Do you charge Sales Tax / VAT / GST or are you breaking the law?

Sad to know that adam. Here in Singapore any income form oversea is tax free. However, if the traffic is local that another story.

51% rule (51% must be from foreign).

According to my accountant I only have to pay sales tax for customers who buy who live in my State.

But I don't charge sales tax.

I pay it out of pocket quarterly and it's like a few bucks.

Hi Jason,

Thanks for your reply. You should check with your accountant though as that information might be false. It depends on the volume of your sales, but if you meet the threshold you'll be liable for paying sales tax in that country.

For example, if you sell more than the VAT threshold in the UK (currently £73,000) to UK based customers, you have to pay UK taxes of 20% (£14,600) no matter what country your business is based in.

The threshold for the UK is high, but I think there are some European countries with very low thresholds (Norway I think has no threshold, you are liable if you make any sales there).

Thanks Val and Kim for your views.

Val - as an affiliate it's unlikely you'd be liable for VAT. But if you and the product vendor are both based in the EU and you make over $100,000 you should probably check - you should be able to afford it

Kim - you're quite right, unless you sell enough to meet the threshold, you don't need to register or pay VAT.

As a product vendor myself, I'm liable for VAT/Sales Tax/etc if my sales volume goes over the threshold. This is a bit of a pain when selling with affiliates as a high proportion of the ticket price already goes to them.

For example, if affiliates get 50% commission on my products and we make £73,000 of sales to people in EU countries - the affiliate gets £36,500, the taxman gets £14,600 and I'm left with £21,900. Out of this come the costs of creating the product and running the site (probably around £50,000 in my case) and then I have to pay corporation tax on any profits.

Does anyone know of any payment processors that automatically add the applicable Sales Tax based on the customer's location? I know Clickbank does (but they also keep the money!)

Always pay taxes that are owed.

Quentin

I know for certain that I only have to charge GST for sales taking place in Canada (Canadian ip Address). I am not responsible for collecting any other tax.

Paypal handles that for me. I also run it through an ip address program to make sure I am in compliance. Doesn't amount to a hill of beans because most of my clients are in the USA and UK.

Adam,

In Australia we have a tax called GST (goods and services tax). It is 10% of the purchase price for goods or services consumed within Australia. I only have to collect GST for any sales made to Australian customers however as the poster above noted, I do not have to register for GST unless I am doing over $75,000 worth of sales to Australians which I am not. The majority of my sales are all overseas where no GST needs to be collected.

If I purchase something from an International website I am not going to get charged GST on that purchase because that business is not in Australia. GST is an Australian tax and is a tax collected by Australian businesses for the Australian government. In fact there is a big debate about this at the moment because Australian retailers are saying they can't compete with international retailers because they don't have to charge GST so their prices are always lower.

That is the only tax I am liable to collect. I don't need to collect taxes for the governments in every country I sell my products in. What you are saying is I need to collect taxes for other governments but how are they then going to get those taxes when I do my tax through the Australian taxation system? I am not registered for tax in other any other countries so I do not need to charge it. I am taxed under the Australian taxation system and that means I have to pay Australian taxes, the only one for goods and services being GST.

Having said all of that, this may be different for different countries so I can only tell you how things work here.

Adam, that's very interesting info about removing the VAT threshold in the UK, and that one is supposed to charge VAT when selling to other EU countries - I had no idea. Presumably one is then supposed to make some kind of a tax return to those countries, and remit the tax. Lordy, one tax return is bad enough!

It seems an odd way of going about things. I'm in Canada and if I order something from outside Canada and it's over a certain value, I get charged GST and the deliverer (Canada Post, Fedex, whatever) collects the tax and sends it to the Canadian govt. It all happens within the country. Requiring millions of businesses outside my country to register and collect tax seems backwards.

Hi @Kevinw1,

It might seem an odd way to go about things, but it's not often a government will pass up the opportunity to collect tax ;-)

It's going to be very complicated to keep track of all the different tax rates and returns, but mostly I can't see how the governments are going to enforce it. Can you imagine a UK HRMC official flying to Canada to arrest you for tax evasion over a few pounds?

Adam, is there any reason why you can't use Clickbank as your payment processor?

This would fix your problems. When you sell your product through clickbank, legally clickbank are the "owner" of the product, and they collect the VAT and pay it to the government. I agree it is complicated, but luckily clickbank take care of it all for you! Because of this legal set-up, it means that you or your company are not liable to pay this VAT, because clickbank has already paid it.*

*of course, check with your accountant first

ChickenLittle

Adam,

Are you registered for VAT?

Hi Adam

I'm in the UK too

See this:

Exports, dispatches, supplying goods abroad: charging VAT
If you sell, supply or transfer goods out of the UK to someone in another country you may need to charge VAT on them. Generally speaking, you can zero-rate supplies exported outside the European Union (EU), or sent to someone who's registered for VAT in another EU country, provided you follow strict rules, obtain and keep the necessary evidence, and obey all laws.

For more see: HM Revenue & Customs: Exports, dispatches, supplying goods abroad: charging VAT

Thanks

Kev

Adam take a look at this, probably clearer than the guidance on the HMRC site, this is quite an old article so don't know if anything has been updated since then:

VAT: Digital services or downloadable products

In my country there are hundreds of taxes, sooo, technically, I prefer not to give these guys any more money than they get from the people.

This is always a sticky subject with IMers and there are so many variables depending on your location, payment methods, services, etc...

It's best to consult a lawyer...and in most cases, they'll set up a more effective system for you to keep as much money as possible.

You are wholesaling the product to Clickbank. They are your customer. CB is selling to the end user.

Adam,

Simple solution, don't sell your product through clickbank.