04):
back to the basics, get back toprofitability.
You know, startups have to actlike small businesses. And, you
know, for us, it's just beenlike, well, that's that's that
was the style that alwaysappealed to us. And it I think
in most cases, especially if thebusiness you've started has a
(09:26):
good financial engine, andthat's a huge caveat. Caveat?
Jon (09:31):
Yeah. Okay. I think that's the same in Canada.
Justin Jackson (09:35):
Sometimes I read that word, and I'm like, kavit?
No. It's not kavit. It's caveat.You know, the caveat is that
it's hard finding a bit you andI have tried other businesses in
our past,
Jon (09:51):
and Mhmm.
Justin Jackson (09:52):
Transistor by far has the best financial
engine of anything we've tried.So, obviously, that really helps
and, to make it feel calm. But,yeah, it it just did feel like
and our friends that havebusinesses like that, you know,
the Ian Landsmans of the world,the Michelle Hansons of the
(10:15):
world, they're running smallsoftware companies like us, and,
I think all of us were kind ofstanding on the outside of this
going, wow. Like, yeah, if youhad a bunch of investment and
then all of a sudden you lostyou you I mean, it wasn't just
that they lost. This would havealso affected us if all of a
(10:35):
sudden our bank account gotfrozen.
Like, that would have beenRight. Not fun.
Jon (10:39):
Right. Or, you know, the the some of the providers we use
are on out of money, and thenthey can't actually run their
business. And
Justin Jackson (10:45):
Yeah. It did make me think about TransferWise
slash Wise, which is similar toMercury. I think it's just some
amorphous tech chrome on top ofa some something on the back
end. You know? Right.
It but, breaking news fromMercury. There are obviously I
(11:07):
think all the banks all thesmaller banks or bank like
things are trying desperately toretain customers because the
unfortunate, side effect of allthis is that a lot of
businesses, even including smallbusinesses, but large depositors
especially, are moving theirfunds from smaller banks
Jon (11:24):
Yeah.
Justin Jackson (11:25):
To the big banks. And you're gonna, you
know, there's, especially in thestates, you're gonna have a
situation where all the bigmoney is at Chase, and then it's
gonna make it even harder toregulate, that the the big banks
because they're gonna always allof them they're they will be
(11:45):
much too large to fail.
Jon (11:47):
Yeah. I think I yeah. Maybe. I think the government
did the right thing now and kindof Mhmm. How they reacted and
kinda prevented a bunch ofdifferent bank runs.
But, I think I think Mercuryactually got a lot of new
customers what I
Justin Jackson (12:02):
was trying to Yeah. That's true. That may it'd
be interesting to know how howthis actually shook out for them
because I see 2 trends. 1,people moving their money out of
smaller banks like Mercury. And2, I've heard that a lot of
people were switching toMercury.
Jon (12:18):
Mhmm.
Justin Jackson (12:18):
But, yeah, they just announced. We've worked
with our partner banks to offeradditional FDIC insurance. First
to 1,000,000 then to 3,000,000.Now we've gone a step further.
By Monday, you have access to upto $5,000,000 in FDIC insurance,
20 times the per banking limit.
Jon (12:36):
Yeah. I think that's something to do with how they
split your money across accounts
Justin Jackson (12:40):
Yeah.
Jon (12:40):
Behind the scenes. But
Justin Jackson (12:42):
And there's also I'm it's not clear if every
depositor gets that. The otherthing is that every time I've
had to deal with insurance, itreally sucks. So it's like,
sure. You might get your moneyback back, but if if accounts
get frozen or whatever, it stillsucks because then you you're
you've got even a week withoutaccess to your bank account is,
Jon (13:00):
not fun. Once the once the FDIC steps in, they're pretty
efficient. They're pretty goodat what they do. I don't think
it's gonna be it's not likeworking with some crappy
insurance company. Yeah.
Justin Jackson (13:10):
Yep. Yep. Yep. Yeah. So interesting.
It'll be interesting to watchthat. I think we should talk
about this next item that I'mhighlighting. Are you okay if we
talk about that? Yeah. Okay.
We've we've had some folks thathave said maybe we shouldn't
talk about it, but I think it'sbetter to talk about it than
not. Section 174. Folks, if youhave a software company in the
(13:35):
United States, you need to beaware of section 174. Basically,
it is treating softwaredevelopment costs, and there's
some confusion about this. Butthe more I've read into the US
tax code, the more it seems likeand now we actually have people
(13:58):
who are trying who who are havebeen assessed by the IRS.
So we know that these theseassessments are actually even
happening. This willdramatically increase the amount
of tax that you pay, becauseinstead of saying a development
salary is an expense, you haveto You
Jon (14:20):
have to categorize it as research and development?
Justin Jackson (14:23):
Yes. And then you have to amortize that over 5
years. Yes. Thanks.
Jon (14:29):
Yeah. Which makes your which makes your taxable income
way higher.
Justin Jackson (14:32):
The example, I'll link to it in the show
notes from Ian Landsman, is,let's say, on a $1,000,000
revenue, normally, you have devsalaries that equal 500,000, and
your tax rate would be 30%, soyour tax bill would be 75,000.
Under this new system, your newyour tax bill would be 225,000.
(14:54):
It dramatically increases. Itbasically, this legislation
makes no sense for smallsoftware companies. It is
actively harmful for smallsoftware companies.
And sometimes software companiesand small software companies, we
kinda live in this mad world ofmagical thinking, you know,
(15:15):
where, I mean, you and I arealso predisposed to this. You
know? Well, sales tax, we don'tneed to worry about that right
now. Or, well, you know, we're asmall company. We don't need to
worry about that.
This actually could have ameaningful effect on people's
businesses?
Jon (15:34):
Yeah. I mean, especially, like, you know, if you don't
last for 5 years. Because everyyear, you're gonna amortize more
and more. Right? So it piles upand it gets you'd be paying less
and less over the years, but butlike the 1st year or 2 is gonna
be like, it's massive hit.
Justin Jackson (15:49):
So Michelle Hanson, friend of the show,
she's the cofounder of Geocodio.She has started the Small
Software Business Alliance, s ssballiance.org. I'll put the the
link in the show notes. If youoh, she's actually expanded this
now. She's got a great TLDR heretoo.
(16:11):
If you have a small softwarebusiness that is incorporated in
the United States, you need togo there, Put your name and
email in there. She is going tobe kind of the central
communication hub for all thisstuff. She's in contact with
people in Washington, DC, andshe's working on some stuff
behind the scenes she can't talkabout yet. But, we we really do
(16:33):
need to make our voices heard onthis. And if you are a US
citizen, you also have anopportunity to contact your
representative.
This is I can sign up for thishere as a cofounder of
Transistor, but only John cancontact his state representative
and say, this is going to affectme. And, Michelle even
(16:56):
recommends calling them. Theyhave to they have to record
every phone call. And, there'sactually a big chance this goes
through and a smaller chanceeven if we make noise that, even
if we make noise, there's noguarantee, but at least there's
a possibility. So
Jon (17:16):
Yeah. I mean, from reading about it, it's like nobody
really wanted it anyway, and yetthey voted on it, but they
didn't maybe didn't read it.It's like they don't read this
stuff anyway, and they just voteit. They just vote it in, and
then they're like, oh, wait. No.
That was a bad idea.
Justin Jackson (17:28):
This is a classic case of it's a classic
case of just fucked up politics,and it sucks. It really does
suck. I actually I've I wasthinking about this the other
day because are are you familiarwith, Peter Lovell's, nomad
list? It's like a site wherethat you can, like, put in,
(17:49):
like, hey. I want sunshine, but,you know, I want it to be safe
and I want it to be you know,you could put all these
criteria.
Mhmm. It's almost like we need aSaaS list, which is like a way
of filtering what is the bestplace to incorporate your
company. Mhmm. Because there'sthere's all these like, if this
comes into law, that that wouldbe a subs a substantial reason
(18:12):
to incorporate your companysomewhere else.
Jon (18:15):
Yeah.
Justin Jackson (18:15):
But on the flip side, if we incorporated it
anywhere but the US, your yourStripe your Stripe fees go up
substantially. So if you're aStripe if if you're
incorporating Canada usingStripe, all of your US credit
cards, I believe, are treated asforeign. Right? They're not
domestic. And so you pay anadditional 1% or 1.5%.
(18:38):
There's all of these factorsthat make it like, maybe we
should incorporate here. Maybewe should incorporate here.
Maybe we should yeah. I wonderit it'd be nice if there's a
central place to
Jon (18:47):
Right.
Justin Jackson (18:48):
Like, if the best place to incorporate your
company is in Saskatchewan,Canada. Let let's do it.
Jon (18:56):
You're always ragging on Saskatchewan.
Justin Jackson (18:59):
That felt like a that felt like a nice a nice
thing to say about Saskatchewan.I'm like, well, maybe we should
look it there. Let's how longhave we gone now? Oh, wow.
Already 20 minutes.
Okay. Well, let's let's do alittle sales tax compliance
update because Oh, yeah. I thinkI think, that's what people are
here for.
Jon (19:14):
The exciting part of this.
Justin Jackson (19:15):
Yeah. We Chris, we need a little sales tax
jingle here. You know? Sales taxcompliance. That's the first
line.
I'll I'll I'll keep working onit. So I think the most relevant
news here is that Revan has justshut down.
Jon (19:37):
What is Revan, Justin?
Justin Jackson (19:38):
So Revan was one of these merchants of record
that was recommended to us byfolks saying, and I'm gonna
yeah. I'll I'll use my voice,but, you know, like, they were
like, you just gotta merchant ofrecords, Revan, they'll solve
your problems. Quit complaining.You know, we had concerns back
then. Now they've shut down, andI have even more concerns about
(20:02):
all merchants of record.
So here's the email that theysent to customers. No public
announcement, by the way. Veryweird. They just all of a sudden
changed their homepage. Now,apparently, they do.
If you go to get revin.com, Ithink it goes to
revin.consulting now. So nowthey're a consulting company.
Here's here's a quote from theemail. The most relevant reason
(20:22):
that we're shutting down is thatthe merchant of record model is
too risky for both sellers andthe merchant of record operator.
What are they talking abouthere?
Okay. Sell back to the email.Sellers bear the risk of
platform shutdown as seen in theexample of Fleurly and Stripe.
Now I hadn't heard of this. Whatthey're talking about here what
(20:42):
happened to Fleurly was thatsome folks were using Fleurly as
a merchant of record becameengaged in illegal activity.
At which point, Stripe sent theman email saying, there's folks
using your Stripe account whoare, who are in violation of
(21:05):
regulations and will be could besubject to substantial fines.
Examples of violations includingselling copyrighted products,
selling pharmaceuticals. Andbecause of that, Stripe had to
shut Flurly's Stripe accountdown, which included all of the
(21:25):
merchants that they were beingthe merchants of record for.
Jon (21:28):
Yikes. And that's what Revan would do too. Right? We'd
be we would have been part ofthat account. Right?
Justin Jackson (21:35):
Yeah. This is this is what would happen with
any Yeah.
Jon (21:39):
I mean, that would that would just kill our business
immediately.
Justin Jackson (21:42):
So I'm gonna put that link in the show notes. So
back to their email, themerchant record operator could
potentially become involved inillicit or illegal activities
quickly, which could lead to allsorts of problems. The problems
are that the people processingyour credit cards could say, no.
This whole account, we're justgonna shut down. Or this whole
(22:03):
account, we're just gonna put onpause.
Or this whole account, we'regoing to just think of all the
times you've seen on Twitterwhere for some reason this is
always a risk. For some reason,someone's PayPal account gets
flagged.
Jon (22:19):
Yep.
Justin Jackson (22:19):
And they're like they they send out a emergency
tweet. PayPal, please help me.Someone's my my account's been
shut down or my account's beenflagged, and I can't get it out
of here. I need to get themoney. I can't it's a nightmare
for the individual.
But now imagine assuming all ofthat risk. You're just gonna go
into a pool. It's like goinginto a email deliverability pool
(22:41):
or a, a web hosting pool whereyou're all on the same IP.
Jon (22:46):
Shared, yeah, shared server. Yeah.
Justin Jackson (22:48):
It's the same risk. And this is something I
hadn't even considered beforewith Merchant of Record.
Jon (22:56):
Yeah. That makes it much, much less appealing or not
appealing at all.
Justin Jackson (23:01):
Especially after these bank runs. It it it's like
I mean, this is a risk. Ofcourse, this is a risk with any,
credit card processing you do.Again, PayPal, Stripe, etcetera.
The difference is this is like aparty line.
Everybody's sharing the sameStripe account. And so that
(23:24):
exposes you to a risk in thesame way that if you sign up
with a merchant of rec amerchant of record, you start
paying, you you have to startsubmitting taxes and collecting
taxes for basically every taxregion in the world because
you've already hit all thethresholds. Why? Because it's
the merchant of record is isbeing treated as the business
(23:46):
there. Well, now you're alsoexposing yourself to all of that
merchant of record's customers.
Anybody else they are being amerchant of record for and that
and you have no idea who theyare. So at any point and this
could happen to Paddle. I don'tknow who Paddle and Lemon
Squeezy and these other folksuse as their credit card
(24:09):
processing. I'm guessing that alot of these services do just
use Stripe. Stripe has theirown, risk assessment people.
Jon (24:18):
Mhmm.
Justin Jackson (24:19):
And if somebody on that account fucks up or does
something illegal, it affectseverybody in the merchant of
record pool.
Jon (24:29):
Yeah. That's wild. Or, like, you know, if Fleurly or
Revan was a bad actor, they justbe like, we're just taking your
money, closing the account, andgoing to Jamaica.
Justin Jackson (24:37):
Mhmm. Back to the email because this even this
I don't again, this is just onecompany's perspective from
Revan. But, furthermore, itbecame increasingly clear that
the merchant of record modelprimarily appeals to small scale
sellers or businesses withquestionable and high risk
business models. This presents asignificant challenge as we
(25:02):
strive to move up the market.The recent change in Stripe's
risk behavior has caused us toexperience issues with keeping
Stripe accounts live.
End of email quotes. Yikes. Thisis a a big deal. Now I'm sure
especially some of the moremature merchants of record like
(25:23):
Paddle, I'm sure they have waysof mitigating some of these
risks, which I'd be I'd love tohear from them. But it shows,
first of all, that, trusting Imean, even Revans, they describe
themselves as an m v they theybuilt an MVP and to test out the
market.
That I don't want to hand mybusiness over to an MVP. Right.
(25:48):
Any company that's brand new,there's there's just something
about it that is stressful. Itfeels too risky Yeah. To hand
your business over to somethingthat's new and unproven.
Yeah.
Jon (26:01):
I mean, hand your bank account over to somebody like
that. Yeah.
Justin Jackson (26:04):
Yeah. So, yeah, we've talked we kept talking
about solutions. One solutionwas maybe we should get your
brother to help us out.
Jason (26:11):
Yeah. I mean, he
Jon (26:12):
he had listened to our episodes, and and I talked to
him for a bit. And he was like,you know, when I was in Texas
working at the capital, like, heactually worked on some
legislation when they were, theywere working on sales tax
legislation for Amazon at thetime. It was a, I mean, it was a
long time ago, but so he, Imean, he read all the
legislation and probably helpedwrite some stuff and he knows
(26:32):
people who still work there atat certain, parts of the
government are like these taxaccounting firms who know the
ins and outs of not just Texas,but basically they have to keep
up with, like, what everystate's doing. Yeah. Whatever we
decide, it might be turning onStripe tax and using tax jar for
some stuff, but then Yep.
Having someone like my brotheractually manage some of that
stuff behind the scenes and dothe payments and registrations
(26:55):
and
Justin Jackson (26:55):
I'm for it.
Jason (26:57):
Yeah. We'll see. I mean, you know
Justin Jackson (26:59):
I I I am still interested in us publishing as
much of this stuff publicly.We've got it on the podcast. But
I think it'd be nice to have ayou know, maybe something like
Michelle's Small SoftwareBusiness Alliance, and maybe
that's the platform. But to beable to publish more of this
publicly, to share ourexperience, and to share some of
(27:21):
these things that just aren'tbeing talked about
Jon (27:23):
Mhmm.
Justin Jackson (27:24):
I again, I think what's challenging about this is
if you're brand new, if you're asmall company, a lot of this
probably feels like superfluousor, you know, maybe you and I
are overreacting or complainingtoo much. But once you're
actually in it and actuallyhaving to figure all this stuff
(27:44):
out, it just becomes clear soquickly that there's no way.
It's not humanly possible, evenfor these merchants of record,
to be 100% completely compliantwith every tax region in the
world at any given moment.
Jon (28:04):
Right.
Justin Jackson (28:04):
The legislation's changing all the
time. The rules are changing allthe time. And even, like I said,
I've I've noticed errors onmultiple platforms, Multiple
merchants of record platformswhere they're making the
calculations wrong or they'reshowing the wrong information on
the receipt. It's very verydifficult to do this. And as has
(28:29):
been mentioned before, tomorrow,Moose Jaw Saskatchewan could
say, well, now any anybody whobuys SaaS products in Moose Jaw
is subject to a 35% tax.
Jon (28:41):
Right.
Justin Jackson (28:42):
Could could send emails to all all the companies
in the world. Hey, you know,hey, DigitalOcean. Hey, Amazon.
Hey, Microsoft. You are now inviolation of the Moose Jaw tax
code, section 102, section b.
And, you know, like, then andand they could
Jon (29:02):
take take a week out of your life to make it to make it,
work right.
Justin Jackson (29:05):
And and, you know, payments to the Moose Jaw
tax office must be done inperson between the business
hours of 10 and 3 PM, Tuesday toThursday.
Jon (29:13):
Please fax this form to this number.
Justin Jackson (29:18):
Please call this number and do the the male
moose, mating call, and then youwill be greeted with a 5 digit
code. Uh-huh. It's ridiculous.Yeah.
Jon (29:29):
It's a lot. I mean, it just consumes you after a while, and
you're like, I don't wanna thinkabout this. I'm just gonna
ignore it, and then, I mean, youknow, it's
Justin Jackson (29:36):
just like All the shit. You know what? It the
going through this, software isa pretty nice business to be in.
Some of this stuff just feelsoppressive. It just feels like I
know.
Some people are gonna say that'san over exaggeration. But, like,
the things that you have tountil you've actually done it,
(29:56):
until you've owned a business,some of the stuff is just feels
like why are cities, states, andprovinces, countries, and then
platforms like Stripe, why arethey making it so difficult to
be a small business? It it feelslike it's it's it's actively it
(30:20):
actively makes business moredifficult. And this is
everything. It's insurance.
I was talking to my friend whoruns a little Main Street
business here. Guess how much hepays in insurance every month?
Jon (30:30):
$5.
Justin Jackson (30:31):
No. Not quite 5 grand.
Jon (30:32):
No. 5. What's the biz I don't know. What does it do?
Justin Jackson (30:38):
It's a little shop, little little record shop,
tiny store, like, under a 1000square feet, probably 500 square
feet. Just insurance.
Jon (30:49):
Is it like insurance or inventory insurance or what?
Justin Jackson (30:52):
It's liability and some inventory insurance,
but $500 a month. And I wasthinking about it. I'm like, I
don't think I I I should look atour insurance bill, but I would
be surprised if we're payingthat much.
Jon (31:07):
Right.
Justin Jackson (31:07):
And and his like, that's more than, that's
like a significant portion ofhis expenses is just insurance.
These kinds of things, I thinkentrepreneurship is amazing. I
think that small businesses arekind of like the lifeblood of
any economy. And I I don't thinkenough people are talking about
it. Maybe because they don'twanna seem like complainers.
Jon (31:29):
Right.
Justin Jackson (31:30):
But it's hard. It's hard. Yeah.
Jon (31:32):
I mean yeah. I mean, US US certainly doesn't make it easy.
I mean, Canada, probably noteither. But
Justin Jackson (31:39):
City planning departments and and Chicago SaaS
sales tax. It's like I I couldtell you one thing that they
should all do right away isincrease your exemption limit.
Don't make it one transactionand then you've crossed the
threshold. Just increase theexemption limit and give small
businesses some breathing room.
Jon (31:59):
Mhmm.
Justin Jackson (32:00):
Anyway, that ends our sales tax compliance
section. Sales tax compliance.On a positive note, you just
released some new software.
Jon (32:17):
I did. Yeah. We we've been kinda working on this for a
while. It's an integration withPatreon, which has been
interesting. Yeah.
We'll probably have some I'msure we'll have more and more
updates as people use it andtime goes on. But, essentially
you can hook up. You can connectyour Patreon account to your
podcast, and it'll pull in allyour supporters and display them
(32:40):
on your website. And,
Justin Jackson (32:43):
show notes as well.
Jon (32:44):
Show notes and have a nice little section where it you
know, people can join thePatreon campaign and shows you,
like, you know, if you haveprogress towards a goal and how
that's going and shout out newsupporters in your show notes.
Yeah.
Justin Jackson (32:56):
Oh, yeah. Yeah. There's even a little we have
these liquid tags, that you canspecifically highlight new
supporters since the lastepisode.
Jason (33:06):
Yeah.
Justin Jackson (33:06):
Yeah. It's really cool. And then a little
widget on the bottom of thewebsite that says, this podcast
has 16 supporters or whatever.So, yeah, that that was really
cool to to roll that out. Lotsof folks have already
implemented it.
It's one of those things where,like, we announced it and that
even before we announced it,people were discovering it and
(33:27):
adding it, you know, adding itto their show. So felt cool to
be able to do something withmonetization. We think that, you
know, even earning a little bitof money from your podcast can
go a long way. So, yeah, it'sfun.
Jon (33:42):
Yeah. I think, yeah. There's, you know, there's other
features we're thinking aboutrelated to this or on top of
this or other platforms that wecan integrate with that do
something similar to Patreon or,but Yeah. We'll see see how this
one goes, but so far people areusing it.
Justin Jackson (33:57):
Yeah. Yeah. It's exciting. I'm I'm I think
monetization is one of thosethings that, we wanna be
thinking more about. And it is alittle bit more complicated.
One of the reasons we chosePatreon was because the
complications of, like, usingStripe or PayPal, it it it's
(34:17):
just a bit of a harder lift. Andthis was like, okay. A lot of
our customers already usePatreon. Let's just do this as
the initial thing to get usgoing.
Jason (34:29):
Yep.
Justin Jackson (34:30):
I've been hiring Josh Anderton to help me work on
a bunch of marketing site stuff,and we've been rolling that out.
It's been really fun to Yeah.
Jon (34:37):
It's been great.
Justin Jackson (34:38):
Have a big refresh. And, Yeah. It just
feels like every day we've gotsomething new to look at. He's
also, worked on a new podcastwebsite theme that is getting
pretty close.
Jon (34:51):
Yeah. It's been pretty close to being done.
Justin Jackson (34:53):
So that's been exciting. It's a it's a much
different theme than we've hadso far, which is which should be
cool. And, I released a littleside project, mypodstudios.com
that I'd like folks to go checkout. It's Yeah. I I'm thinking
more about my studio.
My studio's embarrassing. And,Your astroturf? Yeah. The I got
(35:16):
some astroturf on the ground,but it's just it's not for for
the amount of time I'm on camerafor Transistor, and for the
amount of time I have to show upon interviews and Yeah. You
know, like, I did that Descriptlivestream.
Jon (35:30):
You need a bookshelf back there that makes you look smart.
Justin Jackson (35:32):
I know.
Jon (35:33):
All the things you're reading. Tax compliance law.
Justin Jackson (35:39):
Tax compliance law. That I would love that. I
should just frame some taxcompliance law, and then people
are like, hey. What's that inthe background? Oh, that's
section 32 b from Moose Jaw,Saskatchewan.
I don't talk
Jon (35:51):
about read that. Just read that during lunch.
Justin Jackson (35:53):
I love it. I'm a big fan. So I've been thinking
about how to improve my studio,and I thought, okay. One way to
get inspired is to look atstudios I like. Yeah.
And, so I started this littlesite, using, Indie Hacker and
longtime supporter of the show,Val Soapy. His, he's got a
little product called BlogStatic and, just made a little
(36:16):
site and featured StephenRobles, who's got a really bunch
of cool podcasts on transistor,Apple Insider, HomeKit Insider,
Movies on the Side. Anyway, ifyou wanna see some pretty studio
photos, head over tomypodstudios.com.
Jon (36:33):
Cool.
Justin Jackson (36:33):
Alright. Well, John, now's the time to use our
feature. And thank our Patreonsupporters.
Jon (36:41):
Yeah. Thanks, everyone, as always. We have rewardful.com.
Those guys are great. Greg Park,Mitchell Davis from
recruitkit.com.au, Marcel Falaisfrom wearebold.af, Ethan
Gunderson, Anton Zorin fromproudcamp.com, Bill Kondo, Alex
Payne Ward from memberspace.com,Russell Brown from Fotivo.com,
(37:07):
Avenger Sassy, Austin Loveless,Michael Siper, our friends at
Fathom Analytics, my brother,Dan Buddha,
Justin Jackson (37:15):
sales tax compliance expert.
Jon (37:17):
Yeah. Soon to be Colin Gray, Darby Frey, and Dave
Junta.
Justin Jackson (37:26):
Junta. Junta. We need a new podcast just called
Junta, j g I u n t a. Yeah.Junta.
It's just Dave.
Jon (37:38):
It's just Dave.
Justin Jackson (37:39):
Just talking about Chat
Jon (37:40):
chats with Dave.
Justin Jackson (37:41):
Yeah. Dave, if you wanna start the Junta
podcast, let us know. We'llwe'll we'll we'll we'll show up
for that. Actually, that wouldbe fun. It just it's like
whoever wants to show up, showsup.
Dave just announces the time,shows up.
Jon (37:57):
Yep. Someone just pops in.
Justin Jackson (37:59):
That's the show. Yeah. Sounds good. Alright,
everyone. Thanks for listening.
Please reach out if you've gotcomments or thoughts. We'd love
to hear from you, And, we'll seeyou next week. Beauty.
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