Imposing taxes for your membership Site
Whoever thinks that technology is complicated has clearly never looked into managing taxes on a global membership site. In reality, even contemplating it could have the possibility of causing confusion and even lightheadedness.
The most important thing to remember for managing taxes for an online membership site is to consult a professional. Even at that the problem can become complex enough that your accountant might be wondering what to do. But don't use the complexity of the issue as a reason for avoidance.
In this blog this article, we'll focus on providing you with a general outline of the present tax system in relation to the digital economy and more specifically the membership sites.
Be aware that not every membership website has the same features. It could be a site that only provides details, while another's might have downloadable items or offer physical goods. There could be different taxes in each case.
Changes in Tax Landscape Changing Tax Landscape
Sales tax is made more complicated due to the fact that every country has slightly different rules. In some cases, it gets much more specific, such for Canada or the USA or Canada where the sales tax is different depending on the state or province. Taxes on sales are usually self-regulating and are something many people are unaware of.
For example, imagine I make a purchase from you, which is exempt from sales tax. Whatever the reason, you don't charge me sales tax applicable. If you believe the problem is closed, you'd be mistaken. Being the customer, I would be responsible to assess the amount of sales tax due and then submitting the tax to the proper tax authority. Imagine how often it happens, don't you?
The online economy has grown to the point that government officials are not inclined to shut their eye to the tax revenue loss as digital services, products and memberships cross the international and local borders. A perfect example is in the rules enacted by the EU in January of 2015.
The basic idea behind what the EU has essentially said is that when you sell digital goods or services to EU clients, then you have to charge those customers EU VAT. Yes, it's exactly what it is. Not only might you be making payments, reporting, and collecting taxes in your local area, but you'll be filing a return for the EU taxes you're accountable for collecting.
It's daunting for sure - however, there's some positive new. With the help of a software, the entire procedure can be simplified in a relatively simple way.
Controlling Your Tax Liability
What you don't want to deal with is spending the time tracing sales tax from every required state. With the help of the software, your situation will not be as complex as you might think.
You are not only accountable for collecting and paying sales tax, but you're accountable for the reporting process and maintaining records. For the EU it is required to keeping records for a period of 10 years, clearly identifying the transaction as b2b or B2C, and obtaining two forms of proof to verify the location of the buyer. Oh, and in case you thought that was not enough, within the EU there's 23 different rates for VAT. Yikes!
If your site's membership is based in the US, you can quickly see how onerous the requirements can be. However, there are alternatives that could make your life a little easier.
Quaderno
In addition to handling VAT, Quaderno is useful for automated invoicing, storage of data and for other tax-related conformity.
Taxamo
Taxamo offers a second choice. While it was not designed specifically for integration Taxamo, it's compatible with 3 popular gateways like Braintree, Stripe, and PayPal and subscription support is also included.
Taxamo offers a very like feature set, which includes managed VAT rates as well as tax settlement files fully-compliant invoicing as well as more. They are also currently working to roll out tax services that incorporate other global jurisdictions as required. As an example, Australia is introducing GST on digital services in July 2017 and that's just one country among many.
Pricing for Taxamo is a slightly different method based on the number of transactions. If you are on a pay-as-you go plan, the cost is EUR0.20 per transaction, for as long as 20k transactions are made. Beyond that level the cost for an enterprise plan decreases to EUR0.05 per transactions.
Wrap-Up
Everyone hates taxation. Unfortunately, they are just an everyday thing. As the digital economy grows in size, Governments around all over the globe are awakening to the fact that they're missing out on a big chunk of tax revenue.
When the EU rules were first rolled out, there was a ruckus about the possible difficulty of managing taxes for the average small business. However, as more services providers emerge on to the market, the volume of work required on your part will decrease. It will be easier to focus your time managing your site as well as providing value to your members.
One thing's for sure, the rules are slowly being implemented, which will require digital businesses to collect taxes regardless of their location. The ability to monitor and track every transaction is already established. There's no doubt there is only a matter of time before enforcement starts. And you can be sure that the cooperation will occur between the government agencies to make sure that everyone's tax dollars are being collected.
If you've implemented a global tax system to your membership website Please share your experience here.