How to Charge Tax on your Memberships

July 1, 2021

By Mitch Colleran

Software Developer / Founder at @JoinIt, membership software NGOs & SMBs.

View other posts by Mitch

Collecting taxes on your membership can be a pain, so we’ve built a few tools that make it easier for you to manage!

Sales Tax or Value Added Tax

The two most common types of tax are sales tax (primarily in the US and Canada) and value added tax (primarily in the EU and Australia).

While determining which type of tax you collect will depend entirely on your organization's tax liability, the key difference between these two types of taxes is that sales tax is primarily calculated on top of the price of memberships. While VATs are typically included in the final price. 

Let's look at a scenario where tax is 10% and the membership price is $100.

In the sales tax model -- where the tax is added to the purchase price -- the tax is equal to $10.00. Pretty simple! 

However, in the value added tax model -- where the tax is incorporated into the final price -- the tax would equal $9.09. The calculated tax amount is 10% of the remainder from the final price when tax is subtracted ($90.91). 

Regardless of which tax calculation you need, Join It takes care of it for you and makes it easy! 

Setting the Correct Tax

Depending on your organization’s tax model, the most difficult part of the tax is deciding how much you should charge for your memberships. If you have any questions or doubts about what your organization should be charging for tax on memberships, we recommend consulting a tax attorney. 

Determine the correct tax rate is more difficult in some situations than in others. In the US and Canada, we’ve come across different interpretations by different organizations, while the EU has regulations that are (at least relatively) a bit more straightforward. 

Tax Invoices and Receipts for Members

Lastly, Join It makes it easy for you to provide receipts to your members as proof of purchase on the calculated tax.

This is especially important for organizations that collect a value added tax. There are cases where the member will need a compliant tax invoice as proof of tax payment to make a claim. 

Members can log in to their Join It accounts and find the Tax Invoices on their previous payments to your organization. For more information on how a member can find their invoices, we’ve put together this helpful article on downloading tax invoices

Remember, taxes vary based on the nature of your membership, the nature of your tax status, your location, the location of your members, and other factors. These general tax options may or may not work for your specific tax situation. You should consult with your tax advisor about your obligations concerning how much tax you need to collect, remit, and report for your event.