Dealing with Tax as a Business

Discussion in 'General Chat' started by pani100, Jun 22, 2018.

  1. pani100

    pani100 Well-Known Member

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    Hi, I have been going through the fees while working on a mod and have a question that will probably arise at some point.
    If you set up a WeBid site as a business how do you deal with the tax element?
    You are providing a service so any sales will need to be recorded and taxed accordingly.
    In the UK for example we would need to provide VAT (tax) receipts for any charges we place to our users.
    If we are dealing with another business they would want a VAT receipt for any charges.
    I don't know if anyone has any experience or has found a way to deal with any tax issues.
    Just after ideas or thoughts on this matter.
     
  2. pani100

    pani100 Well-Known Member

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    Attached is an image which has brought up this subject and hopefully inspire you and others to place your opinions

    [​IMG]
     
  3. nay27uk

    nay27uk Super Moderator Staff Member

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    Thought about this many times myself panni100 however I do think that most sites would not initialy register as a businnes they would first give it a few years to monitor Member sign ups, sales etc. But a very good question indeed
     
  4. Jan Krohn

    Jan Krohn Member

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    I used to set up tax professionally. Getting it done in WeBid would not be an easy task.
    Here is the easy solution that I've been working with:
    * For items sold on WeBid, I included in the terms that all prices need to be end prices for the buyer (i.e. including VAT / GST / sales tax). If the seller is tax registered, they need to indicate that fact in the auction text. (A new field "seller information" would be helpful, that would be included in each auction text of this seller automatically, that includes tax ID, business registration, and/or any other information that the seller is required to disclose under their country's legislation).
    * For listing fees, I added the following wording to the invoice text: "This is not an invoice, but a system generated receipt. Upon request, we can issue you a quarterly tax invoice including your local VAT". I also included in my terms in which regions auction fees are taxable, and that VAT is always included in the price shown to the user. (So the net auction fees can differ per region, which is not really nice, but I'm okay ignoring this, considering the work that would have to go into getting it to work properly.)

    Now what would need to be done to set up tax professionally. (I'm not saying that this is needed. Just outlining how to do it for the case that someone wants to have it, to avoid incorrect implementation.)

    * In some regions tax has to be included in the price given to the user, in other regions tax has to be added on top the price given to the user. I think this needs to be a global setting for the site. Anything else would cause confusion.

    * Tax on items sold on the site. Rules are different for physical goods and digital goods. Physical goods are usually taxed in the seller location, but in some cases have to be taxed in the buyer location (such as in case of cross-state transactions within the USA). Cross-country transactions are never taxable, but the buyer usually has to pay import tax when they receive the item (this is nothing that could be implemented on the system).
    So the seller needs to be able to select the region(s) where he is taxable, and be able to maintain the tax rate (or multiple tax rates) per region. Different tax rates per region might apply when the seller also sells goods that have a discounted tax rate (books, for example, in many regions). The admin needs to be able to define regions for taxation (not only countries, but also regions within the countries). The seller needs to be able to create multiple tax configurations, and assign one of them to each item that he sells (such as "physical goods full rate", "physical goods discounted rate", "digital goods full rate"). Non tax registered sellers would have one default tax configuration of zero percent everywhere.

    * Digital goods sold on the site: digital goods are always taxed in the buyer's location. I'm not aware of any exceptions here. Usually there's a threshold before sellers have to register for tax in the countries to which they deliver digital goods. Anyway, the set of regions that are taxable for digital goods might look completely different from the set of regions that are taxable for physical goods. Therefore, the requirement for multiple tax configurations would be very important.

    * Prices shown to the user in the auction details or list view must be calculated according to global settings, and the sellers' tax configuration (based on the current user's location). If the user is not logged in, prices would have to be calculated based on geoIP, or some default region of the site.

    * Auction fees: auction fees are digital goods. The admin must be able to create a tax configuration for auction fees based on the same rules explained above.

    Finally, in the above example, since prices in the UK always need to include VAT, you'd need to have an additional line below the sub total, giving you the "sub total (net)", in this case 23.75, then VAT 4.75, and the total is 28.50.

    Imagine the above would be a dollar price in the US subject to 4% sales tax (for example in NY). Sales tax is not included, but added on top in the US.
    So you'd have the sub total of 28.50, then sales tax 1.14, and a total of 29.64. The line "sub total (net)" is not needed.

    Now a complex case. The user is from Ireland (tax rate 23%), but using a UK auction site. So the net total has to remain at GBP 23.75, which requires the individual prices of the line items to be adapted:
    Auction setup GBP 3.08
    Subtitle GBP 1.03
    Relist GBP 20.50
    Image Upload GBP 4.61
    sub total GBP 29.22
    sub total (net) GBP 23.75
    VAT (23%) GBP 5.47
    Total GBP 29.22
     

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