Implementing Taxes for your Membership Site
Anyone who thinks technology is difficult has not considered transferring taxes to a worldwide diversified member website. Even if you think about it, the possibility of having the chance of creating confusion and even lightheadedness.
The initial piece of advice when it comes to tax management for sites that are members is to consult a professional. If you do, the issue can be complex enough that your accountant might become confused. Don't use on the difficulty of the situation to justify avoiding the issue.
In this blog we'll concentrate on giving you an overall review of current tax laws and rules pertaining to the digital economy, in particular, online membership sites.
Remember that not all membership sites are exactly similar. You may only provide specific information, while another's might offer products that are downloaded or deliver physical items. There may be different tax rates involved in each case.
Tax Laws and the Changing Tax Landscape
Taxation on sales is more difficult due to fact that each nation has various rules. Sometimes it becomes much more specific, such as countries like those in the USA or Canada where the sales tax is different according to provincial and state. The sales tax is typically also self-regulated - a fact many people do not know about.
Consider, for example, that I purchase from you, which includes sales tax. For whatever reason, you, don't charge me the sales tax applicable. If you believe the matter is resolved, you're mistaken. Since I am the buyer, legally I would be in charge of assessing the tax amount I owe by sending it to the appropriate tax authority. It's not difficult to envision how often it occurs, don't you?
The growth of the digital economy has accelerated to the point that the government is no longer able to shut their at revenues as the digital economy's products or services as well as memberships transcend national and international boundaries. The most extensive examples of which can be seen in the regulations enacted by the EU in January of 2015.
What is clear from what the EU has said in essence is that, if you provide digital goods and services for EU clients, you have to cost them EU TVA. That's exactly what you think is the meaning. You may not only be paying tax, reporting and reporting locally, but also paying a return on the EU taxes that you're responsible to collect.
It can be stressful at times. However there's a positive side. With the help of a software this entire procedure could be streamlined in a fairly straightforward manner.
How to manage the tax burden
The last thing you want to deal with is spending your time tracking sales tax for every jurisdiction you need to track. With this plugin, things won't be nearly as difficult than you imagine.
Not only are you accountable for the collection and payment of sales tax, but you're also responsible for reporting the procedure and maintaining records. If you're a member of the EU it is required to keeping records for 10 years. You must mark transactions as b2b, or in the case of the b2c type, two documentation to prove the location of residence of the buyer. And if this wasn't enough, in the EU there are 23 taxes on VAT. Yikes!
If the site's members are situated in the US it's simple to see how difficult regulations could turn out to be. There are several options to make your life more simple.
Quaderno
As well as handling VAT issues, Quaderno is useful for automatic invoicing, the storage of data, and other tax complying to tax.
Taxamo
Taxamo is our other option. While it's not designed specifically to use Taxamo, it's an excellent combination with three of the most popular gateways, including Braintree, Stripe, and PayPal and subscription support is included.
Taxamo provides a similar feature set that includes taxes that are controlled, management of VAT rates and tax settlement files complete invoicing that is compliant, as well as more. Taxamo is also in the process of introducing tax-related solutions that include different jurisdictions around the world as required. For instance, Australia is introducing GST for digital services from July 2017. And that's just one of many countries.
Pricing for Taxamo is different from the model based upon transactions. If you are on a plan with pay-as-you-go, the price will be EUR0.20 per transaction the first 20k transactions. After that point the cost of an enterprise plan drops to EUR0.05 per transaction.
Wrap-Up
Taxes aren't something individuals like. But, they're an integral part of life. With the growing digital economy in size, governments of the world are beginning to realize the reality that they're loosing significant amounts of revenue from taxes.
When the initial EU rules were first rolled out, there was some outrage over the possible complexity involved taxation for a typical small company. But, as increasing number of service providers join this market place, then the volume of work required on your part will decrease. It will be possible to devote the time you need managing your website as well as providing the best value for your clients.
There is one thing for certain, the regulations are gradually being implemented, which will require companies that make use of digital technologies to collect tax regardless of where they are. It is possible to track the entire transaction. It is already implemented. The fact is that it's only a matter before the enforcement process begins. It is certain that there will be co-operation between the government agencies to ensure that all tax dollars are received.
If you've installed a global tax solution on your member website, post your experiences below.
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