This would kill our company immediately

And see how I don't know how long we're gonna do this, but

Let's aim for 30 minutes, and we'll end up talking for an hour.

Hour might be too much. Hey, everyone. Welcome to build your SaaS. This is the behind the scenes story of building a web app in 2023. I'm John Buddha, a software engineer.

And I'm Justin Jackson. I do product and marketing. Follow along as we build transistor data fam And keep up to date on all the crazy, latest happenings in the world.

All your all the craziest sales tax and banking related.

It's just the financial system is melting before our eyes. But, you went on vacation, so you you were you were maybe oblivious to some of this. How many times did you think about the banking sector and sales tax while you were on vacation?

Not at all.

Oh, glorious.

In fact, it was the I it was the first time I haven't opened my laptop. Well, I was gone for, like, 9 days. Didn't open my laptop once. And that's the first time that's happened. Wow. I don't know. 8 years probably like it

Dude,

it's pretty nice.

That's just success.

Do you

think you didn't open your laptop because the Internet was bad, or do you think was it you're just fully in vacation mode

or both? Just wanted to be in vacation mode. I mean, I I kept up to date on my phone and stuff and talked to you guys and, but it's, you know, you can do that from the beach while drinking a margarita pretty easily. And, yeah, the internet was not great. It was, you know, it worked okay, but it wasn't like it was not great.

Yeah. That I mean, that's a long time to, have not kinda had a real chance to unplug. What was was there any other kind of how was it? Like, what was the other parts of that? Did it feel like you really got something back? Did it feel renewing?

Yeah. I felt yeah. It was very restful in renewing and yeah. It's nice to unplug. I mean, it you know, I like I said, I still kept in touch, so I wasn't, like, totally out of what was going on.

Yeah. You're still in Slack.

Which, you know, next time I could maybe just disappear from that too till you get from my phone. But, I don't know. I still like to keep up to date. I mean, 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.

I mean, this was kind of your, the test run for, the 6 month sabbatical we keep talking about having. Yeah. Yeah.

Where Helen and Jason run the team.

Yeah. Helen and Jason just run the company. And, I mean, I think one thing that is, obviously, you and I bring a lot to the team and to the product and to the company, but it is incredible to see how much Jason and Helen bring.

Yeah.

And sometimes they're just scheming away in their own Slack channels just just deciding, hey. We should, you know, Jason just did a big well, Helen and Jason kind of schemed on this together, and then Jason went and did it where we had basically folks that have been on the platform who haven't paid in ages. Like, the card would fail, but we wouldn't kick them off. It would just be kind of in limbo.

Right. Yeah. Like, their feeds still worked, and maybe they couldn't use the platform, but their everything still worked.

So they're essentially getting free hosting.

Obviously, not great, but, yeah. So Jason went ahead and figured out and wrote a whole system to, like, notify people multiple times and then automatically cancel accounts. And, yeah, it worked

out well. I I I mean, there's there's obviously dunning systems. Like, we've always had a basic kind of dunning and system, but this this is, like, next level for giving people warnings at different stages depending on their status. Yeah. And, it's amazing how many people obviously, if you're not paying, then, actually, here in this coworking place, for years, we just never got an Internet bill, like, for cable Internet.

Yeah. Somebody found something in the system.

Yeah. It's a good things to put in place. Yeah. Dude, a lot's happened though. Let's talk briefly about the modern day run on a bank, because it was silicon Silicon Valley Bank. And, that we were actually a briefly, an SVB customer.

I don't know how long we used them. I mean, they were what Stripe Atlas used when we signed up and incorporated, and they just, like, automatically open an account for you.

They were the only option for a long time. Now, Stripe Atlas offers you a few different options, but

Yeah. Yeah. I mean, we used them and it was like, it was a bank. It was fine, I guess, but it was really hard. I think it felt really hard to do stuff. Mhmm. It's pretty inflexible. I don't know. We used them for maybe a year. I don't know. I mean, we didn't we didn't make money for a while. We had

to count actually used thought we should switch right away because we signed our partnership docs, and I don't think I ever logged into Silicon Valley Bank. And then fairly soon after that, I think you were like, let's get off this Silicon Valley, and we switched to Capital 1.

We did Capital 1, and then they capital 1. I think they like closed that type of account down or

something happened like a small business

account or something. Could log in to the dashboard or something. Yeah. Yeah. And so we found Mercury pretty early on. Yeah. When they were pretty new, I think, still.

Yeah. Yeah. That would have been yeah. We it feels like we've been with them forever now. I mean, the the UX of Mercury is incredible, but I think, this whole banking crisis has made us rethink about what is a bank.

Yeah. Because Mercury Mercury is technically not a bank. They are. So tell

me what is mercury? What is it?

Well, I saw this something online and I think it was the guy that runs it, said something. He's like, we're not actually a bank. We're like a, we're a software platform for your money, but we work with banks. They have partner banks.

Okay.

And that's where your money goes. Right? And it can you I think they split it across multiple accounts or something. I mean, it looks like one account to you, but

Yeah.

It's not, yeah, it's not technically a bank.

Yes. But

it's all very seamless. I mean, it's, like, has worked great. They have free international wires and, like,

The user experience is amazing, and it's it doesn't feel like something that's been taped together. It it just, like, we we've sent tons of wires. We've, you know it hooks up to our accounting platform well. It it feels like it just always works. It's been very dependable. And

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 better for that type of company. But

Well, apparently not. They only had $250,000 of, of insured deposits.

Right. Right.

Right. I I I I think this is this whole episode and honestly, it is awful. I don't wanna make light of, you know, a lot of these companies who've received funding are still small businesses who are run by people like you and I. They have employees like Transistor and, you know, not making payroll and all of that stuff is awful. And I also wanna recognize that not every company can be structured like Transistor, But it did reveal how different it is to be running a business that is just profitable.

No. We don't.

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 gone up by a little bit. And, that has that model is calmer at least at this stage of history. That could change. But it has it it just revealed, like, wow. Like, this whole new financial era we're in with high interest rates and now, you know, all the think pieces on medium and, other places are like, how now Silicon Valley's gotta gotta get back to the basics, get back to profitability.

Yeah. Okay. I think that's the same in Canada.

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 and I have tried other businesses in our past,

and Mhmm.

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 have businesses like that, you know, the Ian Landsmans of the world, the Michelle Hansons of the world, they're running small software companies like us, and, I think all of us were kind of standing on the outside of this going, wow. Like, yeah, if you had a bunch of investment and then all of a sudden you lost you you I mean, it wasn't just that they lost. This would have also affected us if all of a sudden our bank account got frozen.

Right. Or, you know, the the some of the providers we use are on out of money, and then they can't actually run their business. And

Yeah. It did make me think about TransferWise slash Wise, which is similar to Mercury. I think it's just some amorphous tech chrome on top of a some something on the back end. You know? Right.

Yeah.

To the big banks. And you're gonna, you know, there's, especially in the states, you're gonna have a situation where all the big money is at Chase, and then it's gonna make it even harder to regulate, that the the big banks because they're gonna always all of them they're they will be much too large to fail.

Yeah. I think I yeah. Maybe. I think the government did the right thing now and kind of Mhmm. How they reacted and kinda prevented a bunch of different bank runs. But, I think I think Mercury actually got a lot of new customers what I

was trying to Yeah. That's true. That may it'd be interesting to know how how this actually shook out for them because I see 2 trends. 1, people moving their money out of smaller banks like Mercury. And 2, I've heard that a lot of people were switching to Mercury.

Mhmm.

But, yeah, they just announced. We've worked with our partner banks to offer additional 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 up to $5,000,000 in FDIC insurance, 20 times the per banking limit.

Yeah. I think that's something to do with how they split your money across accounts

Yeah.

Behind the scenes. But

And there's also I'm it's not clear if every depositor gets that. The other thing is that every time I've had to deal with insurance, it really sucks. So it's like, sure. You might get your money back back, but if if accounts get frozen or whatever, it still sucks because then you you're you've got even a week without access to your bank account is,

not fun. Once the once the FDIC steps in, they're pretty efficient. They're pretty good at what they do. I don't think it's gonna be it's not like working with some crappy insurance company. Yeah.

Yep. Yep. Yep. Yeah. So interesting. It'll be interesting to watch that. I think we should talk about this next item that I'm highlighting. Are you okay if we talk about that? Yeah. Okay.

have to categorize it as research and development?

Yes. And then you have to amortize that over 5 years. Yes. Thanks.

Yeah. Which makes your which makes your taxable income way higher.

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 dev salaries that equal 500,000, and your tax rate would be 30%, so your tax bill would be 75,000. Under this new system, your new your tax bill would be 225,000. It dramatically increases. It basically, this legislation makes no sense for small software companies. It is actively harmful for small software companies.

Yeah. I mean, especially, like, you know, if you don't last for 5 years. Because every year, you're gonna amortize more and more. Right? So it piles up and it gets you'd be paying less and less over the years, but but like the 1st year or 2 is gonna be like, it's massive hit.

So Michelle Hanson, friend of the show, she's the cofounder of Geocodio. She has started the Small Software Business Alliance, s s sballiance.org. I'll put the the link in the show notes. If you oh, she's actually expanded this now. She's got a great TLDR here too.

Yeah. I mean, from reading about it, it's like nobody really wanted it anyway, and yet they 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 vote it. They just vote it in, and then they're like, oh, wait. No. That was a bad idea.

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 was thinking about this the other day because are are you familiar with, Peter Lovell's, nomad list? It's like a site where that you can, like, put in, 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.

Yeah.

But on the flip side, if we incorporated it anywhere but the US, your your Stripe your Stripe fees go up substantially. So if you're a Stripe if if you're incorporating Canada using Stripe, all of your US credit cards, I believe, are treated as foreign. Right? They're not domestic. And so you pay an additional 1% or 1.5%.

Right.

Like, if the best place to incorporate your company is in Saskatchewan, Canada. Let let's do it.

You're always ragging on Saskatchewan.

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 long have we gone now? Oh, wow. Already 20 minutes. Okay. Well, let's let's do a little sales tax compliance update because Oh, yeah. I think I think, that's what people are here for.

The exciting part of this.

Yeah. We Chris, we need a little sales tax jingle here. You know? Sales tax compliance. That's the first line. I'll I'll I'll keep working on it. So I think the most relevant news here is that Revan has just shut down.

What is Revan, Justin?

So Revan was one of these merchants of record that was recommended to us by folks saying, and I'm gonna yeah. I'll I'll use my voice, but, you know, like, they were like, you just gotta merchant of records, Revan, they'll solve your problems. Quit complaining. You know, we had concerns back then. Now they've shut down, and I have even more concerns about all merchants of record.

Yikes. And that's what Revan would do too. Right? We'd be we would have been part of that account. Right?

Yeah. This is this is what would happen with any Yeah.

I mean, that would that would just kill our business immediately.

So I'm gonna put that link in the show notes. So back to their email, the merchant record operator could potentially become involved in illicit or illegal activities quickly, which could lead to all sorts of problems. The problems are that the people processing your credit cards could say, no. This whole account, we're just gonna shut down. Or this whole account, we're just gonna put on pause.

Yep.

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 been flagged, and I can't get it out of here. I need to get the money. I can't it's a nightmare for the individual. But now imagine assuming all of that risk. You're just gonna go into a pool. It's like going into a email deliverability pool or a, a web hosting pool where you're all on the same IP.

Shared, yeah, shared server. Yeah.

It's the same risk. And this is something I hadn't even considered before with Merchant of Record.

Yeah. That makes it much, much less appealing or not appealing at all.

Especially after these bank runs. It it it's like I mean, this is a risk. Of course, this is a risk with any, credit card processing you do. Again, PayPal, Stripe, etcetera. The difference is this is like a party line.

Mhmm.

And if somebody on that account fucks up or does something illegal, it affects everybody in the merchant of record pool.

Yeah. That's wild. Or, like, you know, if Fleurly or Revan was a bad actor, they just be like, we're just taking your money, closing the account, and going to Jamaica.

Mhmm. Back to the email because this even this I don't again, this is just one company's perspective from Revan. But, 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.

I mean, hand your bank account over to somebody like that. Yeah.

Yeah. So, yeah, we've talked we kept talking about solutions. One solution was maybe we should get your brother to help us out.

Yeah. I mean, he

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, he actually worked on some legislation when they were, they were working on sales tax legislation for Amazon at the time. It was a, I mean, it was a long time ago, but so he, I mean, he read all the legislation and probably helped write some stuff and he knows people who still work there at at certain, parts of the government are like these tax accounting firms who know the ins and outs of not just Texas, but basically they have to keep up with, like, what every state's doing. Yeah. Whatever we decide, it might be turning on Stripe tax and using tax jar for some stuff, but then Yep.

I'm for it.

Yeah. We'll see. I mean, you know

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 a you know, maybe something like Michelle's Small Software Business Alliance, and maybe that's the platform. But to be able to publish more of this publicly, to share our experience, and to share some of these things that just aren't being talked about

Mhmm.

I again, I think what's challenging about this is if you're brand new, if you're a small company, a lot of this probably feels like superfluous or, you know, maybe you and I are overreacting or complaining too much. But once you're actually in it and actually having to figure all this stuff out, it just becomes clear so quickly that there's no way. It's not humanly possible, even for these merchants of record, to be 100% completely compliant with every tax region in the world at any given moment.

Right.

The legislation's changing all the time. The rules are changing all the time. And even, like I said, I've I've noticed errors on multiple platforms, Multiple merchants of record platforms where they're making the calculations wrong or they're showing the wrong information on the receipt. It's very very difficult to do this. And as has been mentioned before, tomorrow, Moose Jaw Saskatchewan could say, well, now any anybody who buys SaaS products in Moose Jaw is subject to a 35% tax.

Right.

Could could send emails to all all the companies in the world. Hey, you know, hey, DigitalOcean. Hey, Amazon. Hey, Microsoft. You are now in violation of the Moose Jaw tax code, section 102, section b. And, you know, like, then and and they could

take take a week out of your life to make it to make it, work right.

And and, you know, payments to the Moose Jaw tax office must be done in person between the business hours of 10 and 3 PM, Tuesday to Thursday.

Please fax this form to this number.

Please call this number and do the the male moose, mating call, and then you will be greeted with a 5 digit code. Uh-huh. It's ridiculous. Yeah.

It's a lot. I mean, it just consumes you after a while, and you're like, I don't wanna think about this. I'm just gonna ignore it, and then, I mean, you know, it's

just like All the shit. You know what? It the going through this, software is a pretty nice business to be in. Some of this stuff just feels oppressive. It just feels like I know.

$5.

No. Not quite 5 grand.

No. 5. What's the biz I don't know. What does it do?

It's a little shop, little little record shop, tiny store, like, under a 1000 square feet, probably 500 square feet. Just insurance.

Is it like insurance or inventory insurance or what?

It's liability and some inventory insurance, but $500 a month. And I was thinking about it. I'm like, I don't think I I I should look at our insurance bill, but I would be surprised if we're paying that much.

Right.

And and his like, that's more than, that's like a significant portion of his expenses is just insurance. These kinds of things, I think entrepreneurship is amazing. I think that small businesses are kind of like the lifeblood of any economy. And I I don't think enough people are talking about it. Maybe because they don't wanna seem like complainers.

Right.

But it's hard. It's hard. Yeah.

I mean yeah. I mean, US US certainly doesn't make it easy. I mean, Canada, probably not either. But

City planning departments and and Chicago SaaS sales tax. It's like I I could tell you one thing that they should all do right away is increase your exemption limit. Don't make it one transaction and then you've crossed the threshold. Just increase the exemption limit and give small businesses some breathing room.

Mhmm.

Anyway, that ends our sales tax compliance section. Sales tax compliance. On a positive note, you just released some new software.

I did. Yeah. We we've been kinda working on this for a while. It's an integration with Patreon, which has been interesting. Yeah. We'll probably have some I'm sure we'll have more and more updates as people use it and time goes on. But, essentially you can hook up. You can connect your Patreon account to your podcast, and it'll pull in all your supporters and display them on your website. And,

show notes as well.

Show notes and have a nice little section where it you know, people can join the Patreon campaign and shows you, like, you know, if you have progress towards a goal and how that's going and shout out new supporters in your show notes. Yeah.

Oh, yeah. Yeah. There's even a little we have these liquid tags, that you can specifically highlight new supporters since the last episode.

Yeah.

Yeah. It's really cool. And then a little widget on the bottom of the website that says, this podcast has 16 supporters or whatever. So, yeah, that that was really cool to to roll that out. Lots of folks have already implemented it.

Yeah. I think, yeah. There's, you know, there's other features we're thinking about related to this or on top of this or other platforms that we can integrate with that do something similar to Patreon or, but Yeah. We'll see see how this one goes, but so far people are using it.

Yeah. Yeah. It's exciting. I'm I'm I think monetization is one of those things that, we wanna be thinking more about. And it is a little bit more complicated. One of the reasons we chose Patreon was because the complications of, like, using Stripe or PayPal, it it it's just a bit of a harder lift. And this was like, okay. A lot of our customers already use Patreon. Let's just do this as the initial thing to get us going.

Yep.

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.

It's been great.

Have a big refresh. And, Yeah. It just feels like every day we've got something new to look at. He's also, worked on a new podcast website theme that is getting pretty close.

Yeah. It's been pretty close to being done.

So that's been exciting. It's a it's a much different theme than we've had so far, which is which should be cool. And, I released a little side project, mypodstudios.com that I'd like folks to go check out. It's Yeah. I I'm thinking more about my studio.

You need a bookshelf back there that makes you look smart.

I know.

All the things you're reading. Tax compliance law.

Tax compliance law. That I would love that. I should just frame some tax compliance law, and then people are like, hey. What's that in the background? Oh, that's section 32 b from Moose Jaw, Saskatchewan. I don't talk

about read that. Just read that during lunch.

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 at studios I like. Yeah.

Cool.

Alright. Well, John, now's the time to use our feature. And thank our Patreon supporters.

Yeah. Thanks, everyone, as always. We have rewardful.com. Those guys are great. Greg Park, Mitchell Davis from recruitkit.com.au, Marcel Falais from wearebold.af, Ethan Gunderson, Anton Zorin from proudcamp.com, Bill Kondo, Alex Payne Ward from memberspace.com, Russell Brown from Fotivo.com, Avenger Sassy, Austin Loveless, Michael Siper, our friends at Fathom Analytics, my brother, Dan Buddha,

sales tax compliance expert.

Yeah. Soon to be Colin Gray, Darby Frey, and Dave Junta.

Junta. Junta. We need a new podcast just called Junta, j g I u n t a. Yeah. Junta. It's just Dave.

It's just Dave.

Just talking about Chat

chats with Dave.

Yeah. Dave, if you wanna start the Junta podcast, let us know. We'll we'll we'll we'll we'll show up for that. Actually, that would be fun. It just it's like whoever wants to show up, shows up. Dave just announces the time, shows up.

Yep. Someone just pops in.

That's the show. Yeah. Sounds good. Alright, everyone. Thanks for listening. Please reach out if you've got comments or thoughts. We'd love to hear from you, And, we'll see you next week. Beauty.