The Taxes you Pay for Your Membership Site
If you feel that technology is a challenge, then you've never thought about coordinating taxes on a worldwide member website. In reality, even contemplating it could have the chance of creating some confusion, and possibly even lightheadedness.
The initial piece of advice when it comes to tax management on a member website is to get professional assistance. The issue can be complex enough that your accountant could be scratching his/her head. Don't let the complexity as an excuse to avoid this issue.
In this post, we'll to focus on providing an overview of the current tax environment as it relates to online commerce, and specifically web-based membership websites.
Keep in mind that not all sites for membership have the same features. You may only provide details and a different website may offer downloads or even physical goods. It is possible that there are different tax rates in every case.
Tax Laws and the Changing Tax Landscape
Sales tax is made more complex due to the fact that each nation is governed by its own laws. Sometime, the rules are extremely specific, as for USA or Canada in which the tax on sales is different for each provincial and state. Sales taxes are generally self-regulating also - a fact which many are not aware of.
Imagine, for instance, I purchase an item from you, which is exempt from sales tax. Whatever the reason, you don't charge me the sales tax that applies. If you think that the problem is resolved, you're wrong. Since I am the consumer is my responsibility to self-assess the amount of tax I owe and then sending the tax back to the tax authority that is appropriate. It's easy to see how frequently this occurs and why it isn't?
The internet-based economy has expanded to the point that governments are no longer willing to turn a blind eye to the tax revenue loss because the products, services, and memberships span local and international boundaries. One of the best examples is the laws enacted by EU in January.
In essence, what basically, what EU has basically said is that, if you are selling digital goods or services to EU customers, you must charge them EU VAT. Yes, it's exactly what you think it is. You may not only be paying, reporting and reporting tax locally. you'll also need to submit a tax return in respect of the EU taxes you are responsible to take in.
The process can be difficult sometimes, but there's a lot of good info. Through the use of software program, all the process can be made easier by using a simple method.
How to limit your tax liability
What you don't want to do is waste hours tracing sales tax for each state that is required. If you're using the software, it will not be as complex as you imagine.
You are not only responsible to collect and pay sales tax, but you're accountable for the entire reporting procedure and maintaining the records. If you're in the EU there are requirements for keeping records for a period of 10 years, marking the transaction as either B2C, and having two supporting documents to prove the place of residency of the customer. As if this weren't enough, inside the EU there's 23 different rates for VAT. Yikes!
If your site's membership has its head office located in the US and you're located in the US, it's easy to discover how burdensome these rules could prove to be. There are a few ways to make your job.
Quaderno
Although it handles VAT issue, Quaderno is useful for making invoicing more efficient, storage of data and a variety of tax-related compliance.
Taxamo
Taxamo offers a second choice. Though it wasn't created specifically for use with Taxamo but it's fully compatible with the three most popular gateways like Braintree, Stripe, and PayPal and subscription support is included.
Taxamo provides a similar set of services which include tax that is controlled, management of VAT rates as well as the tax settlement file that includes and compliant invoicing and much more. Taxamo is currently working to roll out tax services that incorporate additional jurisdictions around the world as needed. As an example, Australia is introducing GST on digital services in July 2017 and is just one of many countries.
Pricing for Taxamo differs slightly from the technique based on the volume of transactions. If you opt for a pay-as -you-go option, it costs EUR0.20 for each transaction, up the 20k limit. Over that amount it drops to EUR0.05 per transaction.
Make It Wrapped Around
Taxes aren't something that people enjoy. Unfortunately, they are just an everyday issue. While the digital economy expands in size, governments of the world are coming to terms to the fact that they're not missing an enormous amount of tax revenue.
When the EU rules were first rolled in, it was a debate about the tax burden for the average small business. As new service providers emerge on their way to the market, the work you must manage for yourself will decrease. Your time will be free to spend the time that you require managing your site and delivering benefits to your users.
One thing is for sure that the regulations are gradually being put into place which will require companies operating online to collect tax regardless of location. The capability to track and monitor the activities of every one is established. This is a given since there is only an issue of time to wait until the enforcement process begins. We can be sure that there will be collaboration between authorities of the federal government to ensure that all taxes are collected.
If you've put in place global tax solutions to your website's members and would like to discuss your experiences below, please do so.
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