Digital Consultant’s Guide to Sales Tax, VAT, and GST

The digital consultant’s value ladder

  1. Ebook
  2. Membership site
  3. Online course
  4. Group coaching (e.g. Mastermind)
  5. One-on-one consulting
  6. Custom Do-It-For-You services

Types of sales tax around the world

Tax liability for a digital consultant’s services

  • You or your offices are physically located
  • Your employees are located
  • You employ certain affiliate or digital marketing activities (US only. See nexus rules.)

1. Ebook

  • Tax exempt or zero-rated because, well, it’s a book! And when books are considered educational products, some countries don’t tax them.
  • Taxed at a lower rate than other digital goods, because it’s classified primarily as a book, which are in a reduced tax class.
  • Taxed at the same rate as other digital or physical goods.
  • In Alabama, digital downloads are considered “tangible personal property” and therefore taxable at the same rate as physical goods.
  • In Connecticut, digital downloads are taxed at a reduced rate of 1%, as opposed to the state’s usual 6.35%.
  • In New York, some e-books are taxable and others aren’t. It all depends on the state’s tricky technicalities…
  • In Virginia, digital products are exempt from sales tax altogether.

2. Membership site

  • If you provide access to automated content, like pre-recorded courses and webinars, your membership fees might be liable for consumption tax.
  • Any e-commerce component of your site, where members can purchase downloadables or physical merchandise, will surely be subject to consumption tax.

3. Online course

  • Downloadable vs. Pre-Recorded vs. Live Webinars
  • Fully automated vs. Interaction with and among students
    Is there an interactive element, either between other students or with the instructor? Is there a live tutoring component? Is there an evaluation that’s conducted by a human, rather than a computer? This is a key point of automation. Generally, automated online courses are subject to digital tax, whereas courses with human interaction are not.

4. Group coaching (e.g. Mastermind)

5. One-on-one consulting

6. Custom Do-It-For-You services

Tax registration thresholds for digital consultants

The tax compliance solution for digital consultants

  • Calculates the right amount of tax on each sale, directly on your checkout page.
  • Verifies customer tax IDs.
  • Collects and stores the customer location evidence that you need from every sale.
  • Creates and sends invoices that are customized to your brand, in multiple languages and currencies.
  • Tracks your sales in all jurisdictions, and notifies you when you approach a tax registration threshold.
  • Alerts you when any tax policies or rates change, so you’re always in the loop.
  • Provides instant, easy-to-read financial and tax reports that make filing returns just a matter of data entry.

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