Implementing Taxes for your Membership Site
If you think 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 blurred vision and lightheadedness.
First thing to do when it comes to handling taxes on a membership website is to consult a professional. In the event that you do it can become complicated enough that even your accountant could be wondering what to do. But don't use the complexity of the matter as an excuse to avoid the problem.
In this article we'll concentrate on providing a general review of the tax system in relation to the digital economy, and particularly the membership sites.
Remember that not every membership website is exactly the same. Yours may strictly offer details, while another's might have downloadable items or offer physical goods. There might be various tax rates involved for each one.
The Changing Tax Landscape
Taxes on sales are further complex due to the fact that every country has different regulations. Sometimes it becomes even more granular, such for countries like the USA or Canada where the sales tax is different by state and province. Taxes on sales are usually self-regulating and are something most people do not know about.
For example, imagine I buy an item from you which should be sold with sales tax. For whatever reason, you do not charge me with the applicable sales tax. If you believe the problem has been resolved, then you're incorrect. Since I am the buyer, legally I'm accountable in assessing my own amount of tax that I owe and submitting it to the tax authority that is appropriate. You can imagine how often it happens, don't you?
The digital economy has grown to the point that governments aren't ready to roll a blind and oblivious to tax revenues lost as digital services, products and memberships travel across local and international borders. A perfect example is in the new regulations issued by the EU in January of 2015.
In essence, what basically, what EU has stated is that when you sell digital products or services to EU customers, you must be able to charge them EU VAT. And yes, that means exactly what it does. In addition to making payments, reporting, and collecting taxes locally, but you'll have to file a tax return for taxes from the EU taxes you are responsible for collecting.
The process can be daunting at times, However, there's good news. With the help of a software, the entire process can be made easier with a fairly simple approach.
Managing Your Tax Liability With
One of the last things you'd like to deal with is spending an inordinate amount of time tracking sales taxes for every required state. Luckily, if you use the software, your situation will not be as complex as you think.
In addition to being in charge of collecting and remitting sales tax, but you're also responsible for reporting and maintaining records. For the EU there are requirements for keeping records for a period of 10 years, marking the transactions as either b2b or B2C, and obtaining two documents that prove the place of residence of the client. In case 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 it is easy to realize how difficult the demands could turn out to be. There are a few options available that can help make life more manageable.
Quaderno
Although it handles VAT, Quaderno can be useful in automated invoicing, storage of data and for other tax-related compliance.
Taxamo
Taxamo is our other option. While it was not designed specifically for integration Taxamo, it's compatible with 3 popular gateways like Braintree, Stripe, and PayPal and subscription support are included.
Taxamo provides a like feature set, which includes managed VAT rates, tax settlement files, complete invoicing that is compliant, and much more. Taxamo is currently working to roll out tax services that incorporate other global jurisdictions as required. For example, Australia is introducing GST on digital services starting in July 2017 and that's just one country among many.
Pricing for Taxamo is a slightly different model based upon transactions. In a plan that is pay-as you-go pricing is 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
Nobody likes taxes. Unfortunately, they are just a fact of life. With the growth of the digital economy in scale, governments around all over the globe are awakening to the fact that they are missing out on a big chunk of tax revenue.
When the EU regulations first came out, there was some agitation about the possible difficulty in managing taxation for typical small-sized business. However, as more services providers emerge on their way, the amount of effort required from you is going to decrease. You'll be able to spend your time managing your site and delivering the best value for your customers.
It's a fact that regulations are being slowly implemented, which will require companies that operate online to collect tax regardless of location. It is possible to keep track of the transactions of each one is in place. There's no doubt there is only a matter of time before enforcement kicks in. You can rest assured that the cooperation will occur between the government agencies to ensure that all tax dollars are being collected.
If you've already implemented a global tax solution to your membership website, please share your experiences here.