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About Advanced Sales Tax Settings

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Katie
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In this article, we want to help you make the best settings for VAT, JCT, GST, QST, and Sales Tax. These settings do not affect your fees or payouts but they may help some of your patrons based on their locations. We'll go over: General information about Advanced Sales Tax Settings, Accessing and Using the Settings, Advanced Sales Tax Settings frequently asked questions, Other Sales Tax questions. 

If you haven’t read up on the new sales tax requirements on Patreon, you might want to do that first (read: Patreon's Sales Tax Requirements) before you dive into the advanced sales tax settings. If you’re ready to learn about the advanced settings, read on!

In this article, we'll go over:

General information about Advanced Sales Tax Settings

Advanced Sales Tax Settings are located within each tier you've created. Head to your Tiers settings page, and click Edit for each individual tier to access sales tax settings. 

We built these new 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. Throughout this article, when we say ‘sales tax’, we also mean VAT, JCT, GST, QST, and other similar taxes. By using these settings to give us further detail on exactly what benefits you offer and how much those things should be valued for sales tax purposes, you may save your patrons some sales tax depending on where they are located and the tax laws in their location. 

Not all benefits are taxable in all regions. Having these details from you will allow us to charge tax only where absolutely 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 always working to keep up with those changes to meet our obligations in the most creator-first way possible. 

If you don’t use the settings, we will still apply sales tax to pledges from your patrons in required locations automatically, but some patrons may end up paying a bit more sales tax than they would have with your custom settings in place. Learn more about required tax locations in this help article: Patreon's Sales Tax Requirements
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. 

The settings have different instructions depending on whether you created a tier for your membership prior to May 20, 2020. If you created your first tier after that date, skip to these instructions: Advanced Sales Tax Settings for tiers created on or after May 20, 2020


For creators who created their first tier prior to May 20, 2020: 

There are two steps you need to complete on each and every one of your tiers to finish the process successfully.

Step 1: List your Benefits
List all the benefits you offer on that tier by selecting each one from the drop down menu or entering details manually. This step only applies to tiers that were created before May 20, 2020. Tiers created on or after this date have a new tier builder that has this step automatically built in, to make this even easier. 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 that has the process of listing benefits built into the flow. 

Step 2: Adjust benefit value
This step only applies if you have at least 2 benefits in a tier. This is where you tell us how much each benefit in that tier should be valued for sales tax purposes, using percentages. For example, if you have 2 benefits in a tier, you might decide that they are both equally valuable, and set them each at 50% of the tier’s value.

About Listing your Benefits

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, organized, 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. 

IMPORTANT: Listing “General Support” as a benefit

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 they 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. 

About Adjusting benefit value, using percentages

Adjusting benefit value is a way for you to tell us the relative value of the benefits in each of your tiers. One 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 discussing the episode and shaping future content as well.  

IMPORTANT: 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 May 20, 2020 click on this link: In-product guide of the tax settings. If you created your first tier on or after May 20, 2020, visit this article: Advanced Sales Tax Settings for tiers created on or after May 20, 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’re already delivering 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 Tiers settings page, and click Edit for each individual tier to access and use your tax settings. 

Using the Advanced Sales Tax Settings
To customize your tax settings, follow the steps below. Patreon's CEO Jack Conte also made a great video where he demonstrates how to use the advanced sales tax settings: Learn how to use Patreon’s advanced sales tax settings


Step 1: This link will take you to the page to get started. The popup pictured below will populate for you. 

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Step 2: Click the "Edit Tier" button on your first tier.

Step 3: You'll be auto scrolled down toward the bottom of the page into the Advanced tier settings in the Sales tax section. This is where you will list all the benefits you offer. Start by clicking the "List your benefits" button.

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Step 4: Next you’ll get a pop-up menu with a scrollable list of benefits commonly offered on Patreon. Click the “Add” button next to the benefit that most closely matches what you offer. You can also choose “Custom benefit” if what you offer isn't listed. After you click “Add”, you’ll have a chance to rename the benefit to something that suits you (though the name won’t show up for patrons).
 
If you’re adding a Custom benefit, you’ll still need to choose a category that most closely matches the benefit you’re offering. Use this process to list all the benefits in this tier. If you’re working on a tier that includes benefits from a lower tier, you still need to add each one on every tier. 
List_Benefits.gif
Step 5: Once you’ve listed all the benefits you offer in this tier, you can then adjust the value of each benefit for sales tax purposes. You must have 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.

You can choose to distribute values evenly between all the benefits in this tier by checking the box next to “Distribute values evenly”. In this case, if you have 4 benefits, each would be given a 25% value. If you have 5, they would each be given 20%, and so on.

If you’d like to specify your own percentages, leave that box unchecked and enter each benefit’s value in the corresponding boxes. Please note that this has to add up to 100% total.
 
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Step 6: Don’t forget to save your tier by clicking the Save tier button!

Please note that you need to do this for each membership tier that you are offering.


Advanced Sales Tax Settings FAQ

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, so 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 you are using Merch for Membership, Patreon is handling sales tax on those items, so you do not need to list that benefit at all in the settings. Patrons may still be taxed on those tiers if there are other benefits on the Merch tiers that are taxable in the patron’s location.


I’m not sure which category to pick when listing my benefits from the drop down menu. 

Here is a list of examples of common benefits creators offer and the benefits category they correspond to:

Benefit you offer
Benefit category you should select from the drop down
Bonus podcast (weekly, monthly etc.)
Bonus content
Join my Discord community
Private Community
Access to Lens videos
Live video or audio stream
Sincere gratitude
General support
One-time swag (ie, a print when you join or a print once a year) 
Merch or tangible goods
Free sticker pack
Merch or tangible goods (zero weighted, if free)
Extra, bonus episode
Bonus content
Complete archive/catalog of work
Bonus content
Autographed photo
Merch or tangible goods
PDF songbook
Digital downloads
Swag (mugs, t-shirts)
Merch or tangible goods
Early access to content that is later free
Early access
Polls on Patreon
Exclusive voting power
Digital wallpapers
Digital Downloads
Extended versions of free content
Bonus content
Priority access to event tickets
Early access
Anniversary thank you gift
Merch or tangible goods
Ad-free videos or podcasts
Ad-free content
Subscription to newsletter
Exclusive posts and updates
Sneak peek samples of current projects
Behind-the-scenes content
Coupon codes for apparel
Promotions and discounts


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, though, 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 yours 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 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, or 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. 

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