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Charging Sales Tax for Membership Sites?

by Kelby
8 replies
Do I need to pay state sales taxes on the sales made for an online membership site?

Since the customer isn't downloading anything (just access to protected content), I would assume no sales taxes are required.

What if I allow the customer to download videos or other content once inside the membership site? Does that change anything?

Thanks for any help.

PS - I know there aren't probably any accountants, and YES I WILL SPEAK to an accountant.
#charging #membership #sales #sites #tax
  • Profile picture of the author Greg D
    Asked and Answered.

    YES, speak to an accountant.

    I know this, depending where you live, sales tax is a BIG deal. In order to do this properly, you become an authorized 'agent of the state' to collect the tax.

    Most people do not know this, but you are paid by the state to collect it. Don't get excited, it is about 1/4 of a %. NOT enough to justify the time and expense and inconvenience of doing it.

    BUT, like the IRS, do NOT screw this up, the state you are in takes it VERY seriously and will HAMMER you for errors.

    Talk to an accountant (specifically one familiar with internet law and protocol when it comes to things like this), you probably don't have to, but check anyway.

    Personally, I would avoid it like the plague!

    Greg
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  • Profile picture of the author JD Nunes
    I think I read somewhere that you don't need to charge sales tax to people who live outside of your state. Then again, I read in other places that they're trying to get everyone to charge sales taxes, depending on where the buyer lives. That's pretty ridiculous, in my opinion. There was an affiliate marketing fiasco related to this a while ago. I don't remember all the details, but hundreds of affiliates stopped promoting certain sites.
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    • Profile picture of the author deu12000
      I don't have a membership site (but will be launching a big one in the next two weeks), but for all sales I make to people within my state I don't charge them sales tax, I pay the sales tax on their purchases. Basically I take a 7% pay cut on every customer from my state and I pay it quarterly to the state.

      I don't pay sales tax for out of state customers. Every once in a while Michigan sends me a letter to see if I owe them any money, but the money I make in that state is low enough where I don't have to pay them sales tax (if I remember correctly you have to make over $100K from Michigan residents, it could be higher though).
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  • Profile picture of the author celente
    You need to find yourself an accountant dude.

    I live in australia but have an american accountant, he is awesome, and keeps up to the latest news for us here that have to pay tax, and GST and double tax on stuff. Sucks, but you better off getting it right from day one.
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  • Profile picture of the author Kelby
    Wow... I thought you only had to pay sales tax on tangible goods. I thought a membership site would be excluded, but I guess I was wrong.

    What if I was to use a payment processor like 2CheckOut? Since they are the reseller of my product, wouldn't that free me up from paying any sales taxes? Thanks.
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  • Profile picture of the author David Allen
    I would be interested to hear what your accountant says about this. I'd assume that sales tax would be paid as they are purchasing access and therefore it is a sale.
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  • Profile picture of the author deu12000
    The laws also vary by state. For example my state says that you are taxed on a sale unless you are told by the state you are exempt (which I haven't) NJ Business Portal | Taking Care of Business | Sales Tax Obligations . Other states it's possible that services are not taxed.

    Wikipedia has a good state by state breakdown for sales tax Sales taxes in the United States - Wikipedia, the free encyclopedia . That might give you an idea of if your state charges tax on services. After glancing at it you probably want to verify it with your state.

    P.S. I sell a combination of physical goods with web services so everything goes under my LLC.
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