Imposing taxes for your membership Site
Whoever thinks that technology is complicated, has never considered managing taxation on a global membership site. Honestly, just thinking about it has the potential to cause the appearance of lightheadedness and blurred vision.
The first piece of advice when it comes to managing taxes for a membership website is to consult a professional. In the event that you do it can become complex enough that your accountant could be scratching his/her head. However, don't turn the complexity of the matter as a reason for avoidance.
In this article we'll concentrate on providing a general outline of the present tax laws and regulations in relation to the digital economy and particularly, membership websites.
Remember that no membership site is the same. It could be a site that only provides details, while another's might offer downloadable products or ship physical products. There might be various tax rates for each one.
Tax Laws and the Changing Tax Landscape
Taxes on sales are further complicated due to the fact that every country has its own rules. Sometimes it becomes extremely granular, as countries like the USA or Canada where sales taxes vary according to state and province. Sales taxes are often self-regulating also - a fact that is often not understood by the majority of people.
Imagine, for instance, that I make a purchase from you that should be subject to sales tax. Whatever the reason, you do not charge me with sales tax applicable. If you think the issue is resolved, you're incorrect. Being the customer, I'm accountable in assessing my own taxes due on sales and sending it to the proper tax authority. Imagine how often this occurs, isn't it?
The digital economy has grown to a point that government officials are not ready to roll a blind at the revenue that is lost when digital products, services and memberships travel across local and international borders. A perfect example is in the new regulations issued in the EU in the month of January.
Basically, what is clear from what the EU has said is that when you sell digital products or services to EU customers, you are required to be able to charge them EU VAT. And yes, that means exactly what you believe it is. You may not only be collecting, reporting and remitting taxes locally, but you'll need to submit a tax return in respect of taxes from the EU taxes you are responsible for collecting.
It's difficult to say the least - However, there's good news. Utilizing a tool , the whole process can be made easier by a simple method.
How to manage your tax liability
The last thing you want to be dealing with is spending excessive amounts of time tracking sales taxes from each required jurisdiction. Luckily, if you use this plugin, things will not be as complex as you think.
You are not only responsible for collecting and remitting sales tax, but you're also responsible for reporting and maintaining records. If you are in the EU it is required to maintaining records for 10 years, identifying the transaction as b2b or B2C, and obtaining two forms of proof to prove the place of residence of the customer. In case you thought that was not enough, within the EU alone, there are various VAT rates. Yikes!
If your membership site has its headquarters in the US, you can quickly discover how burdensome the rules might turn out to be. There are a few solutions that will simplify your work more manageable.
Quaderno
While handles the VAT, Quaderno helps with automatic invoicing, data storage, and other tax complying with tax.
Taxamo
Taxamo represents our second option. Though it wasn't designed for integration Taxamo, it's compatible with 3 popular gateways like Braintree, Stripe, and PayPal and subscription support are included.
Taxamo offers a very similar feature set that includes controlled VAT rates and tax settlement documents, complete invoicing that is compliant, as well as more. Taxamo is in the process of rolling out tax solutions that include other global jurisdictions as required. For instance, Australia is introducing GST on digital services starting in July 2017 and that's just one country among many.
Pricing for Taxamo is slightly different system based on the number of transactions. In a plan that is pay-as you-go pricing is EUR0.20 per transaction up to 20k transactions. Above that the cost for an enterprise plan decreases to EUR0.05 per transactions.
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're not getting a large portion of tax revenues.
When the EU rules were first rolled out, there was a ruckus over the potential complexity of managing taxes for the typical small-sized business. Fortunately, as new services providers emerge on the scene, the amount that you have to do on your part will decrease. You'll be able to spend your time managing your site and delivering the best value for your customers.
There's one thing for certain, regulations are being slowly introduced, making it mandatory for companies that operate online to collect tax regardless of location. The ability to monitor and track the transactions of each one is in place. It goes without saying that it's just an issue of time until enforcement kicks in. It is certain that it will involve cooperation among officials of the government to make sure that everyone's tax dollars are being collected.
If you've already installed a tax-saving solution for the world for your membership site Please share your experience below.