Collect taxes

Memberful can calculate and collect taxes on subscriptions and downloads when your business and members are located in supported regions. Tax collection is available in the United States, European Union, United Kingdom, Canada, and Australia. When you use test mode, Memberful applies the minimum summary rate for the applicable state, province, or country. Billing addresses within the same U.S. state or Canadian province will use the same tax rate. In Australia, the EU, and the UK, billing addresses within the same country will use the same rate. In this help article, we’ll explain how to enable tax collection, add nexus locations, configure regional tax options, understand the member checkout experience, and access your tax records.

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Configure tax collection

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Enable tax collection

Memberful helps you collect applicable taxes when a transaction takes place, but it doesn’t file or remit those taxes to the government on your behalf. You’ll still need to remit the collected taxes yourself. Memberful passes tax information to Stripe to help with reporting. Taxes aren’t collected by default. Go to Settings → Taxes in your Memberful dashboard and toggle on Collect sales tax. If your business is located in the European Union, Canada, or Australia, you’ll also be asked to provide your tax identification number, such as a VAT or GST number. When taxes are charged, this number is included on the member’s payment receipt.

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Add nexus locations

After enabling tax collection, add each location where your business has an economic nexus. Memberful compares these locations with the member’s location to determine whether taxes should be applied to an order.

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Choose tax-inclusive or tax-exclusive pricing

Prices are tax-exclusive by default. When Memberful determines that taxes apply to an order, the tax amount is added to the subtotal. You can configure tax-inclusive pricing separately for each nexus location. For example, to include taxes in prices for European members, go to Settings → Taxes, edit the European nexus address, and toggle on Inclusive tax.

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Choose which plans and downloads are taxable

You can enable taxes for individual plans and assign each plan a tax category. The default category is Digital Goods. Choose the category that most accurately represents what the plan provides. When tax collection is enabled for your account, it is enabled by default when you create a new plan or sell a standalone download. For plans, you can enable or disable tax collection from Settings → Taxes or from the individual plan settings. For downloads, manage tax collection from the individual download settings. Consult a tax professional if you’re unsure which tax category to select. You are responsible for collecting the correct amount of tax.

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Configure regional tax options

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Charge your home country’s VAT rate

If your business is in the European Union and your annual revenue is below €10,000, you may be eligible to charge your home country’s VAT rate for all transactions. Business-to-business sales to VAT-registered people or entities don’t count toward this threshold. Business-to-consumer sales do count toward it. Consult a tax professional if you’re unsure whether this option applies to your business.

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Charge Canadian provincial taxes

Some Canadian provinces require businesses to register and collect provincial taxes after reaching a specified revenue threshold within a 12-month period. The thresholds and tax rates vary by province. After crossing the applicable threshold, businesses may need to collect Provincial Sales Tax (PST), or Quebec Sales Tax (QST) in Quebec, in addition to the 5% Goods and Services Tax (GST). Below the threshold, only the 5% GST is charged. This applies to:

• British Columbia
• Manitoba
• Quebec
• Saskatchewan

If you’ve added a Canadian nexus address, you can choose whether to collect provincial taxes from members in these provinces. When provincial tax collection is enabled, Memberful checks whether the member is located in one of the selected provinces. If so, Memberful charges the 5% GST and the applicable PST or QST.

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Understand how taxes are calculated during checkout

Memberful uses the member’s location and your economic nexus locations to calculate applicable taxes during checkout. The location information required depends on the region. In the European Union, Memberful verifies two non-conflicting pieces of location evidence. The member’s IP address may provide enough information to initially determine the applicable tax rate. In the United States, Memberful may require the payment method’s ZIP code before calculating the tax rate. If Memberful can’t immediately determine an accurate location, such as when a member is traveling or using a VPN, the location being used is displayed during checkout. The member can click Edit and enter the correct country, state, and postal code when applicable. Taxes are calculated when:

• your business and the member are in the same U.S. state
• your business and the member are in the EU
• your business and the member are in the UK
• your business and the member are in Canada
• your business and the member are in Australia

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Apply the EU reverse charge mechanism

For some business-to-business transactions in the European Union, Memberful applies the reverse charge mechanism. If a member has a valid EU VAT number and is located in a different EU country from your business, Memberful recalculates the tax rate to 0%. The member can click Edit next to their location during checkout: They can then enter their VAT number: TaxJar, Memberful’s tax processor, uses the VAT Information Exchange System — VIES to validate EU VAT numbers. If the VAT number isn’t valid, Memberful displays a Wrong Tax ID error during checkout. Memberful also collects business tax numbers in Canada and Australia, but it doesn’t validate them or apply a reverse charge mechanism.

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Apply taxes to existing subscriptions

After you enable tax collection, new members are required to enter their billing location during signup. Existing members are asked to enter their billing location when they update their payment method. To add taxes to an existing subscription, direct the member to their account to click Update card and update their payment method. Members can also update their tax or VAT number from this area when required for their location. Only the member can update this value.

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Review tax records

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Review tax information on receipts and invoices

When taxes are collected for an order, the payment receipt or invoice emailed to the member includes:

• the tax rate and amount charged
• the total amount charged, including taxes
• the member’s billing location
• the member’s tax identification number, when applicable
• your business’s tax identification number
• your business’s nexus address
• your business’s name, when specified

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Review tax information in Stripe

All Memberful transactions are processed through your Stripe account. Stripe provides the most accurate record of the funds you’ve received and can be used for tax reporting and remittance. When tax collection is enabled, Memberful passes the following information to Stripe:

• the tax rate collected
• the tax amount collected
• the member’s IP address
• the member’s billing country
• the member’s tax identification number, when applicable

You can export CSV files from Stripe or integrate your account with a third-party service such as TaxJar or Quaderno to analyze and report your taxes.