The Taxes you Pay for Your Membership Site
Whoever thinks that technology is complicated has clearly not considered coordinating taxes to a worldwide diversified membership website. In reality, even considering it is enough to have the potential for the appearance of lightheadedness and blurred vision.
First thing to do for managing taxes for a membership website is to seek professional advice. In the event that you do it can become complicated enough that even your accountant may be left scratching his/her head. But don't use the complexity of the matter as an excuse to avoid the problem.
In this article we'll concentrate on providing you with an outline of the present tax laws and regulations in relation with the internet economy, and, more specifically the membership sites.
Be aware that not every membership website is exactly the same. It could be a site that only provides details, while another's might offer downloadable products or deliver physical items. There could be different tax rates involved with each.
Changes in Tax Landscape Changing Tax Landscape
Taxes on sales are further complicated due to the fact that each country has slightly different rules. In some cases, it gets extremely granular, as the USA or Canada where the sales tax is different according to state and province. Sales taxes are often self-regulating as well - something that many people are unaware of.
Imagine, for instance, that I purchase an item from you which should be subject to sales tax. For whatever reason, you fail to charge me the applicable sales tax. If you think the issue is closed, you'd be incorrect. As the purchaser, technically I'm accountable to assess the taxes due on sales and submitting it to the appropriate tax authority. It is easy to imagine how frequently this happens, right?
The online economy has grown to a point where governments are no longer willing to turn a blind eye to the tax revenue that is lost when digital services, products and memberships travel across the international and local borders. A perfect example of which can be seen in the regulations put forth by the EU in January 2015.
Basically, what is clear from what the EU has said is that, if you offer digital products or services to EU customers, you must be able to charge them EU VAT. That's exactly what it is. You may not only be paying, reporting and reporting taxes locally, but you'll need to submit a tax return in respect of taxes owed to the EU taxes that you're responsible to collect.
The process can be overwhelming to say the least - However, there's good new. By using , the whole procedure can be simplified by a simple method.
How to manage your tax liability
What you don't want to do is spend an inordinate amount of time tracking sales taxes from the various jurisdictions that are required. With the help of the plugin, the scenario will not be as complex as you think.
In addition to being responsible for collecting and remitting sales tax, but you're equally responsible for reporting and record keeping. If you are in the EU, the requirements include keeping records for a period of 10 years, marking the transactions as either b2b or in the case of b2c, requiring two pieces of evidence that confirm the location of the buyer. And if you thought that was not enough, within the EU there's 23 different tax rates. Yikes!
If the membership website you are using is located in the US and you're in the US, it's easy to discover how burdensome the rules could become. Luckily there are some options available that can help make life simpler.
Quaderno
In addition to handling VAT issue, Quaderno can be useful in automating invoicing, data storage and for other tax-related compliance.
Taxamo
Taxamo represents our second option. Though it wasn't designed to integrate with Taxamo, it's compatible with the three most popular gateways, including Braintree, Stripe, and PayPal and support for subscriptions is also included.
Taxamo offers a very similar set of features that include controlled VAT rates and tax settlement documents, fully-compliant invoicing and much more. They are also in the process of rolling out tax services that incorporate different jurisdictions across the globe as is required. For instance, Australia is introducing GST for digital services from July 2017. And that's only one of the many countries.
Pricing for Taxamo is a slightly different model based upon the number of transactions. For a pay-as-you-go plan it costs EUR0.20 per transaction, for up to 20k transactions. Above that, the enterprise plan drops EUR0.05 per each transaction.
Wrap Up
Everyone hates taxation. However, they're an everyday thing. With the growth of the digital economy in scope, the governments of the world are waking up to the fact that they are losing a huge chunk of tax revenue.
The time the EU regulations first came out there was an outcry over the potential complexity in managing taxation for common small-sized company. However, as more service providers enter their way, the amount that you have to do on your part will decrease. It will be easier to focus your time managing your site and delivering value to your members.
It's a fact that regulations are being slowly put into place, requiring digital businesses to collect taxes regardless of location. Being able to track and monitor every transaction is already established. There's no doubt it's just a matter of time before enforcement starts. You can rest assured that it will involve cooperation among government authorities in order to make sure that everyone's tax dollars are collected.
If you've implemented a global tax solution for your site's membership and would like to share your thoughts in the comments below.