Sales tax and Value Added Tax (VAT) requirements vary depending on where a customer is located and the type of product or service being purchased.
Because tax laws and rates differ between jurisdictions, customers purchasing the same product may see different tax amounts at checkout. In some cases, a transaction may be taxable in one location but not taxable in another.
Why Sales Tax and VAT Amounts Vary
Sales tax and VAT requirements are determined by the applicable tax laws for a transaction.
These requirements can vary by:
- Country
- State
- Province
- Local jurisdiction
- Customer location
- Type of product or service being purchased
For example, one jurisdiction may require tax to be collected on a digital product, while another may not. Even when a product is taxable in multiple locations, the applicable tax rate may be different.
This means two customers purchasing the same product may be charged different amounts of tax.
The Type of Product Matters
Tax treatment can also depend on what the customer is purchasing.
Products sold through JVZoo may fall into categories such as:
- Tangible Personal Property
- Downloaded Software
- SaaS
- Custom Software
- Digital Goods
- Services
- Tickets
Different jurisdictions may have different rules for each product category.
For example, a jurisdiction may tax downloaded software differently from SaaS or other digital goods. This is why sellers must accurately categorize their products within JVZoo.
For more information, see How to Categorize Your Products for Tax Purposes.
The Customer's Location Matters
Applicable taxes are generally determined using the location information associated with the transaction and the tax rules that apply to that jurisdiction.
As a result, customers may notice that:
- Tax is charged on a purchase in one location but not another.
- Different customers are charged different tax rates for the same product.
- The amount of tax changes when the customer's location changes.
A seller's own location does not necessarily determine whether tax must be collected from a customer.
Sales Tax and VAT When Using JVZoo Processing Services
When a transaction is processed through JVZoo Processing Services, JVZoo will determine the applicable Sales/VAT tax based on the transaction information, including the customer's location and the product category selected by the seller.
When applicable, JVZoo will:
- Calculate the Sales/VAT tax
- Collect the tax from the customer
- Report the applicable taxes
- Remit the taxes collected to the appropriate tax authority
Because the seller's product category is used when determining the appropriate tax treatment, sellers must make sure their products are categorized accurately.
Sales Tax and VAT When Using Your Own Payment Processor
When a seller uses their own payment processor, the seller is responsible for their applicable tax obligations.
This includes responsibility for:
- Determining whether Sales/VAT tax applies
- Collecting any applicable taxes
- Reporting applicable Sales/VAT taxes
- Remitting applicable taxes to the appropriate tax authorities
JVZoo does not report or remit Sales/VAT taxes on the seller's behalf for transactions processed through the seller's own payment processor.
Why Was My Customer Charged Tax?
If a customer sees Sales Tax or VAT at checkout, the tax may be required based on the customer's location, the type of product or service being purchased, and the tax rules that apply to that transaction.
The tax amount is not necessarily the same for every customer.
For example, one customer may be charged 6% tax, another customer may be charged a different rate, and another customer may not be charged tax at all.
This does not necessarily indicate an error. Tax requirements and rates can differ between jurisdictions.
Seller Responsibilities
Sellers are responsible for accurately categorizing the products they sell through JVZoo.
Do not select a product category based on which category receives the lowest tax rate or whether a category is taxable in a particular location. The category should accurately reflect the product or service the customer is purchasing.
Sellers using their own payment processors are also responsible for understanding and meeting their applicable Sales/VAT tax obligations.
Important
Tax laws, taxability rules, and tax rates can vary by jurisdiction and may change over time. The tax treatment of one transaction should not be used to determine how another transaction will be taxed.
JVZoo cannot provide individual tax or legal advice. If you have questions about your specific tax obligations, product classification, registrations, or reporting requirements, please consult a qualified tax professional.