The Taxes you Pay for Your Membership Site
If you think technology is complicated has clearly never considered managing taxation to a worldwide diversified membership site. Honestly, just considering it is enough to have the potential for confusion and even lightheadedness.
The most important thing to remember regarding handling taxes on a membership website is to consult a professional. Even at that the problem can become complex enough that your accountant could be in a state of confusion. Don't let the difficulty of the problem as an excuse to avoid the problem.
In this post we'll concentrate on providing you with a general overview of the current tax environment as it relates to the digital economy, and more specifically web-based membership websites.
Remember that not all membership websites is the same. It could be a site that only provides details, while another's might provide downloadable goods or even ship physical products. There could be different tax rates involved with each.
The Changing Tax Landscape
Sales tax is made more complicated by the fact that every country has its own rules. Sometimes, the rules are even more granular, such as the USA or Canada where the sales tax is different according to state and province. Sales taxes are often self-regulating also - a fact that most people do not know about.
Imagine, for instance, that I purchase an item from you, which is sold with sales tax. Whatever the reason, you do not charge me with the appropriate sales tax. If you believe the problem is resolved, you're wrong. Since I am the buyer, legally I'm responsible for self-assessing the amount of tax that I owe and submitting it to the proper tax authority. You can imagine how often this occurs, isn't it?
The economy of the digital age is now at a level that government officials are not willing to turn a blind eye to the tax revenue loss as digital products, services and memberships are able to cross national and international boundaries. One of the most comprehensive examples of this can be found in the rules enacted in the EU in the month of January.
In essence, what is clear from what the EU has said is that if you sell digital products or services to EU clients, then you have to be able to charge them EU VAT. Yes, it's exactly what it does. You may not only be paying, reporting and reporting taxes locally, but you'll have to file a tax return for the EU taxes you're accountable for collecting.
It's difficult to say the least - however, there's some positive news. Utilizing a tool , the whole process can be made easier by a simple method.
Controlling Your Tax Liability
The last thing you want to be dealing with is spending the time tracking sales taxes from the various jurisdictions that are required. If you're using the software, your situation isn't as difficult as you might think.
In addition to being in charge of collecting and remitting sales taxes, you are equally responsible for reporting and keeping records. If you are in the EU there are requirements for keeping records for 10 years, identifying the transactions as either b2b or b2c, and collecting two pieces of evidence that confirm the location of the buyer. And if that wasn't enough, in the EU alone, there are 23 different VAT rates. Yikes!
If your membership site has its headquarters in the US, you can quickly discover how burdensome the rules might become. Luckily there are some options available that can help make life simpler.
Quaderno
Although it handles VAT issue, Quaderno helps with automating invoicing, data storage, and other tax conformity.
Taxamo
Taxamo offers a second choice. While it was not designed specifically to work with , it is compatible with the three most popular gateways, including Braintree, Stripe, and PayPal as well as support for subscriptions is also included.
Taxamo provides a similar set of features that include taxes that are managed, VAT rate management as well as tax settlement files compliant invoicing, full reporting and more. Taxamo is currently working to roll out tax-related solutions which include other global jurisdictions as required. As an example, Australia is introducing GST on digital services starting in July 2017, and it's only one of the many countries.
Pricing for Taxamo differs slightly from the system based on transactions. For a pay-as-you-go plan it costs EUR0.20 per transaction, for up to 20k transactions. Beyond that level the plan for enterprise drops to EUR0.05 per transaction.
Wrap It Up
Everyone hates taxation. However, they're a fact of life. The digital economy is growing in size, Governments around the world are coming to terms to the fact that they're missing out on a big portion of tax revenues.
In the beginning, when EU regulations first came out there was an outcry regarding the likely complexity dealing with taxes for typical small-sized business. As new services providers emerge on the scene, the volume of effort required by you will be reduced. Your time will be free to devote your time managing your site and providing benefits to your users.
It's a fact that regulations are being slowly put into place, requiring companies that operate online to collect tax regardless of where they are located. Being able to track and monitor each transaction is also already established. It goes without saying that that it's only a matter of time before enforcement kicks in. It is certain that the cooperation will occur between officials of the government to ensure that every citizen's tax dollars are collected.
If you've installed a tax-saving solution for the world for your membership site and would like to share your thoughts here.