On May 6th, 2020 Patreon announced that we are being required by law to start adding sales tax to more patron pledges starting on July 1st, 2020. This affects patrons in parts of the US and 15 other countries (see list).
Patreon already handles charging and paying VAT (European sales tax) for patrons in the EU, and has been doing so since 2015 when the laws changed in the EU. Over the past couple of years, many countries and many states in the United States have passed similar laws that require “online marketplaces” to apply sales tax to transactions. Although aimed at 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.
The article and FAQs below will cover all the details about how sales tax applies to Patreon and what you need to know.
Contents
Who is affected?
Whether or not you will pay sales tax as a patron depends on where you are located, and what benefits the creators you support are providing. The laws and tax rates in effect in your country of residence will be applied whenever you pay a creator money through Patreon, whether that’s monthly or per thing, if the benefits offered are taxable in your 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 you are located. For most patrons the impact will be minimal, and many patrons won’t see any sales tax added to their pledge at all.
If Patreon is charging sales tax in your location, you will see an additional line item on your receipt for sales tax starting July 1st. Since tax laws and rates 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 your local government, and there are no fees on this portion of your payment.
If Patreon is charging sales tax in your location, you will see an additional line item on your receipt for sales tax starting July 1st. Since tax laws and rates 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 your local government, and there are no fees on this portion of your payment.
About the announcement
Should sales tax apply to Patreon? Is supporting a creator on Patreon the same as making a purchase?
The way these new laws were written, if you are receiving benefits in exchange for your pledge, the pledge may be subject to sales tax, depending on what is considered taxable in your location. For example, many places have passed laws that make streaming content taxable with platforms like Netflix and Spotify in mind. So in those places, streaming video and audio are considered taxable.
If your are not receiving any benefits, the pledge is not taxable in most places. For example, if you pledged but didn’t select a reward tier, your pledge is not taxable in most places. In addition, if you added any amount of money on top of the tier price, that additional amount is not taxable in most places. One notable exception is the EU, where we are currently required to apply tax (VAT) all pledges regardless of whether the patron is receiving any benefits. We are working with EU tax authorities to secure reductions and exemptions for support-based pledges in the future.
I thought sales tax was only applicable on tangible goods?
If your are not receiving any benefits, the pledge is not taxable in most places. For example, if you pledged but didn’t select a reward tier, your pledge is not taxable in most places. In addition, if you added any amount of money on top of the tier price, that additional amount is not taxable in most places. One notable exception is the EU, where we are currently required to apply tax (VAT) all pledges regardless of whether the patron is receiving any benefits. We are working with EU tax authorities to secure reductions and exemptions for support-based pledges in the future.
I thought sales tax was only applicable on tangible goods?
The laws about what is taxable vary by location, but in many places digital goods are now taxable, both downloadable and sometimes streaming.
Why are you starting to apply sales tax now?
Why are you starting to apply sales tax now?
As a result of communications with taxing authorities and the evolution of online taxation, Patreon has determined that it will have the obligation to begin charging tax in certain locations effective July 1.
Can creators absorb the cost of sales tax so that it’s not an additional charge for the patron?
Can creators absorb the cost of sales tax so that it’s not an additional charge for the patron?
Some creators would prefer this and we wish we could provide this option, but in the US, we are not legally allowed to include sales tax in the pricing. It must be broken out as a separate line item and added on top of the base price. In other regions, most of the time prices do include sales taxes, such as VAT in Europe which is normally included in any price shown. We are looking into how we can update Patreon to accommodate tax customs in more regions, but this will take some time.
Details on Sales Tax: How it works in different regions and how that applies to Patreon
Which benefits on Patreon will be considered taxable?
Outside of the United States it is common for all electronically supplied services and physical goods to be subject to tax. Within the United States, what’s taxable varies greatly by location. As a rough guide, we’ve broadly sorted benefits into 5 categories that are each taxed differently.
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Typical Benefit Type
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Examples
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U.S. Status
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Donations/Support
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Support only. Language such as “pledge whatever"
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Currently exempt from Sales Tax in the majority of states
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Recognition
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Shout outs, names in credits
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Exempt in vast majority of states
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Exclusive Community Access
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Patron only posts, Discord server access, polls
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Exempt in majority of states
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Streaming Content
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Extra podcast episode per month, videos, bonus content
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Taxable in roughly half the states
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Downloadable Digital Goods
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PDFs, computer game builds, downloaded coloring pages
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Taxable in roughly half the states
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Physical Goods
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Candles, T-shirts, mugs, mailed coloring pages
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Taxable in all states in which Patreon is collecting, unless the item is a one-time thank you gift
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Where is Patreon collecting tax, and what are the tax rates?
Patreon already handles the collection, filing, and remittance of VAT (European sales tax) for patrons in the EU, and has been doing so since 2015 when the laws changed in the EU. See EU VAT rates per country.
Starting July 1, 2020, Patreon will begin charging and paying sales tax in the below list of additional countries. As sales tax laws change, Patreon will add or remove regions as needed to comply with new regulation.
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Country
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What sales tax is called there
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Tax Rate
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Australia**
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GST
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10%
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Belarus*
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VAT
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20%
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Iceland
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VAT
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24%
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New Zealand
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GST
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15%
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Norway
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VAT
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25%
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Canada (Quebec only)*
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QST
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9.98%
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Russia
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VAT
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20%
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Saudia Arabia (pending)
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VAT
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15%
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Singapore
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GST
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7%
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South Africa (pending)
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VAT
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15%
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South Korea
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VAT
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10%
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Switzerland
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VAT
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7.70%
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Taiwan
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VAT
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5%
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Turkey
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VAT
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18%
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UAE (pending)
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VAT
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5%
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United States (36 states plus D.C.)
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Sales Tax
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ranges from 4% - 11%
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*We will not apply sales to pledges from patrons in that live in Belarus that support creators in Belarus, or from patrons that live in Quebec that support creators in Quebec.
**We will not apply GST to pledges from patrons in Australia that support creators in Australia. However, if those patrons support creators in other countries, they may still be charged GST on those pledges if the benefits they receive are taxable in Australia.
United States - State Breakdown
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States where Patreon will collect Sales tax starting July 1st, 2020
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States where Patreon does not collects sales tax
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Alabama
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Nevada
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Alaska
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Arizona
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New Jersey
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Delaware
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Arkansas
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New Mexico
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Florida
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California
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New York
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Kansas
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Colorado
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North Carolina
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Louisiana
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Connecticut
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North Dakota
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Mississippi
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District of Columbia
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Ohio
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Missouri
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Georgia
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Oklahoma | Montana |
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Hawaii
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Pennsylvania
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New Hampshire
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Idaho
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Rhode Island
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Oregon
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Illinois
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South Carolina
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Tennessee
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Indiana
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South Dakota
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Iowa
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Texas
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Kentucky
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Utah
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Maine
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Vermont
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Maryland
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Virginia
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Massachussetts
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Washington
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Michigan
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West Virginia
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Minnesota
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Wisconsin
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Nebraska
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Wyoming | |
What is the rate being charged?
Whether you will be taxed, and at what rate, depends on both your location and the types of benefits the creator provides you.
Within the United States, sales tax rates currently range from 4% to 11%. To make things more complex, some locations tax certain things while others don’t (e.g. - “physical goods” vs. “digital downloads” vs. “digital streaming”). Outside of the United States, rates range from 5% to 25% in the countries where Patreon will charge and pay sales tax.
It is important to understand that tax rates and rules change frequently. Patreon ensures that patrons are taxed at the current rate for the patron location and the benefits being provided.
Will more states/countries start requiring Patreon to charge sales tax in the future?
Within the United States, sales tax rates currently range from 4% to 11%. To make things more complex, some locations tax certain things while others don’t (e.g. - “physical goods” vs. “digital downloads” vs. “digital streaming”). Outside of the United States, rates range from 5% to 25% in the countries where Patreon will charge and pay sales tax.
It is important to understand that tax rates and rules change frequently. Patreon ensures that patrons are taxed at the current rate for the patron location and the benefits being provided.
Will more states/countries start requiring Patreon to charge sales tax in the future?
Very likely. We expect more states and countries will attempt to pass similar laws or regulatory changes in the future. We are constantly monitoring our tax obligations, and will keep this page up to date and with as much advance warning as possible.
How will US Sales tax work for a creator that charges ‘per thing’?
How will US Sales tax work for a creator that charges ‘per thing’?
Sales tax applies on each transaction. For patrons that pay per thing, if they are in a location that requires sales tax, and the thing the creator offers is taxable in their location, they will see sales tax applied to each monthly transaction where the creator posted a ‘thing’ during that month.