Adult Site Broker Talk Episode 294 with Fabio Lavanna of 1stopVAT

This is Bruce Friedman of Adult Side Broker and welcome to Adult Site Broker Talk, where each week we interview one of the movers and shakers of the adult industry and we give you a tip on buying and selling websites. This week we'll be speaking with Fabio Lavanna of 1stopVAT. I'll be in Cali, Columbia for the LAL Expo April 27th through the 29th I hope to see many of you there If you'd like to sit down and discuss business contact me at adultsidebroker.com We're proud to announce our latest project TheWarOnPorn.com You'll find articles on age verification laws and other attacks on our industry It's to raise awareness of our industry's plight in the war on porn. You'll find all that and more at thewaronporn.com. Now time for our properties for sale at AdultSite Broker. We have a premium AI companion platform focused on emotional realism and deep memory. Users interact with lifelike companions that remember every detail and respond with real emotion. They've just added advanced video capabilities. We have a network of BDSM subreddits that has over 1.49 million users, over 3.8 million posts, and almost 45,000 comments. The three subreddits feature rough anal, rough sex, and BDSM. We have a buyer who's looking for dating and lifestyle sites in Europe. They'd also consider other geos. They currently operate some very successful sites. We're offering a growing free porn gaming site with adult sex games. The site is owned by one of the top entrepreneurs in our industry. And there's a highly active, organically grown Reddit community centered around the stocking and foot fetish niches. It's one of the leading spaces for adult fetish content on Reddit. For more information, go to our listings page at adultsidebroker.com. Now time for this week's interview. My guest today on Adult Site Broker Talk is Fabio Lavana of One Stop VAT. Fabio, thanks for being with us on Adult Site Broker Talk. Thanks for having me. It's a pleasure. Fabio is an Italian-born resident of Latvia. After studying tax accounting, he explored several career opportunities before coming to the world of taxes seven years ago, specifically as a VAT consultant. He recently joined forces with One Stop VAT. They're a Lithuania-based VAT compliance provider with worldwide clientele, bringing VAT, sales tax, and GST compliance services to over 110 jurisdictions worldwide. One Stop VAT's mission is to ensure that its clients are 100% bulletproof when it comes to following tax rules in all the countries they're serving to make sure that businesses can concentrate on doing their part of the job while taxes are being handled by One Stop VAT. With more than six years of experience with e-commerce, they've recently shifted their focus to the much more challenging and complex world of digital goods and services, including the adult industry. They have over 50 dedicated tax professionals providing qualified advice and support. Fabio, tell us about One Stop VAT, besides what I just said, and what led you to focus on serving online companies. Sure. Well, yeah, you said a lot. You said pretty much everything. Thanks for making it as clear as deep as possible. Okay. Thanks for your time today. Okay. So, bye. Let's go. All right. So, yeah, we are those who make people pay, as I like to say, and we keep them happy while doing that. Because, you know, paying VAT, paying taxes is an important part of every business. And, you know, you have to be compliant to avoid having consequences with tax offices and the like. And the industry of the VAT providers is quite wide. There's quite a bunch of good people out there. They're all working very well. They serve different clients. They serve different regions of the world even. But there's a really high professional level there. And this industry in itself is very much leaning towards the physical goods merchants. With Amazon forming a large part of this market share, of course, because Amazon is the largest shop in the world. So there are obligations that come with having a shop on Amazon. And that's a pie everyone wants to share. And since we're hungry and we like sweets, we like cakes, we decided to try and maybe concentrate on another kind of cake. And instead of focusing on Amazon, which we still serve, of course, it's an important market, you can't just ignore it. We moved to the world of digital goods and specifically digital goods merchants, those who sell services and digital product. Just to make things clear, just for context, I want to clarify what digital goods are. And I'll take a definition that I asked my friend, Chad GPT, to do for me, but I'll not be reading verbatim. So digital goods are products that exist entirely in an electronic form. The things you can buy, you can sell, you can download, but you don't actually have them in your hands or in your pocket or in your wallet. So think like having your favorite songs on Spotify, any book on your Kindle, a movie or Netflix, or in the context of the adult industry, a pay-per-view video or an OnlyFans, Pornhub was a premium, X-Videos Red, and so on, where you have to pay extra on top of your normal access. So, unlike physical products like mobile phone, bottle of water, pair of socks, whatever, that need to be manufactured in country A and shipped to country B, going through country C and so on, digital goods are created once, they can be delivered instantly without going physically from A to B, and they can be delivered anywhere in the world multiple times through the internet. So, you can sell this phone once, but you can sell this video a thousand times. And the fact that there's no physical journey creates a very, very specific situation when it comes to the taxation, to how these goods are taxed or even if they're taxed at all. Of course, it created a business opportunity for us. So we started shifting our focus to this business segment, of course, without forgetting the average Amazon merchant. As you said before, we have our team of dedicated advisors. We have a specific team there that is constantly updating us on the changes of tax laws in several countries worldwide when a new country is adopting a law for digital services, when something changes in the taxation of this or that item. And, yeah, as I said, specifically focusing on digital goods. Yeah. Okay. What specific tax compliance challenges do you see online businesses facing in today's regulatory environment? Well, when we think about digital goods, I would say the biggest challenge is the part I was just mentioning now, and that's keeping up with the regulations. Because in several countries, the very existence of digital services is something that they didn't take into consideration until a few years ago. And in some countries, mostly in the so-called developing world, it's something that is happening now. They're tackling the taxation of the services only now. One example I just came across like last week I was dealing with a client and it's Sri Lanka. They wanted us to cover their sales tax in Sri Lanka. And we found out we couldn't do it yet because the government is introducing the VAT on digital goods and services only as of March next year. But they do have a plan. So they are adopting it. Other countries are not yet. They're not there yet. But, of course, governments are realizing now that whatever happens on your computer screen can be a source of tax revenue. Oh, sure. They're very happy to make you pay and they're finding ways to do that, you know. So, our advisors team, they're frequently posting on our blog, on social media, whenever there's this kind of updates. And, of course, it helps our clients stay ahead of these changes and they can knock on our door whenever they see that something applies to them. Yeah. Do you guys have a podcast yet? No, we do have some webinar occasionally. I have to say it's not the most exciting subject. It's not the sexiest. Taxes are not sexy, but, you know, they're inevitable. Yeah, just like death. They say death and taxes, and taxes is one of those two. How pleasant. So, both are so pleasant, actually. Why is your company looking to expand into the adult segment specifically? Well, the digital services, digital goods is a very special industry. And the adult segment is a very particular segment of the special industry. And as an outsider, I have to say that there is often a social stigma that comes with it. And people, they frown if you say that you're selling videos or whatever you're doing or you're a performer. But the operators that move in this industry, they are getting more and more aware that it's a way to earn a living. And they are getting more aware that they have to be as compliant as possible with the law. Not only when it comes to the content, which is something you guys are dealing with a lot recently, but also when it comes to the tax part. It keeps you safe in a way. It keeps your business in good standing. And, you know, the subscription-based and pay-per-view websites, all those websites that charge a fee to their clients, they have to be aware of the tax framework of what I said before, basically, of how their revenue is taxed, how, if, when, and where it is taxed, and to stay on top of that. So in short, I would say like in all industries, education is key. It's good to know. It's important to know things in advance when something is going to happen in the tax part of your business. And what we do is that we help them get more educated in tax matters so they can focus. They can, in a way, forget this part and they keep doing their daily job, which is making their site visible, making money out of that and living. There you go. Now, I always like to ask this to people who are fairly new to our space. And you told me that before the September test show, you were an adult show virgin. So, now that you've had your virginity broken, what was your thought about talking to people in the adult industry? The average outsider, I'm an average outsider in many things as well, would think, wow, I'm going to an adult show. There's going to be lots of TNA, lots of fun, lots of drinks, but there was a lot of business. Of course, there were beautiful women. Of course, that was eye candy. But I found people who are very focused, very prepared. We had a panel with a group of Italians. There was a subgroup, Italians in the adult business. And I was really, really not surprised because if you're in business, you have to know a couple of things, two or three things. But I was really impressed at how professionally they run their businesses and how they try to be, as I said, on top of things that happen to make sure that it cannot come and haunt you in a way. Yeah. Yeah. So, I'm guessing that my good friend Massey was on that panel. Absolutely. Yeah. Love that man. He had his feet perfectly there. Oh, yes. Yes. Indeed. Indeed. Yes. Yes. Massey's awesome. What unique tax considerations do adult websites face compared to other digital service providers? Well, the rules are the same. The rules are the same for everyone. They apply to all other providers of online-based services. The example that I made earlier. Let's say the rule of thumb in general, then there can be exceptions to that, is that the place of taxation changes depending on whether the service is provided live, think a cam show, or if it's a pre-recorded item, like imagine a language course, Duolingo, or something that you can access at a later stage, you download it on your computer, and then you look at it whenever you have time. So if it's a video on demand, in this case, you purchase a video and then you watch it whenever and wherever you want. So to keep it short, a live performance is taxed in the provider's place of residence or registration or the performer in this case. So if it's a lady doing a camp show sitting somewhere in LA, it's going to be taxed in California. Now, California is maybe the wrong example because they do have a particular legislation for digital services that doesn't apply up to a certain threshold, but I'm not going to get too technical with that. But that's the general idea. Performer provider is sitting in place A and the tax applies in place B. If it's a pre-recorded video, then the guy that downloads the video and watches it at his convenience is sitting somewhere in Germany, then the applicable tax is going to be the German one. And again, without getting too technical, there's a global way of reporting tax in the entirety of the EU. So you don't have to file tax in Germany for 10 euro, in Italy for 50, but you can do a EU-wide declaration, EU-wide reporting. And additionally, in some countries or some jurisdictions, there might be a revenue threshold. So let's say that the first 100,000, whatever, is some sort of a grace amount where tax doesn't apply, registration doesn't apply, but others may have no threshold, meaning that the first sale you do, 5 euro, is taxable. You have to find a way to pay tax on your 5 euro. Italy, in Latvia, in Kazakhstan, in Uganda, you name it. And of course, that makes for quite a challenge because the provider would have to track their sales very accurately and flag any sales in new countries and check what happens there. I have a new sale in Kazakhstan. What's going to happen here? Do I have to pay? Do I not have to pay? Do I have to register? Do I not have to register? And so on. That's why we're here in the end. And it's important to have a partner to work with so we can help with monitoring. And because, yeah, this is a market that is growing quickly and tax offices don't sleep. They're constantly looking for ways to take a slice of the money in form of tax revenue. So it's just a matter of time until you get a letter from a tax office from the other side of the world asking you to pay your tax on that. So it's really better to be compliant before tax officers notice that you're not in the end. You know, I would think anyway. I mean, in the case you talked about a CAM model in California and let's say the CAM company's in Romania, okay? But the taxation would not be in Romania because when there's a live CAM show, the initial payment goes to the company. So wouldn't that make the company's domicile where it would be taxed? Well, you actually hit the nail on the head with that, because that's a very technical question you've been asking me. In this case, yes, the initial tax is done in Romania, and then it's going to be the provider. So the Romanian company, which is going to be liable for paying the taxes in California as a so-called merchant of record. It depends on whether you are selling your product through a platform or standalone. Think, again, Amazon. So if you're selling stuff by Amazon, Amazon can serve as a so-called deemed supplier, which is the equivalent of merchant of record. Basically, they are the ones that are responsible for your taxes towards the tax offices, but they're going to collect it from you. So you're selling something for 100 euros. Let's say the 20 euros out of that is tax. So your transaction is not a B2C transaction to an end user, but it's for 100 euro and then you have to pay 20. But it's a B2B transaction with the provider and the provider gives you 80 and then they pay the 20. But the provider in this case is the one that has to be registered for VAT at the jurisdiction where you would pay the taxes and pay it on your behalf. So this gives me the opportunity to say that it's not only the end operator, let's say the provider of the cam show, the performance on that needs to stay compliant. But this is also very, very relevant for providers. Yeah. Cam website, I don't know, Bongo cams first comes from my mind, have to be compliant, can have to monitor their sales in country, country B, country C to make sure that they don't get hit from behind. Got it. Got it. So explain how VAT sales tax and GST obligations work for adult sites selling directly to consumers. Well, I think we just did in a way. Okay. Because basically when you're selling directly to the consumer, you have to register a VAT number, sales tax, GST and so on in the country of destination if the service is taxable under the description that we made before. So when you say destination, it's where the customer is. Yeah. Sometimes I use the physical goods lingo, forgive me. Okay. No, no, no. That's fine. Interesting. Okay. What are the biggest compliance risks that B2C adult operators should be aware of in different jurisdictions? Well, as mentioned before, it's navigating the rules, I would say, because it applies to every business, of course, but what affects the adult scene most is that, briefly mentioned it before, we've seen when I was at Tess in Prague last month, there was a lot of talk about Michigan and how restrictive they're being on basically banning online porn and how can fall under the freedom of speech. And so there's a lot of arguing on what constitutes acceptable content or not. That comes before the consideration on tax, whether your content is acceptable in country A, country B, and so on. But when it comes to the taxation part, yeah, as we said before, the tax law on digital service may be not applied yet, may be non-existent at all, or it may be fully implemented. But one thing that could be important to consider now is AI, because AI governments are tackling the taxability of AI-generated content. But while they're discussing it, and we know how political discussion can be long, they finally come to an agreement. Okay, let's tax it this or that way. But you know that AI is developing so fast that it's already like three years ahead. By the time they finish discussing the law, it's already three years ahead and it renders what has been discussed until now obsolete. Because, I mean, if we use the same logic that we were using until now of taxability in the place where the service is provided, right? One can argue, okay, let's imagine live AI videos. I don't know about live. I'm not a user of that field. So I use the three parts. So a live AI generated video bought from Kazakhstan. I like to use Kazakhstan in my examples, from a company that's based in Romania, as you said, but generated at the moment by AI through a server that is in Iceland. Where is it taxable? Is it something that's happening in Kazakhstan? No, because it's live. Is it something that happened in Romania? No, because it's generated by the AI server, which is in Iceland. So it's an extreme example, but it's something that legislators have to tackle. But by the time they come to tackling it, It's already obsolete. Well, and the hosting is all over the world. So, I mean, the hosting for a fan site or for a cam site or for a pay site might be in Holland. For any kind of a site, pay site, a fan site, a cam site, does where the hosting happens matter in terms of taxation? In terms of taxation, no. It's only where the company is based. So let's say that the parts that are concerned are the parts that constitute the transaction. So company based in Romania, client based in Kazakhstan. But I was just making an extreme example with the AI. When the AI part is generated somewhere else or is generated by a third-party company, which is based somewhere else, then it can have repercussions in a way. Another thing to mention is that, okay, fortunately, first of all, the tax law amendments are not retroactive. So if you are providing a service today and they reach an agreement on how to tax it next year, you don't have to report that, to amend that part to match the taxability. So if you have reported it in Germany and it's now taxable in Netherlands, you have reported in Germany, you paid in Germany, you're fine. It's confusing. It can be confusing. And another thing that we should mention is there's no escape. I don't know if anyone knows an acronym, which is CESOP, C-E-S-O-P, which stands for Central Electronic System of Payment Information. It's basically an exchange platform for tax authorities that help them identify businesses that are doing lots of cross-border trades or from country A to country B, but they're not reporting their VAT accurately or properly. So it is an EU system. It was born as an EU system under the framework of OSS, one-stop shop, which is where I take our name from, which is basically, to cut it very short, a unified way of reporting EU VAT within the EU on cross-border sales of mobile phones, socks, and so on, from Germany to Italy, from France to Spain, and so on. This exchange platform basically was informing tax authorities of the destination countries would say this should have been paid here, but it wasn't. So they inform your country of incorporation, the country where your center of VT number is registered, and they can seize your money. They can block your funds, and you can get your, for physical sellers, you can get your Amazon account blocked, your website blocked in this case. is being exported outside of the EU. Because we export good things, but we also export ways to make people pay. So, cases are coming of situations where the guy doesn't pay his tax in Colombia and the Colombian tax office comes to Germany to recover their money. So, there's no escape. As I said, be very careful with that. Sounds like a movie. There's no escape. You know, one other thing that came to mind, what if somebody, let's say the end user, or let's say the provider is using a VPN and puts themselves someplace else? Well, VPN doesn't really matter in this field because it only matters as far as the access to the content is concerned. But what matters is the country of transactions. So if you're using a VPN that shows that you are in Denmark, but your billing address, your credit card shows an address in Germany, then you bought it from Germany. Okay. Okay. I understand. Okay. Interesting. How did you handle the complexity of different tax rates and rules across multiple countries for adult content providers? Well, as we said before, we have a team of roughly 50 people. So, of course, we have to keep them busy. That includes several departments. And yeah, we have the operations department that takes care of actually filing the returns. And we have the account managers who are the ones who are talking to the clients. That's the hardest job, believe me. I've been doing that. And we have the accountants that are actually doing the actual filing of the return to the tax office. They are the ones who maintain their relationship with tax offices in a way. And on top of those, we have two very specific teams. One is the tax consultants. They're mostly working remotely. We've got two guys based in Serbia. They are freaking Wikipedia, taxopedia, something like that. They know everything. They're constantly updating us with all changes in local regulation. Sometimes you see a post of something new happening in the Philippines, in PNG, in Thailand, whatever. They are really, really on top of it. So if there's a change in specific products, specific services, or whenever, as we said before, a new country decides to start applying taxidone digital services. And the other one is the product team, which works hand in hand with them and basically turns these new regulations into instructions for the software so that when you feed the data into our system and our system generates the V2 return or sales tax or GST, you name it, it makes sure that the right rate is applied. As I said before, we make people pay and we keep them happy. That's the idea, making them pay the right amount in the right place. Interesting combination for sure. Something that came to mind does, in most cases, I would imagine, that the accounting department of a company or in some cases, even the CEO of the company is going to have to do all this work. and be forced to know what all the rules are everywhere, which, as you said, is almost impossible unless you're in the business because you've got two specialists that keep up on the laws all over the world. And I doubt very much if people inside companies have that. So that's obviously a fantastic resource. But does the company need to be a certain size to make sense of this, of using you? In theory, no. In theory, you should be, even if you're a small time operator, as an old colleague of mine would call it, one man and his dog business. That's me as one man and five dogs. But anyway, go ahead. Or one man and three cats in my case. Plus wife and stepdaughter, but that's another story. Well, that's why it's good to expand slowly, which is in a way counterintuitive when you're talking about online digital product sales, because you're not storing your goods anywhere. You don't have overhead costs to ship your goods in Thailand, in South Africa, in Canada. But you do have. You just don't realize it. You do have this kind of cost if you are selling there and if your goods are taxable there. So, the advice I give to physical goods sellers is, again, I have to go back to Amazon in a way. We have an American seller that is starting to penetrate the European market. I always suggest them to start with one country, start selling, and I have specific advice, Germany, because it's easier in terms of tax obligations and so on. Don't try to fuck their tax people, though. No. They are slow, but they get to you. I know someone who did time over tax evasion. But anyway, that's another story. Yeah. And so the advice I give is to, if possible, expand slowly. Like limit geographically your sales, let's say, to European Union as a whole first. Because European Union as a whole contains German, the Italian, the French market. The Germans are very high on fetish. So our friend Massey would be very happy. And they allow you, I mean, selling to a European market allows you to sell to, I don't know how many we are, 300 million people with only one tax report. And that makes it cheaper when it comes to paying people like us. If you are selling, let's say you start making millions. I don't know what your threshold is for deciding that something is okay to keep expanding. When you reach the point where you say, okay, it makes sense to add another country and to bear the cost of expanding to this other country, then do it. Add geo-restriction and take the geo-restriction of selling to this market or that market. Then before you know, you're big enough that you can open the world. Yeah, definitely. But I mean, let's say somebody is a very small company. Is this still a service they can take advantage of and benefit from? They can if they are small worldwide but big locally, let's say. If you focus on a small market or on a very specific market on a few countries, as I said before, then you have the chance to expand gradually. It's, as I said, counterintuitive, but it's something that should be taken into consideration. You can also pick, that's an interesting advice that just came to mind, that you can pick countries or jurisdictions where there is either no law on digital services or there is a high threshold. Meaning that, let's say, for the first, I think the first $200,000 of sales in certain states, certain US states, you do not have to report tax. You don't have to pay tax. So you open, let's say, open up IPs from, say, California, sell there, see how it goes. The moment you reach the threshold of $200,000, it's the moment that makes it worth your while to start paying taxes. Yeah, I certainly wouldn't open up in California. My company used to be there, and I'll tell you something. They tax you every which way but loose, so that wouldn't be my advice. Okay, yeah. It's an example. You are closer to the ground there. So you have your advice, absolutely. That's where I'm from. What types of strategic partnerships are you looking to build within the adult space? Well, as we've been saying all the time here, the ones that the merchants that would mostly benefit from having a partnership with a provider like us are the B2C merchants. Because they will be the ones who are actually firsthand dealing with having to pay taxes and so on. So it burns closer to their heart or to other body parts in the back. But of course, this doesn't mean that working with us is a no-go for B2B players because there are opportunities for them as well. Okay. So how can B2B players in the adult industry benefit from a cooperation with you since you deal mostly with B2C? Well, of course, if you're not paying your VAT directly, you're selling B2B, you can either benefit, be our client, let's say, if you are operating as a merchant of record, because that's where you're going to have to pay your B2C sales, your B2B2C sales, sorry, VAT, on behalf of the final, of the cam show provider in Kazakhstan, again, or Italy or whatever. That's a very specific case. But if you are not a merchant of record, we have two cooperation options. One that mostly applies in another world, let's say in the world of accounting firms, is a white label option, where we are basically selling our service to the partner. Partner is reselling it to the B2C merchants. But however, of course, if you're reselling the service, it says if you're providing it. So you will be the end client's point of contact for VAT matters and get VAT-related questions. Of course, it's not ideal if you're in a different line of business, if you're not in the accounting field, because you may have to field questions you don't have an answer for. So it's not what I would recommend for the adult. Yeah, I would not be ideal. No, no, absolutely not. And in this case, I would believe that content aggregators, traffic providers, all the operators in our industry who are selling to a B2B audience would mostly be working on a referral commission basis where we reward them with around 10% of their referrals yearly revenue. So if you advertise us or you bring us clients, we set up a cooperation scheme and we can, How to do it, possibilities are endless. Of course, you can set up mutual landing pages. You can send out promo emails, feature on each other's email, newsletters. Or what I see as an important way of doing that is going back to what we were talking about earlier, education. Having some webinar is a good idea, in my opinion, to educate the audience on the importance of tax compliance. And where you can meet people who have different, very specific business cases, and you can tackle them directly, possible, or trying to have specific answer to the specific case, you know, as a useful way to cooperate, I would say. It raises awareness in a way. Sure. Absolutely. Hey, that's what makes this industry go is people referring people. I get a large percentage of my business on referrals because either people have done business with me, know people who have done business with me, know me, and trust me. And a lot of people who buy and sell websites ask friends, hey, who should I use? And they say, hey, you know, use adult site broker. And that's, you know, I've got a really nice 20% of my commission that I pay people when there's a successful deal. And then if that person does a deal again and again and again and again, that person keeps getting paid. I always like to say it's the most profitable email you'll ever send. Yeah. I heard a speech in Prague. Yes, you did. Yes, you did. At Tess. Yeah, absolutely. What trends are you seeing in tax compliance requirements that adult website owners should prepare for? Well, yeah, it's the same stuff we've been talking about over and over, I think. The direction where the world of taxes, indirect taxes specifically, is going is tackling digital goods, digital goods and services. It's gold. It's a golden egg. And they are finding ways to trace. And I have an interesting example on that. finding more and more ways to trace your electronic transactions, your non-physical goods purchases, and they're finding ways to tax it. One thing that goes hand in hand with that is the e-invoicing. So more and more countries are implementing e-invoices, which means that each and every transaction you do must have an invoice. Each and every transaction you sell must be reported immediately, the day after, within a few days or so, electronically to the state. So you have to have Some kind of direct link to the software that tells the tax office, hey, Fabio has sold 100,000 euro and has to pay 20,000 euro of VAT. Pretty soon it sounds like they'll tax you when someone thinks about buying. Yeah. We're going 1984, you know? Exactly. And one almost funny example of this is what's happening in Taiwan. What's happening in Taiwan specifically with one way that people have, that normal people like me have to try and make money, which is the lottery, the national lottery. So when consumers are buying a national lottery ticket from a reseller, each ticket comes with an invoice. And it's called UIN, I believe, Uniform Invoice Number. And if your ticket doesn't have a valid uniform invoice number on it, it doesn't have a unique transaction, let's say, on it, then you win, I don't know, $50 million? No, you don't. You're not eligible to win the lottery. You're not eligible to participate in the lottery. That sucks. Yeah, that would suck, absolutely. And with my luck, I'm sure it would happen. But basically, in a way, if I can go a little bit to the extreme, it's encouraging people to snitch on the resellers. Because if you do not have a valid invoice number, you can, I don't know, report them to the tax authority or whatever. Because it's their fault if you don't win the lottery. Damn right. I would expect the merchant to pay me then. Anyway, how can proper tax compliance actually become a competitive advantage for adult websites? Well, be educated, get to know things in advance. We know that adult websites are facing scrutiny. I mentioned Michigan before. They got governments after them. Only like 30 states in the United States have either adopted age verification or are going to adopt age verification already. where there's a planned date for it to start. So it's not just Michigan. Yeah, Michigan was, let's say, the tip of the iceberg. But you guys know the iceberg. You guys are the Titanic and you're very aware of the iceberg coming in. And I can make an example that might ring a bell. You guys know Al Capone, right? Italians, we call him Al Capone. I've heard of him, yeah. Yeah, he was doing everything. Alcohol, smuggling, prostitution, drugs. All the legal businesses, right? Yes, exactly. And they got him for tax evasion. It wasn't murder. No, it wasn't murder. It was tax evasion. The issue was not how he was making his money. The issue was what he was doing with the money he earned by killing, by smuggling, by whatever. He was not paying taxes on that. And then they got him for that. Of course, this is an extreme way of thinking. It doesn't mean in any way that the money that guys in the adult business are making is illegal. Although one might argue, I mean, governments might argue that comes from a content that they don't like, so the money may not be liked. But if you still pay taxes on that, they turn a blind eye to that in a way. Of course. It's kind of like banks. You know, we tend to get debanked on a regular basis because we're in the adult industry. But for the most part, until something comes down from the very top of a bank, even though they may have a policy against businesses in our industry, the banker, the guy at the bank wants your money. And a lot of our people in our industry go through a lot of it. So unless an entire bank says, like Wells Fargo threw everyone that they knew to be in the adult industry out two, three years ago. which was pretty shocking to the system. But when I talk to people and they want to form a corporation and they want to get a bank, I say, tell them you are in digital goods. Tell them you're in e-commerce, whatever you do. And make sure you have a vanilla website to show them with your corporate name on it, something very boring. But whatever you do, don't tell them that you sell videos of people fucking on film and this is my website of people fucking on film because you're never going to get a bank account exactly but they may not like what you do but they still like your money that's the thing so yeah in short be be prepared be be educated and try to be one step ahead of what you're doing with planning the expansion to a country where you know what to do in from a tax perspective. Otherwise, you will be in hot water sooner or later, see the example we made before with this CSOP system. Yes, or Al Capone. Anyway, what's your typical onboarding process like for new adult industry clients? Well, it's pretty much the same regardless of what business you have. First of all, the first part is before the onboarding. So we have a free consultation call with the potential clients. So, you know, each business is unique. Each business has its own consideration, its own regulations to follow and so on. Its own approach to the regulations to follow, I would say. So we try to understand the business case and try to find the best solution for them to tackle the specifics. And as soon as everything's clear for both parties, and the client says that they want to cooperate with us, we start the standard KYC, KYB procedure. You guys know about that from an age verification part of view. But also, I believe that the providers have to verify the identity of those who are actually of the performance, right? So there's adult verification for the end user and identity verification for the performance. We do something in a way similar, verifying that the company is in good standing and so on, they send us the company document, the ID of the CEO with an identity verification system that is pretty much the same as you guys know. And then once the documents are checked and everything's fine, we prepare an agreement, which is then signed digitally. And then the client is handed over to our onboarding team, where the onboarding team is basically once again reviewing the company documents and help the client prepare the application for VAT or sales tax or GST registration, which changes from country to country. So what's the same for every country is the base documents you provide. Then some countries may require a notarized version of this, a translated version of that, and so on and so forth. They may have a questionnaire you might need to file. You have to ship it in original. You can send it in a scanned version. So it has all the world in there. But the idea is the same. Basically, you put together your company documents, you prepare an application, you send it to the tax office, and then you do what you do on flights. You wait. Just with the difference that you can be on a flight for two hours, for three hours, for 10 hours. The waiting game with the tax offices is weeks, if not months. Can go from three, four weeks to three, four months easily. Yeah, the IRS, they're famous for that. And so I just want to make it clear because I do have a client that probably within the time we're spending together, he may have sent me three emails already. He's a very impatient guy. But let's say that once the documents are sent to the tax office, we need to wait, take a sweet time. They take their sweet time. And once finally you get the VT number, you're ready to go, which is important. I don't know if it applies also in, if they may apply in this world. but it's important for physical goods that you do not sell before having a BAT number. I believe it's going to be the same. It's the same with digital goods because the moment you sell something, you're liable for tax, especially if you're in a no threshold, if you're selling to a no threshold country, then it's better to, the advice I always give, it's better to wait a while and get perfectly compliant before selling than selling before and then having to chase issues. We all want to earn money starting tomorrow, starting today, starting yesterday. But then if we do something tomorrow, the day after tomorrow, tax office is going to be after us. So it's not ideal, I would say. So once you get a VAT number, so you're basically handed over to the operations team where we have account managers that follow the clients' everyday life. They instruct them on how to provide the data, what format to use, what report to download from your invoicing software, from your billing software, your Stripe, your WooCommerce, or whatever you use, and how to customize it to match our reports that are then used to generate the beta returns. That sounds long, but it's actually not that difficult. Okay. And Stripe, by the way, a lot of adult companies have tried to use Stripe and paid dearly for that, do not use Stripe because they don't accept adult companies. I'm just telling that to the listeners because I know people have lost their processing with Stripe. Can you share success stories or case studies from working with adult site owners? Not adult site owners, but the digital goods in general. Broadly, it allows you guys as well. It includes you guys as well. So without naming names, of course, I can tell you that we have a client for whom we're handling tax sales compliance in over 30 countries, which is quite a bit. And before they switched to us, they were working with four different providers, if I'm not wrong, in different regions. So they got one for Asia, one for Europe, one for the US and so on. And that was quite a headache for them because they had to provide data in different formats. They have, of course, to wake up at different times at meetings in the middle of the night, early in the morning to talk to the tax provider on the other side of the world. They're Europe-based, so they loved it when we approached them. And we started with them for seven, eight countries in Europe. So same time zone was easier. It was, let's say, the demo version. They started working with us where it was easier. They liked it. Now we're handling all the compliance for them. So for them, it's easy to have to talk to someone in the same time zone, even for things that concern the other side of the world. And most of all, the most important thing they have is that they reduce their overhead compliance costs by something like 30%, 35%. And their operations team are very happy because they have a standardized approach. They're working with same people all the time, with the same format of reports all the time. And basically, they're spending half the time that they were doing before on the specific VAT issues. And yeah, as I said, with a 30% cost saving, which is a nice, sweet little thing. Takeaway is that it's much easier to deal with, to have one single contact point instead of having to deal with different optimization. In other words, one-stop VAT. Exactly. One-stop-pat is the one-stop-shop for one-stop-shop as the European tax method. So there you go. Well, Fabio, I'd like to thank you for being with us today on Adult Site Broker Talk, and I hope we'll get a chance to do this again soon. It's a pleasure. Well, can I say thanks to you and thanks to you for having me and thanks to the audience for listening to me up to now. That's quite something. And yeah, if I may have a final word, I would like to quote an Italian prime minister from, I think it was 2013. He was not very popular in Italy at the time. His name was, still is, Mario Monti. He was not popular because he said something like paying taxes is beautiful. That's what we're here to help with. I'll take your word for it. Thank you, Fabio. My broker tip today is part 10 of what to do to make your site more valuable for when you decide to sell it later. Last week, we talked about what information to give a potential buyer and what determines the value of a site. We'll continue that today. If a site hasn't been monetized, then it's all about the amount and the quality of the traffic. If a sale is based on traffic, it will be a multiple of what the traffic would sell for on the open market. What are the sources of traffic? Direct traffic, search engine traffic, and review traffic are the most valuable. Tube traffic, the least valuable. Is the traffic reliable and sustainable? What is the traffic history? In a rare case, the valuation will be based upon revenue. The same factors apply to that as a profit, but of course the valuations will be lower than those of profits. How old is the website? Is the domain a.com or something else? .com is still king. How many inbound links are there? How much staff does it take to run the site? How many email addresses do you have? In the case of a dating site, this is very important. Another factor can be the reverse engineering cost. How much would it cost to build a site from scratch and drive the same amount of traffic to it, and how much time would be involved? What is the lifetime value of a customer on the site? Next week, how to buy a website. And next week, we'll be speaking with Derek Anjora of Haven. And that's it for this week's Adult Site Broker Talk. I'd once again like to thank my guest, Fabio Lavanna of 1stopVAT. Talk to you again next week on Adult Site Broker Talk. I'm Bruce Friedman.