Set Taxes
You can set up the tax rules (also known as VAT or GST) you need by country, city, state, province, or zip code. Once set up, the appropriate taxes will be added to the membership dues. All taxes collected are tracked, so you you can easily export the information to a spreadsheet or directly to your accounting software (Quickbooks or Xero).
Set Up Tax Rules
Step 1: Login
Login to MembershipWorks as the primary admin.
Step 2: Locate Tax Settings
Go to MembershipWorks > Organization Settings and click the Integration link at the top of the page.
If
you do not see the Integration link, this means you are not logged in
as the primary admin. Only the primary admin is able to add tax rules.
Step 3: Add a Tax Rule
Go to the section titled Tax Rules and click on + Add Tax Rule.
Step 4: Set Tax Location
Next to Apply tax to members located in, enter the area that the tax rule covers, for example Texas (state) or Canada (country). You may define tax rules down to a city or zip code.
If the tax rule is set to be location specific, our system’s address field must be included on forms in order to calculate tax based on location. You can view instructions for customizing the membership form templates here.
Step 5: Set Tax Rate
Next to Tax rate,
enter the tax in percentage. If you enter a tax rate but do not enter a
location in the field above, the tax rule will apply globally by
default.
If your organization intends to apply the same tax rate to all members no matter their location we recommend leaving the location blank. As noted blank = global.
Step 6: Tax Exclusive or Inclusive?
Next to All membership/event/form prices are select either Tax Exclusive or Tax Inclusive from the drop down. When set to tax exclusive (the default setting), the
applicable tax will be calculated and added to the price. When taxes
are set to be inclusive, all taxes are included in the specified price. You can find more information about this setting here.
Step 7: Taxing Handling Fees
Next to Handling fees are, select if your handling fees are Not Taxed or Taxable.
Step 8: Save
Click the Save & Continue button at the bottom of the page.
The Difference Between Tax Exclusive and Tax Inclusive
After adding tax rules,
taxes are set by default to be exclusive. This will cause taxes to be
added to the total cost of the item or dues. You can change this if you
need taxes to be inclusive. When taxes are set to be inclusive, they are
included in the total price of the item or dues.
Tax Exclusive
When set to tax exclusive, the applicable tax will be calculated and added to the price.
Example:Membership dues are $10.00Tax rate is 10% ($1.00)Member is charged $11.00$10.00 for membership dues plus $1.00 tax = $11.00
Tax Inclusive
When taxes are set to be inclusive, all taxes are included in the specified price.
Example:Membership dues are $10.00 (with tax included)Tax rate is 10%Member is charged $10.00$9.09 for membership dues plus $0.91 tax = $10.00
Some things to consider when selecting to apply tax inclusively:
- If
you have non-global tax rules, and a tax rate is not applicable, then
that amount of tax is deducted from the price. For example, if you
specify a tax rule of 10% for Australia, and the membership price is
$10. But the member’s address is outside of Australia, then the price of
membership will be adjusted to $9.09. In this case, the $0.91 tax that
is supposed to be included in the price is not applicable, so it is
deducted.
- If you create multiple tax rules, then the sum of all
the tax rates are considered to be included in the prices. An example of
this is if a global tax rule of 10% is added and another tax rule for
5% is added to apply to Texas. In this case, users from outside of
Texas will be charged 10% tax and users in Texas will be charged 15%.
How Tax Rates Are Applied
A tax rule is considered to be applicable if the address is located in the area specified by the tax rule:
- Membership payments: The tax rules are applied based on the address (Account Address field) of the member’s account.
- Events: The tax rules are applied based on the billing address provided during the event registration.
- Forms/Carts/Donations: The tax rules are applied based on the address (Account Address field) on the form template.
- If the tax rule is global (ie. you left the area blank), then the tax rule will apply regardless of the address.
- If you define multiple tax rules, then all the applicable tax rates are added up. For example, you define a tax rule for USA as well as a tax rule for Texas, users from Texas will have both tax rules apply – the applicable tax rate will be the sum of the 2 tax rates.
Manage Tax Exemptions
Some of your members may be exempt from these taxes. A member can be exempted from tax on their membership automatically if the Do not tax field is enabled on their account. Click here to learn about managing tax exemptions.
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