Implementing Taxes for your Membership Site
Anyone who thinks technology is complicated has clearly never looked into managing taxes to a worldwide diversified member site. In reality, even considering it is enough to have the possibility of causing confusion and even lightheadedness.
The first piece of advice when it comes to managing taxes for websites that are members is to seek professional advice. In the event that you do, the issue can be complex enough that your accountant may be left in a state of confusion. However, don't turn the complexity of the issue to justify avoiding the issue.
In this blog, we're going to focus on giving you a general overview of the current tax laws and regulations in relation to digital commerce, and more specifically web-based membership websites.
Remember that not all membership websites is exactly the same. You may only provide specific information, while another's could offer downloadable products or deliver physical items. There might be various tax rates involved for each one.
The Changing Tax Landscape
Sales tax is made more complicated due to the fact that each nation has different regulations. Sometimes it becomes even more granular, such as countries like the USA or Canada where the sales tax is different according to state and province. The sales tax is often self-regulated as well - something that most people do not know about.
Imagine, for instance, that I make a purchase from you, which is sold with sales tax. You, for whatever reason, don't charge me the applicable sales tax. If you think the issue is closed, you'd be mistaken. Since I am the buyer, legally I would be responsible to assess the amount of tax that I owe and sending it to the proper tax authority. It is easy to imagine how frequently it happens, don't you?
The digital economy has grown to a point where governments are no longer inclined to shut their at the revenue lost as the digital economy's products, services, and memberships cross local and international borders. One of the most comprehensive examples of which can be seen in the rules enacted in the EU in January of 2015.
In essence, what is clear from what the EU has essentially said is that, if you offer digital products or services to EU customers, you must cost them EU VAT. That's exactly what you think that it means. Not only might you be paying, reporting and reporting taxes locally, but you'll be filing a return for the EU taxes you're accountable for collecting.
The process can be overwhelming at times, however, there's some positive news. Utilizing a tool , the whole procedure can be simplified in a relatively simple way.
How to manage your tax liability
The last thing you want to deal with is spending the time tracking sales taxes for each required jurisdiction. With the help of this plugin, things will not be as complex than you imagine.
Not only are you accountable for collecting and paying sales taxes, you are accountable for the reporting process and keeping records. If you are in the EU it is required to keeping records for 10 years, marking the transactions as either b2b or in the case of b2c, requiring two documents that prove the place of residence of the buyer. And if this wasn't enough, within the EU there's 23 different VAT rates. Yikes!
If your site's membership is based in the US it is easy to discover how burdensome the rules might turn out to be. There are a few alternatives that could help make life easier.
Quaderno
While handles the VAT issue, Quaderno is useful for automated invoicing, storage of data, and other tax complying with tax.
Taxamo
Taxamo is our other option. Although not specifically created to work with it, it's a good fit with the three most popular gateways, including Braintree, Stripe, and PayPal and support for subscriptions are included.
Taxamo provides a similar feature set that includes taxes that are managed, VAT rate management as well as tax settlement files complete invoicing that is compliant, as well as more. They are also working on rolling out tax services that incorporate different jurisdictions across the globe as is required. For instance, Australia is introducing GST for digital services from July 2017 and that's just one country among many.
Pricing for Taxamo differs slightly from the model based upon transactions. In a plan that is pay-as you-go, the cost is EUR0.20 per transaction the first 20k transactions. After that point the cost for an enterprise plan decreases to EUR0.05 per transactions.
Wrap-Up
Taxes aren't something that people like. However, they're a fact of life. As the digital economy grows in scope, the governments of the world are waking up to the reality that they're losing a huge chunk of tax revenue.
In the beginning, when EU rules were first rolled out there was an outcry regarding the likely complexity dealing with taxes for typical small-sized business. However, as more service providers enter to the market, the volume of effort required on your part will decrease. You'll be able to spend the time you need managing your website as well as providing the best value for your customers.
One thing's for sure, the regulations are gradually being implemented, which will require firms that use digital technology to collect taxes regardless of their location. It is possible to track and monitor every transaction is already implemented. There's no doubt that it's only a matter of time before enforcement begins. It is certain that there will be cooperation between the government agencies to ensure that all tax dollars are collected.
If you've implemented a global tax solution to your membership website Please share your experience below.