About Advanced Sales Tax Settings

This article is a reference guide for all things VAT/GST, and Sales Tax settings-related.

If you’re curious about which locations are impacted by sales tax, feel free to read through our article: Patreon's Sales Tax Requirements

Throughout this article, when we say ‘sales tax’, we also mean VAT, GST, and other similar taxes.

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 more control over how sales tax and other similar taxes around the world, such as VAT, or GST, are applied to your membership. Using these settings you can give us further detail on what benefits you offer and how much we should value those things for sales tax purposes.

Why is this important? Not all benefits are taxable in all regions and taxation depends on your benefits and how these are offered. These details from you will allow us to charge tax only where necessary.

If you don’t use the settings to define your benefits and/or assign values to these, we will apply sales tax to pledges from your patrons in required locations based on a bundle approach. This may result in higher taxes being applied to your sales.

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. Learn more about required tax locations in this help article: Patreon's Sales Tax Requirements.

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 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 sales tax more accurately 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, without 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 relevant benefit. That way we can consider those pledges to be support-motivated and we may be able to not apply sales tax to them.

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. Once you’ve done this, we’ll be able to apply sales tax more specifically only to the benefits which should be subject to tax. And we will know what portion of a given pledge should be taxed. For example, if you have a tier that includes both digital content 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 digital content, 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.

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, as part of a tier subscription, you offer any reward 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 on its own.

Accessing and Using the Settings

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 are offering 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

You can use the steps below to customize your tax settings:

1. 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
2. Click into the Advanced section of the tier editor
3. 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
4. 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%
5. Don’t forget to click the Save button when you’re done!
6. 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 FAQ

• 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, recurring merch and access to a poll, 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 poll access? If so, it seems reasonable to assume that the remaining $5/month should go towards recurring merch. In that case, you’d set the values at 30% for the podcast episode, 20% for poll access, and 50% for recurring merch. 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.

• 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
  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

• 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.
  
  You are thus responsible for ensuring that all of your benefits are properly categorized using good faith efforts and to the best of your ability using the available tools. We also rely on the fact that you will provide accurate information when you are engaging with the tier tools, sales tax weighting tools and, generally, when listing and categorizing benefits transferred within membership tiers and offerings.
  
  As long as you’ve filled out the settings accurately and to the best of your ability, we should be able to show proof that we are collecting sales tax correctly on your pledges.
  
  If you have any doubts about using the tax tools, please reach out for support.

Other Sales Tax Questions

• Tax amounts can change for a 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 digital streaming) 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).

• Please review your tiers to ensure your benefits accurately reflect what you are providing to 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 or any other benefit you offer, you can choose 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.

• 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.

• In locales where Patreon is liable for tax collections, Patreon will have to decide whether a discount for sales tax collected is appropriate. This will depend on the reasons for which tax was applied and whether this may have been applied in error. If you believe tax should not be applied on the pledge by a certain fan, ensure the fan has 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.

• Unfortunately, our system does not currently support this. However, please contact us if you would like more information.

• 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.) The entity required to collect tax and submit a sales tax filing depends on the rules applicable in tax jurisdiction i.e., usually the fan location and essentially whether that location requires or allows a marketplace to take on such obligations. In most jurisdictions where Patreon is requested to take charge of the tax collection obligations creators will not be required to comply with the tax for the relevant sales. This may however also depend on your tax registration status and activities you have in the relevant location. Please consult with your tax advisor for specific details regarding your tax obligations.

• No, it is not being reported on your 1099K.