Imposing taxes for your membership Site
Whoever thinks that technology is complicated has clearly never looked into managing taxes to a worldwide diversified membership website. In reality, even considering it is enough to have the possibility of causing blurred vision and lightheadedness.
The most important thing to remember for handling taxes on a membership website is to seek professional advice. In the event that you do the problem can become complex enough that your accountant may be left in a state of confusion. Don't let the difficulty of the issue as a reason for avoidance.
In this blog this article, we'll focus on providing an overview of the current tax system in relation to digital commerce, and more specifically the membership sites.
Be aware that not every membership website has the same features. You may only provide specific information, while another's could provide downloadable goods or even deliver physical items. There might be various taxes for each one.
Tax Laws and the Changing Tax Landscape
Sales tax is made more complex due to the fact that each country has different regulations. In some cases, it gets much more specific, such as the USA or Canada in which sales tax rates vary by state and province. The sales tax is often self-regulated as well - something that is often not understood by the majority of people.
As an example, suppose I purchase an item from you that should be sold with sales tax. Whatever the reason, you don't charge me sales tax applicable. If you believe the problem has been resolved, then you're wrong. Being the customer, I would be responsible for self-assessing the amount of tax that I owe and sending it to the proper tax authority. You can imagine how often this happens, right?
The online economy has grown to the point where governments are no longer ready to roll a blind eye to the tax revenue loss as digital services, products and memberships travel across national and international boundaries. One of the most comprehensive examples of this can be found in the regulations put forth in the EU in January of 2015.
In essence, what is clear from what the EU has essentially said is that when you sell digital services or goods to EU clients, then you have to be able to charge them EU VAT. And yes, that means exactly what you believe it does. You may not only be paying, reporting and reporting taxes locally, you'll also have to file a tax return for the EU taxes that you're responsible to collect.
It's overwhelming to say the least - however, there's some positive information. By using , the whole 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 excessive amounts of time tracking sales taxes for every required state. Luckily, if you use the software, your situation won't be as complicated as you think.
In addition to being responsible for collecting and remitting sales tax, you're also responsible for reporting and record keeping. If you are in the EU, the requirements include maintaining records for 10 years, identifying the transaction as either b2c, and collecting two forms of proof to prove the place of residence of the client. And if that wasn't enough, in the EU alone there are apparently 23 different tax rates. Yikes!
If the membership website you are using is based in the US it is easy to realize how difficult the demands can turn out to be. Luckily there are some solutions that will simplify your work simpler.
Quaderno
Although it handles VAT issue, Quaderno helps with automating invoicing, data storage as well as other tax complying with tax.
Taxamo
Taxamo represents our second option. Though it wasn't designed to integrate with , it is compatible with the three most popular gateways, including Braintree, Stripe, and PayPal and support for subscriptions is included.
Taxamo has a very similar feature set that includes controlled VAT rates, tax settlement files, complete invoicing that is compliant, as well as more. Taxamo is currently working to roll out tax services that incorporate other global jurisdictions as required. As an example, Australia is introducing GST for digital services from July 2017. And that's only one of the many countries.
Pricing for Taxamo is slightly different method based on the number of the number of transactions. In a plan that is pay-as you-go it costs EUR0.20 per transaction, for as long as 20k transactions are made. Above that, the enterprise plan drops EUR0.05 per transactions.
Wrap-Up
Everyone hates taxation. Unfortunately, they are just the way of life. The digital economy is growing in size, Governments around the world are waking up to the fact that they're losing a huge amount of tax revenue.
The time the EU regulations first came out there was an outcry regarding the likely complexity of managing taxes for the common small-sized company. As new service providers come on to the market, the volume that you have to do from you is going to decrease. You'll be able to spend the time you need managing your website as well as providing value to your members.
One thing's for sure, the regulations are gradually being introduced, making it mandatory for companies that operate online to collect tax regardless of location. The ability to track and monitor the transactions of each one is in place. It goes without saying that there is only an issue of time until enforcement kicks in. It is certain that the cooperation will occur between government authorities in order to make sure that everyone's taxes are collected.
If you've already implemented a global tax system for your membership site, please share your experiences in the comments below.