Sales Tax and upcoming changes (Patreon)

Please do not respond to this with a knee-jerk reaction and actually read this post first.

Tldr: some US residents might be charged a few cents extra per pledge due to recent legislation, starting July 1st.

A bit of background:

Patreon has been charging and paying VAT for patrons in the EU since 2015, when the laws changed there. Over the past couple of years, many other countries and states in the US have passed similar laws that require “online marketplaces” to apply sales tax to transactions. Although aimed at large online stores, 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. Due to this, Patreon is legally required to start adding sales tax on applicable patron pledges from July 1st 2020. 

So, yeah, the US has passed some laws that wound up affecting small time digital markets too, and technically patreon pages fall into that.

But, Patreon has taken some steps that greatly mitigate the fallout from this.

They've made the process nuanced and given creators jurisdiction over if their content is taxable (though the controls for it on my end are a bit tedious.) We've got a bit over a month to get things sorted out before then (technically two: news of this first dropped May 6th, but I was waiting to see what the course of action would be).

Patreon pages now can assign what kind of benefits apply to each tier they have, and weight them according to their own discretion. Not every kind of benefit gets taxed either.

Some things are kinda vague--for one, I'm not sure if early access to art counts or if it counts everywhere. Full res downloads probably would count, but only for a very limited respect. For instance, this is how I have it weighted for the $2 tier:

Some of the numbers are a bit all over the place because this is all decided by a cumulative percentage equaling 100, rather than a 'weight' system which would be WAY easier to visualize. Some states might consider something like early access a taxable good, while others might not. Most probably would consider the archive a taxable good.

So, only a tiny percentage of the $2 pledge is therefor taxed, and then it'd be whatever the tax rate is for that state. A percent of a percent results in a small amount, and will probably only be a couple of cents for most people. (Sometimes even less than 1 cent I would imagine.)

It's annoying, but this is 100% on the US government. I am extremely glad that I can weight my content myself instead of Patreon just assuming tax on 100% the value of each pledge. (I just wish it was easier to edit.) Ultimately, I think most people here shouldn't expect to pay more than a couple of cents (like, lower single digits) in taxes.

It's still a month before this goes into effect, so if you wanna ask questions, or need to plan for anything, there's time to do so. I'll forward anything I'm unsure of to the official discord and forum.

If you also have feedback on how you personally value your pledge, e.g. why you're in the tier you're at, lemme know, I can use it to help make my benefits more accurate.