Imposing taxes for your membership Site

Aug 1, 2023

Reader Disclosure

If you think technology is complex has never considered managing taxation on a global member site. Honestly, just thinking about it has the possibility of causing blurred vision and lightheadedness.

First thing to do for managing taxes for websites that are members is to seek professional advice. In the event that you do the problem can become complex enough that your accountant could be wondering what to do. Don't let the difficulty of the problem as a reason for avoidance.

In this blog we'll concentrate on providing you with an outline of the present tax environment as it relates with the internet economy and particularly, membership websites.

Be aware that not every membership website is the same. It could be a site that only provides information while someone else's may offer downloadable products or offer physical goods. There might be various tax rates involved in each case.

The Changing Tax Landscape

Sales tax is made more complicated by the fact that every country has its own rules. Sometimes it becomes even more granular, such as the USA or Canada where the sales tax is different by state and province. Sales taxes are often self-regulating and are something is often not understood by the majority of people.

As an example, suppose I purchase an item from you which should be exempt from sales tax. Whatever the reason, you fail to charge me the applicable sales tax. If you think the issue has been resolved, then you're wrong. Being the customer, I'm responsible in assessing my own amount of sales tax due and sending it to the proper tax authority. You can imagine how often this occurs, isn't it?

The online economy is now at a level that government officials are not willing to turn a blind at the revenue that is lost when digital products, services and memberships cross local and international borders. The most sweeping example is in the regulations put forth by the EU in January of 2015.

In essence, what the EU has said is that if you sell digital products or services to EU clients, then you have to cost them EU VAT. That's exactly what that it means. You may not only be making payments, reporting, and collecting taxes locally, but you'll need to submit a tax return in respect of taxes owed to the EU taxes you are responsible to collect.

The process can be overwhelming to say the least - however, there's some positive new. By using , the whole process can be made easier with a fairly simple approach.

Managing Your Tax Liability With

The last thing you want to be dealing with is spending an inordinate amount of time tracking sales taxes for every required state. If you're using this plugin, things isn't as difficult as you think.

In addition to being responsible for collecting and remitting sales tax, but you're equally responsible for reporting and keeping records. For the EU it is required to keeping records for 10 years, clearly identifying the transaction as either in the case of b2c, requiring two pieces of evidence that confirm the location of the buyer. And if you thought that was not enough, within the EU there's 23 VAT rates. Yikes!

If your site's membership is located in the US it is easy to discover how burdensome the rules could turn out to be. Luckily there are some alternatives that could make your life a little simpler.

 Quaderno

In addition to handling VAT issue, Quaderno is useful for automated invoicing, storage of data as well as other tax conformity.

 Taxamo

Taxamo Tax Service

Taxamo is our other option. Though it wasn't designed to integrate with , it is compatible with the three most popular gateways, including Braintree, Stripe, and PayPal as well as support for subscriptions is included.

Taxamo offers a very like feature set, which includes managed VAT rates and tax settlement documents, complete invoicing that is compliant, as well as more. Taxamo is also in the process of rolling out tax services that incorporate additional jurisdictions around the world as needed. For instance, Australia is introducing GST on digital services starting in July 2017. And that's only one country among many.

Pricing for Taxamo is a slightly different system based on the number of transactions. For a pay-as-you-go plan it costs EUR0.20 per transaction for the first 20k transactions. After that point, the enterprise plan drops EUR0.05 per transaction.

Wrap Up

Nobody likes taxes. However, they're a fact 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 portion of tax revenues.

The time the EU regulations first came out, there was a ruckus regarding the likely complexity dealing with taxes for common small-sized company. Fortunately, as new service providers enter to the market, the amount of effort required on your part will decrease. It will be easier to focus your time focusing on your website as well as providing the best value for your customers.

There's one thing for certain, regulations are being slowly implemented, which will require firms that use digital technology to collect taxes regardless of their location. The ability to track and monitor every transaction is already established. There's no doubt that it's only an issue of time until enforcement kicks in. It is certain that there will be cooperation between the government agencies to ensure that all tax dollars are collected.

If you have already implemented a global tax system for your site's membership and would like to share your thoughts below.