This article is a reference guide for all things VAT, JCT, GST, QST, and Sales Tax settings-related. While these settings do not affect your fees or payouts, they may help some of your patrons based on their locations.
If you’re curious about which locations are impacted by sales tax, feel free to read through our article: Patreon’s Sales Tax Requirements
In this article, we’ll cover:
- General information about Advanced Sales Tax Settings
- How to use Advanced Sales Tax Settings
- Frequently asked questions
- Other Sales Tax questions
General information about Advanced Sales Tax Settings
Sales Tax Settings lives within each tier you’ve created. Head to your Membership tier editing page, and click the Edit Tier button for each tier to access sales tax settings.
We built these tax settings to give creators control over how sales tax and other similar taxes around the world, such as VAT, JCT, GST and QST, are applied to your membership. Using these settings to give us further detail on what benefits you offer and how much we should value those things for sales tax purposes, you may save your patrons some sales tax depending on their location and the tax laws in their location.
Not all benefits are taxable in all regions. These details from you will allow us to charge tax only where necessary. Sometimes, these details may also allow us to charge tax on just a fraction of a patron’s pledge. Tax laws change frequently and Patreon is constantly working to keep up with those changes to meet our obligations in the most creator-first way possible.
If your account is in Patreon’s Lite plan, you don’t need to use the new settings at this point because sales tax will not currently apply to your patrons since you do not provide membership tiers or benefits.
Did you create your tier(s) before 20 May 2020?
The settings have different instructions depending on whether you created a tier for your membership before 20 May 2020. If you made your first tier after that date, you can skip to these instructions: Advanced Sales Tax Settings for tiers created on or after 20 May 2020
For creators who created their first tier prior to 20 May 2020:
There are two steps you need to complete on each and every one of your tiers to finish the process successfully.
- List your benefits: select the benefits you offer from the drop-down menu or enter them manually. This step only applies to tiers created before 20 May 2020. Tiers made on or after this date have a new tier builder that has this step automatically built in. Once you’ve used the Advanced Sales Tax Settings to list your benefits on an existing tier and saved your work, the next time you edit that tier you will use the new tier builder
- Adjust benefit value: this step only applies if you have at least two benefits in a tier. This is where you tell us how much each benefit should be valued for sales tax purposes, using percentages. For example, if you have two benefits in a tier, you might decide that they are both equally valuable, and set them each at 50% of the tier’s value.
Not all benefits are taxable in all regions. By giving us more detail about the unique benefits you’re offering, you allow us to be more accurate about applying tax only where absolutely required. The settings allow you to choose from common benefit types or create a custom benefit if what you offer is not listed. When you’re finished with this step, we’ll have a clean, organised and detailed list of what you’re offering in each of your tiers in our database to make it possible for us to charge the most accurate and, in many cases, the lowest amount of sales tax possible for your unique membership. You can update this at any time and our sales tax logic will update along with it.
Listing “General Support” as a benefit – IMPORTANT!
If your patrons are at all motivated by the idea of supporting your work, alongside or instead of wanting the benefits or content you provide, you can account for that fact in your tax settings. Pledges with the purpose of support are not taxable in some regions, but tax law cannot be applied based on your patrons’ intentions. We can only apply tax law according to whether or not a patron is receiving something taxable in return for their pledge and the value assigned to each thing.
If your patrons in one or more of your tiers receive no benefits, you should add General Support as the only benefit. That way we can consider those pledges to be support-motivated and we will not apply sales tax to them from patrons who live in the following countries: the US, Australia, Canada, New Zealand, Norway and Switzerland. We are working hard to expand that list, but we have to obtain permission from taxing authorities in more countries.
If your patrons receive some benefits but are also motivated by supporting your work, you should still add “General Support” as a benefit along with your other benefits. In Step 2, Adjusting benefit value, you will decide how much this support motivation plays a role in your membership. For example, if you have a tier that gets an exclusive video every month (taxable in most places), and has an element of support motivation (nontaxable in most places), you might determine those things are equally important to most of your patrons, and assign each item a 50% value. Then in the countries where support-motivated pledges are not taxed, we will only apply sales tax to 50% of the pledge.
Adjusting benefit value is a way for you to tell us the relative value of the benefits in each of your tiers. Once you’ve done this, we’ll be able to apply sales tax to just a portion of some pledges in places that allow us to do so. And we will know what portion of a given pledge should be taxed. For example, if you have a tier that includes Discord access and a sticker, you can adjust the benefit value setting to tell us that the sticker makes up 10% of the value of that tier. Then, in places where the sticker is taxable, but not Discord, we can apply tax to just 10% of the pledge amount. If we don’t have these percentages set by you, we will have to apply sales tax to 100% of each pledge, in all locations where sales tax applies.
Adjusting benefit value also comes into play when your patrons are motivated by supporting your work rather than or in addition to getting benefits. If this is the case, as it is for many Patreon creators, make sure you have added “General Support” as one of your benefits so you can then adjust its value accordingly. Our data shows that when patrons are asked why they joined a creator's membership, the research shows that just under 40% of patrons report being interested in getting stuff, with an almost equal amount stating that they "just want to support the creator. I don’t care if I get anything in return”. Of course, this varies per patron; you are aiming to set values that generally apply to your audience.
Value can be challenging to determine. It can be about more than just the wholesale cost of an item. Think about why your patrons participate in your membership. A t-shirt is a commodity, but wearing your t-shirt may also be about the patron demonstrating their overall support for your creations. Your podcasts aren’t just about the file itself, but how the patron can engage in the community by discussing the episode and shaping future content as well.
Some benefits are one-time gifts or giveaways. Set those to 0% value!
If you offer any benefits that patrons only get once after they join or after a certain number of months, that should be considered a giveaway or thank you gift, like the tote bag you get if you support a public radio station. You can list that benefit, but set it at 0% value so it is not generally considered taxable.
Accessing and using the settings
If you created your first tier prior to 20 May 2020 click on this link: In-product guide of the tax settings. If you created your first tier on or after 20 May 2020, visit this article: Advanced sales tax settings for tiers created on or after 20 May 2020
If you’ve already defined your tiers, pricing and the benefits that you’re delivering to patrons, and it’s working for you, you don’t need to change anything in order to prepare for sales tax. All you need to do is use the Advanced sales tax settings to tell us what benefits you’ve already delivered and how to value those benefits for sales tax purposes.
Where do I find the Advanced sales tax settings?
Advanced sales tax settings are located within each individual tier you've created. Head to your Membership tiers settings page, and click Edit for each tier to access and use your tax settings.
Using the Advanced sales tax settings
Patreon’s CEO Jack Conte also made a great video demonstrating how to use the advanced sales tax settings: Learn how to use Patreon’s advanced sales tax settings
You can also use the steps below to customise your tax settings:
- Visit your Membership tier editor and click the Edit tier button for your first tier – follow these instructions, save your work and repeat with all of your other tiers
- Click into the Advanced section of the tier editor
List ALL of the benefits for this tier using the List your benefits drop-down menu. If you don’t have the List your benefits drop-down, click the Add benefit button. You can also choose Custom benefit if what you offer isn’t listed
- Be sure to add General support as one of the benefits if patrons pledge to support you/your work
- In the Adjust benefit value section, tell us how much each benefit is worth. You’ll need at least two benefits listed for any tier before you can access the Adjust benefit value settings. If you only have one benefit in a tier, it can only equal 100% of the tier value. Please note that if you manually adjust the benefit values for each benefit, they must equal 100%
- Don’t forget to click the Save button when you’re done!
- Repeat the above steps on each of your tiers. If your higher tiers include benefits from your lower tiers, you’ll need to list them out each time on every tier
Advanced sales tax settings FAQs
How do I determine what value to assign to my benefits?
More practically, a helpful way to think about this may be to consider what you would charge for the benefit if the tier consisted of nothing but that benefit. In other words, if you have a ₤10 tier made up of an extra podcast, general support, and access to a Discord server, imagine what you would charge for each one of those components if they were listed individually as three separate items on a menu. Would you charge ₤3 a month for the extra podcast episode? ₤2/month for the Discord access? If so, it seems reasonable to assume that the remaining ₤5/month should go towards general support. In that case, you’d set the values at 30% for the podcast episode, 20% for Discord, and 50% for general support. If there is only a single thing in a tier, such as a shoutout, then 100% of the value of that tier will be the shoutout. Taxing authorities are not going to question how a business prices itself, as long as those prices are reasonable.
What if I’m using Patreon’s Merch for Membership product? How do I set sales tax settings?
If I use the tax settings incorrectly, will I be liable for taxes?
No, using the settings doesn’t make you any more or less liable than you were before. Patreon is taking on the liability of collecting and remitting sales tax in the jurisdictions outlined. If someone is going be audited, it’s going to be Patreon. As a company, we can only use the information which you have provided, so we trust Creators to be honest and act in good faith when engaging with the tools. As long as you’ve filled out the settings accurately and to the best of your ability, we’ll be able to show proof that we are in fact collecting sales tax correctly on your and all creators’ pledges.
Other sales tax questions
I noticed that the amount of tax changed for one or more of my patrons. Why?
Tax amounts can change for any number of reasons. It may be that you updated your tier settings and the taxable items in the tier were assigned a new value. It may be that the patron moved locations. A state could have clarified a ruling or enacted a law relating to something (like Discord access) which to that point they had not ruled as being taxable or nontaxable. Or it may just be that the actual tax rate changed in the local jurisdiction (which happens frequently).
I don’t believe my tier should be taxable, or I believe too much tax is being charged
Please review your tiers to ensure your benefits accurately reflect what you are providing patrons to the best of your ability. If your tier is only for patrons to support you and they are not paying directly for any physical or digital goods or services, you can always put the “General support” benefit in your tier. If you have more than one benefit, you can use the tax weighting feature in the tier to tell us how much to value each benefit, likely reducing the amount of the pledge that needs to be taxed if not all of your benefits are taxable in the patron’s location.
What if I said there would be merchandise in a tier but then didn’t send merchandise?
We understand that creators don’t always have a regular cadence for providing benefits. In this case, we recommend using the Benefit value feature and giving the merchandise benefit a lower value. If the merchandise is really a give-away for support, you can give it a 0% value to ensure it is not taxed in locations that don’t tax give-aways.
I want to issue a refund for the sales tax you collected, how can I do that?
It is not currently possible to refund just sales tax. If you refund a patron, they will be refunded the full payment, including tax. If the patron is going to continue their membership, ensure they have set their accurate location in their patron settings. Encourage the patron to contact Patreon support and we can assist them in their sales tax concerns.
I am exempt from tax on my purchases (as a school, Native American group or other). What do I do?
Unfortunately, our system does not currently support this. However, please contact us if you would like more information.
Do I need to submit my own sales tax filings in all the places where my patrons are located?
Maybe, depending on your circumstances. First, to be clear, this is in regards to sales tax filings. (Everyone always needs to file income tax returns.) Who is required to submit a sales tax filing depends, again, on where you are located but some Creators had likely met sales thresholds that would have required that they collect and file sales tax returns on their own prior to Patreon taking on the responsibility. If you were one of these people and now Patreon is doing the sales tax for you, it’s possible that the state would still want you to file the return to report only that Patreon is now responsible for the collecting/paying the tax. If you did not have an obligation to file a sales tax return prior to now, you do not have one now.
Is the additional sales tax charged to the Patron reported on my 1099K?
No, it is not being reported on your 1099K.
What is Patreon doing to help?
Patreon is actively lobbying on Creators’ behalf in myriad ways, including reaching out directly to states to clarify sales tax laws and advocate for the necessity and importance of independent creative artists.