Implementing Taxes for your Membership Site
Whoever thinks that technology is complicated has clearly never looked into managing taxes for a globally diversified membership website. Simply contemplating it could have the potential to cause the appearance of lightheadedness and blurred vision.
The most important thing to remember for tax management for an online membership site is to seek professional advice. Even at that the problem can become so confusing that even your accountant might be in a state of confusion. But don't use the complexity of the problem to justify avoiding the issue.
In this post we'll concentrate on providing an outline of the present tax laws and regulations in relation with the internet economy, and particularly web-based membership websites.
Remember that not every membership website is exactly the same. You may only provide details, while another's might provide downloadable goods or even offer physical goods. There might be various taxes for each one.
Changes in Tax Landscape Changing Tax Landscape
Taxes on sales are further complicated by the fact that each country has different regulations. In some cases, it gets even more granular, such as in Canada or the USA or Canada where the sales tax is different by state and province. Sales taxes are often self-regulating and are something most people do not know about.
For example, imagine I purchase an item from you that should be exempt from sales tax. Whatever the reason, you don't charge me the applicable sales tax. If you think that the matter has been resolved, then you're incorrect. Since I am the buyer, legally I would be responsible to assess the taxes due on sales and submitting it to the appropriate tax authority. Imagine how often it happens, don't you?
The digital economy has grown to a point where governments are no longer inclined to shut their and oblivious to tax revenues lost as digital services, products and memberships are able to cross national and international boundaries. One of the most comprehensive examples of which can be seen in the new regulations issued by the EU in January 2015.
The basic idea behind what the EU has stated is that when you sell digital goods or services to EU customers, you must charge those customers EU VAT. Yes, it's exactly what you think that it means. In addition to paying, reporting and reporting taxes locally, you'll also be filing a return for the EU taxes you're accountable to collect.
The process can be difficult to say the least - but there is some good information. Utilizing a tool , the whole process is made simpler by a simple method.
Managing Your Tax Liability With
One of the last things you'd like to do is spend the time tracking sales taxes for the various jurisdictions that are required. With the help of the plugin, the scenario won't be as complicated as you might think.
In addition to being responsible for collecting and remitting sales taxes, you are also responsible for reporting and maintaining records. If you are in the EU there are requirements for maintaining records for 10 years, identifying the transactions as either b2b or b2c, and collecting two forms of proof to verify the location of the buyer. Oh, and in case you thought that was not enough, within the EU alone, there are 23 VAT rates. Yikes!
If your membership site is located in the US it is easy to discover how burdensome the rules might turn out to be. There are a few solutions that will help make life more manageable.
Quaderno
While handles the VAT issue, Quaderno helps with automated invoicing, storage of data as well as other tax complying with tax.
Taxamo
Taxamo represents our second option. Although not specifically created to work with , it is compatible with three popular gateways including Braintree, Stripe, and PayPal and support for subscriptions is included.
Taxamo offers a very similar set of features that include managed VAT rates and tax settlement documents, compliant invoicing, full reporting and much more. Taxamo is currently working to roll out tax services that incorporate additional jurisdictions around the world as needed. For instance, Australia is introducing GST on digital services in July 2017, and it's only one of many countries.
Pricing for Taxamo differs slightly from the system based on the number of transactions. If you are on a pay-as-you go plan it costs EUR0.20 per transaction for the first 20k transactions. Beyond that level the cost for an enterprise plan decreases to EUR0.05 per each transaction.
Wrap-Up
Everyone hates taxation. They are, however, a fact of life. As the digital economy grows in scale, governments around the world are coming to terms to the fact that they are not getting a large portion of tax revenues.
When the EU regulations were initially rolled out, there was a ruckus over the potential complexity dealing with taxes for typical small-sized business. Fortunately, as new service providers come on the scene, the amount that you have to do from you is going to decrease. It will be easier to focus your time focusing on your website as well as providing benefits to your users.
There's one thing for certain, regulations are being slowly implemented, which will require companies that operate online to collect tax regardless of their location. It is possible to track and monitor every transaction is already in place. It goes without saying that that it's only a matter of time before enforcement begins. And you can be sure that the cooperation will occur between the government agencies to make sure that everyone's taxes are collected.
If you've already implemented a global tax system to your membership website Please share your experience in the comments below.