Imposing taxes for your membership Site
Anyone who thinks technology is complex has never considered managing taxation for a globally diversified member site. Simply thinking about it has the possibility of causing the appearance of lightheadedness and blurred vision.
The most important thing to remember for handling taxes on websites that are members is to get professional help. However it can become complex enough that your accountant could be scratching his/her head. However, don't turn the complexity of the matter as an excuse to avoid the problem.
In this blog this article, we'll focus on providing a general overview of the current tax environment as it relates to the digital economy, and particularly, membership websites.
Keep in mind that not all membership websites is the same. Yours may strictly offer details, while another's might have downloadable items or deliver physical items. There may be varying tax rates with each.
The Changing Tax Landscape
Sales taxes are made more complex due to the fact that each nation has different regulations. Sometimes it becomes extremely granular, as in the USA or Canada where the sales tax is different depending on the state or province. The sales tax is often self-regulated and are something most people do not know about.
Imagine, for instance, that I make a purchase from you that should be sold with sales tax. For whatever reason, you fail to charge me the appropriate sales tax. If you think that the matter is resolved, you're mistaken. As the purchaser, technically I'm responsible to assess the taxes due on sales and then submitting the tax to the tax authority that is appropriate. It is easy to imagine how frequently it happens, don't you?
The economy of the digital age has grown to the point that government officials are not inclined to shut their eye to the tax revenue lost as digital products, services and memberships are able to cross local and international borders. The most sweeping example is in the new regulations issued by the EU in January of 2015.
Basically, what is clear from what the EU has essentially said is that when you sell digital goods or services to EU clients, then you have to cost them EU VAT. Yes, it's exactly what it is. You may not only be making payments, reporting, and collecting taxes locally, but you'll be filing a return for taxes from the EU taxes you are responsible to collect.
It can seem difficult at times, but there is some good new. With the help of a software, the entire process can be made easier with a fairly simple approach.
Managing Your Tax Liability With
The last thing you want to deal with is spending excessive amounts of time tracing sales tax from the various jurisdictions that are required. If you're using this plugin, things will not be as complex as you think.
Not only are you in charge of collecting and remitting sales tax, you're also responsible for reporting and maintaining records. If you are in the EU it is required to keeping records for a period of 10 years, identifying the transaction as either b2c, and collecting two forms of proof to verify the location of the buyer. And if you thought that was not enough, within the EU alone there are apparently 23 different tax rates. Yikes!
If the membership website you are using is based in the US and you're in the US, it's easy to see how onerous the requirements might become. There are a few solutions that will simplify your work simpler.
Quaderno
In addition to handling VAT issue, Quaderno is useful for automated invoicing, storage of data as well as other tax conformity.
Taxamo
Taxamo is our other option. While it was not designed specifically to work with , it is compatible with three popular gateways including Braintree, Stripe, and PayPal and subscription support is included.
Taxamo has a very similar feature set that includes controlled VAT rates as well as tax settlement files fully-compliant invoicing and much more. They are also in the process of rolling out tax-related solutions which include other global jurisdictions as required. For instance, Australia is introducing GST on digital services starting in July 2017 and that's just one of many countries.
Pricing for Taxamo differs slightly from the system based on transactions. In a plan that is pay-as you-go it costs EUR0.20 per transaction, for the first 20k transactions. Above that the plan for enterprise drops to EUR0.05 per each transaction.
Wrap Up
Nobody likes taxes. However, they're the way of life. The digital economy is growing in scale, governments around the world are waking up to the fact that they are losing a huge portion of tax revenues.
In the beginning, when EU regulations were initially rolled out, there was a ruckus about the possible difficulty of managing taxes for the typical small-sized business. As new service providers come on their way, the volume of work required from you is going to decrease. Your time will be free to devote the time you need managing your website and delivering value to your members.
There's one thing for certain, regulations are being slowly introduced, making it mandatory for firms that use digital technology to collect taxes regardless of their location. It is possible to keep track of every transaction is already implemented. There's no doubt there is only a matter of time before enforcement begins. You can rest assured that there will be cooperation between officials of the government to make sure that everyone's tax dollars are being collected.
If you've implemented a global tax solution to your membership website and would like to share your thoughts below.