Collecting Tax - USA based businesses
Do I have to collect taxes?
Possibly. If you are based in the United States, you must collect and pay sales tax when you have nexus, or sufficient physical presence, in a state that taxes digital goods or downloads. There are multiple ways that downloads are taxed. Some states use their existing franchise, sales, and use taxes to tax digital purchases. Other states have enacted laws specifically aimed at digital downloads. Outside of the United States, you may also have to pay local VAT (Value-added Tax). Only a tax professional can help you determine where and when you are subject to tax.
As of January 1, 2015 European VAT laws changed with respect to digital goods. VAT in these cases is calculated based on the location of the end-user.
Are digital goods always taxable?
No. Some states do not charge sales tax on certain types of goods. Taxation on digital goods is a particularly new and complex focus of legislators. Some states use their existing franchise, sales, and use taxes to tax digital purchases while other states have enacted laws specifically aimed at digital downloads. There are also a couple of states that explicitly do not tax digital purchases. Before collecting sales tax, research your state's tax laws or talk to a tax professional, because you may be exempt from sales tax.
How do I calculate the taxes I owe?
Once you’ve determined that you need to collect sales tax, the next step is to build that tax into your product pricing. Uscreen does not add sales to the product price for you but instead provides you with the necessary information to calculate your own taxes based on geographic location of your customers. Buyers are always charged the amount that you set so taxes will need to be netted out of that gross price.
If you set your product price at $10, your buyers will always pay $10, and you receive $8.50 for every sale. In the state without taxes, the sale price is $10. In the state with a 20% tax rate, you should set aside $2 for later remittance based on a pre-tax price of $8. While Uscreen does not collect tax for you, we do provide a geographic breakdown of your sales based on the state of purchase (in the U.S.) and country of purchase (outside the U.S.). We can do this per request, you can email firstname.lastname@example.org and request this report per month or by year.
Every month, Uscreen delivers the money from your sales to your bank account if you are using Uscreen gateway or PayPal. If you are using Stripe, you are automatically sent this money whenever you choose to do a Payout. At the end of the year (or more frequently depending on your tax professional's advice), you should send the money that was collected as sales tax to your state's filing office. This process is known as remittance. You can pay the taxes collected directly to each state, or use a tax remittal service.