New Sales Tax Requirements, effective July 1st, 2020

Today we emailed creators to let you know that Patreon is being required by law to start adding sales tax to certain patron pledges from July 1st, 2020. This will affect patrons in some parts of the US and 17 other countries, you can see the full list here. The main thing to remember is that these taxes depend on the patron’s location, and what their laws are, not you as the creator’s location. This does make it especially challenging to be able to talk about what this will look like for each individual creators community as it’s totally dependent on where your patrons are.

Taxes can always be stressful and right now this extra tough timing. We pushed the start date out as far as we could to give you plenty of time to feel informed, and to notify your patrons directly if you wish. This forum thread is to provide you with some foundational information, resources for further reading, and answer any questions you might have.

We made this video to walk you through the the details about sales tax, or you can read the info below!

Background
Patreon has been charging and paying VAT for patrons in the EU since 2015, when the laws changed there. Over the past couple of years, many other countries and states in the US have passed similar laws that require “online marketplaces” to apply sales tax to transactions. Although aimed at large online stores, the Amazons, Ebays, Netflixes, and Etsys of the world, the way these laws were written and the way they’re being interpreted means that they’re impacting many different types of companies, including Patreon. Due to this, Patreon is legally required to start adding sales tax on applicable patron pledges from July 1st 2020.

About Sales Tax
Sales tax is charged based on the location of the patron, not you the creator. Since you may have patrons all over the world, this sales tax change is likely to be relevant to you and your patrons. The rates and laws about what is taxable differ for every country, and in the U.S. those things vary from state to state and sometimes even down to the zip code. Patreon is responsible to charge sales tax accurately, and only on those specific things which are taxable, which means we need to know where the patron is located and what benefits creators are offering.

How will this affect my patrons?
Whether or not a patron will pay sales tax depends entirely on where they are located, what their local sales tax laws are, and what you offer in your tiers. The laws and tax rates for that patron’s location will be applied whenever a patron pays money through Patreon, whether that’s monthly or per thing, if the benefits offered are taxable in the patron’s location. Within the US, we estimate that less than half of all patrons will have sales tax added to their pledge. Outside the US, it very much depends on the country where a patron is located. For most patrons the impact will be minimal, and many patrons won’t see any sales tax added to their pledge at all.

How much more will they be charged?
Some patrons will see an additional line item on their receipt for sales tax starting July 1st. Since tax laws and the rates themselves vary from country to country and state to state, the amount will be different for different patrons. The money that Patreon collects as a result of these laws will be paid directly to local governments. As an example, tax rates in the US range from 4% to 11%. On a $5 pledge, that’s between 20 cents and 55 cents, if tax is applied to the entire pledge.

Which benefits on Patreon will be considered taxable?
Outside of the US it is common for all electronically supplied services and physical goods to be subject to tax in most places. Within the US, what’s taxable varies greatly by location. As a rough guide, we’ve broadly sorted benefits into 5 categories that are each taxed differently.

Typical Benefit Examples US Taxation Status
Donations/Support Support only. Language such as “pledge whatever you like” Currently exempt from Sales Tax in the majority of states
Recognition Shout outs, names in credits Exempt in vast majority of states
Exclusive Community Access Patron only posts, Discord server access, polls Exempt in majority of states
Streaming Content Extra podcast episode per month, videos, bonus content Taxable in roughly half the states
Downloadable Digital Goods PDFs, computer game builds, downloaded coloring pages Taxable in roughly half the states
Physical Goods Candles, Tshirts, mugs, mailed coloring pages Taxable in all states in which Patreon is collecting, unless the item is a one-time thank you gift

Do I need to take any action?
There is no change that you’re required to make; you don’t need to fill out additional paperwork or anything like that. Patreon can automatically detect what’s in your tiers based on keywords and apply the right tax rate for each patron’s location. That means if you don’t need to make any changes and sales tax will be handled. However, for creators who want to dig into the details and optimize, we are launching some advanced tax settings later this month that will allow you to do so. This may save your patrons a small amount of sales tax in some cases. The settings are not live yet, but will be by the end of May 2020. We’ll post a lot more info about those once they are live later this month.

How will patrons know about this?
If you want to let your patrons know, we’ve provided some example copy you can use. Patreon will also notify all impacted Patrons on June 1st.

What’s next?

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Hey everyone, there was some news yesterday related to sales tax. Saudi Arabia raised their VAT rate from 5% to 15%. We’ve updated the chart in our help center article but I wanted to flag there here too as it’s such an increase.

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A post was merged into an existing topic: Sales Tax AMA with Jack Conte

@mindy - does Patreon have a response to California’s attempt to collect eight years of back sales taxes from on-line merchants? I discovered this during my research on sales taxes:

(Article from Nov, 2019)

Hey @Michael_Loucks, thank you for the tip!

Our tax team monitors closely legislative and audit based developments across the globe, and we’ll forward their way. We are working with authorities on any potential past period liability that may be due (from Patreon). Under no circumstances would we apply taxes retroactively to transactions that occurred on our site.

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Where (the hell…) is the “Adjust tax value”? I add a benefit, select the category “Bonus content”, click accept and then in the advanced area in the “optional” Sales tax section I only see:

“First, add a benefit”

Now what do you say, I’ve just did!

Why am I receiving a nag email to set up for the new system when I’ve already done so?

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Thanks for the reply, @mindy!

I am so confused. It clearly says we don’t have do do anything and Patreon will handle sales tax automatically. But the email I received today says I have not finished setting up my sales tax…

Do we need to so something? Which is it?

Here is what it says the Patreon Help Center

"Do I need to take any action?

It is not strictly necessary. Patreon will automatically detect what’s in your tiers based on keywords, and apply the right tax rate for each patron’s location, so you don’t need to take any action and sales tax will be handled."

Hi, I set the lowest two tiers just to general support and then the three higher tiers I put a bunch of other benefits and adjusted their values with the advanced value adjusting feature. I saved each tier.

Today I got an email saying I had not yet completed my settings. Is there something else I needed to do to complete it?

Thank you,
Zan

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I also just got an email saying I haven’t completed my tax settings, but I’ve already gone through and edited each tier’s benefits. I thought I completed everything. The system doesn’t give me any clue as to what part I’m missing now. How can I find out what I haven’t finished yet?

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I got the same email, titled “You didn’t finish your sales tax setup for July 1st!”
I looked it over and I seem to have completed all the tiers. What am I missing?

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Hi @Queex, @Molly_Harrison, @Zan_Edson, @osarusan :wave:
We’re terribly sorry for the confusion regarding the sales tax email! If you received this email, it is because you have not finished updating the “Adjust benefit value” feature. To finish this:

  • Click on Edit Tier on each one of your tiers
  • Scroll down to the Advanced settings and click the arrow to open
  • Check the box that says “Adjust benefit value for sales tax”
  • Then follow the instructions
    This step needs to be completed on all of your tiers, published and unpublished.

A small percentage of you may have completed the settings over the weekend. If so, you’ll see a pop up message when you login to Patreon.com telling you that you have completed the process and can disregard the email. So sorry again for the confusion! Let us know if you have any other questions - we’re always happy to help.

OK, apparently my problem was that one of my tiers only had a single benefit. One cannot adjust the benefit value unless all the tiers has two or more benefits.

Thank you, but I did adjust the benefit values on all the tiers that have more than one benefit. The tiers that only have one general support benefit, you can’t adjust, so I don’t know what else I need to do?

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Could you specify how the popup should look like? I tried to logout/login but I don’t see any popups.
Thanks!

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Can anyone answer me?

For the sake of putting this out there, i didn’t get a message saying it was complete either but i 100% did complete it all, based on what has been said here before.

Hey @DysonLogos, I’ve surfaced this to the team internally and will keep you updated!