I run a modest sized forum that I’m currently funding myself. Optional subscriptions may be added in future but moreover, I’d like to sell forum-related merchandise to help cover costs with an option that extra profits go to charity. Members are mainly from the UK but we do have a few international members and are open to anyone.
As an example, we recently ran a photo competition and I now have a box of 2024 calendars to sell. I’ve just installed the Discourse Subscriptions plugin on my staging server but not got it set up yet. That may do the job but I’m also thining about at setting up a separate products page using Wordpress and Stripe to sell t-shirts etc.
I can work myway through the technology part, though if anyone has advice to help me avoid making too many mistakes that would be helpful. What I’m most confused about at the moment though is the VAT/GST/sales tax implications. If I’m selling merch just to support the forum (i.e. no profits go back to me) it looks like I’ll still have to add sales tax and pass that back to the relevant jurisdictional revenue service. Is that just how it is or am I missing something? Does anyone have a similar use case and have things set up already to avoid the additiona administrative burden?
I’m not an accountant or lawyer, but I think it goes like this:
- Are you VAT registered, if not you can’t claim back the VAT, and you can’t charge VAT, but assume you will sell at cost (you bought merch at price inc. VAT presumably?).
- All income is income, so you will need to register any profits in your tax return (personal or company depending on where you are booking the enterprise).
I have all kinds of little bits of income (and costs!!) from my two sites and they all go through my entity in the tax return.
The forum isn’t a legal entity in it’s own right and not VAT registered. I would probably try to avoid the registration in any case. I have a limited company for my professional life and deregistered for VAT on the advice of my accountant when the annual turnover dropped below the mandatory threshold of £85,000. I now can’t claim VAT back but I also don’t have to submit quarterly returns for the company.
From what I’ve read so far, I would either have to run the forum as a sole trader or, I think more relevantly, as an ‘unincorporated association’. If it starts making a profit then I would have to submit tax returns and pay corporation tax. The intention isn’t to make a profit though, with all receipts either paying the running costs or donated to charity. perhaps that’s the right path to take. I’m still i=unclear on what I do about VAT though. I presume it’ll be payable as the items aren’t exempt.
For the calendars I bought them from the printer and did pay VAT. I want to make a small profit on merchandise to help fund the running costs of the forum.
Overall, my worry is that it won’t be economically viable to sell merchansise, which can’t be right. So I think I’m still missing somehting in my understanding. Hence the OP.
I’m not in your country, but my advice is to have a bank account that you use just for the forum’s business so it’s easy to tell and demonstrate what belongs to the business. Even if it’s not a separate entity legally, it’ll be easier to keep things straight.
I have a separate account for just that reason. At this point there is no ‘business’ as such in the legal sense so the account is in my name.
The rules and amounts may differ from oountry to country (and US state to US state) but roughly the same principles apply anywhere when it comes to sales tax/VAT becoming due, I believe.
There are tools for Sole Traders that allow you to “pick out” your business income and expenses from your regular bank account transactions to allow you to prepare your tax return, so it’s not necessary to maintain perfectly separate accounts. But sure, that’s good practice in any case.
Yes, that’s not really my queston, though. What I’m asking is whether anyone else is running a forum that funds it by selling merchandise, how they’ve set themselves up from an accounting and tax perspective, and what experiences/advice they can share.
Perhaps I’m just looking at this from the wrong perspective. I started a self-hosted forum as a personal endeavour but as soon as I start selling anything it becomes a small business, in effect. With all the legal, accounting and administration responsibilites.
The existence of the forum is a bit of a red herring. AFAIK the same applies in the UK as the US when selling goods and that’s the only aspect here you need to examine.
If you’re using a third party for the end to end merch fulfillment it’s not even a sale of goods issue, they take care of it their side including sales/import tax. The portion the third party pays you is taxed as income. The costs to run the Discourse instance and any other infrastructure is handled like any other expense. Your focus might be the community which generates the sales leads, but I can assure you that the IRS/Inland Revenue couldn’t care one bit.
If you’re selling merch direct then yes, that gets way more complicated, and also not a Discourse question. Your tax accountant should be able to answer all of this.
For low revenue sales there may be no tax due, to be official you can declare your revenue to the government to check. I declare revenue to Washington State, with revenue less than $1,000 a month they haven’t charged tax for that.
Although with your forum not being a registered non-profit organization it doesn’t neccesarily matter that revenue is less than operational expenses.
That’s not what my bookkeeper says!
But for people who don’t need a bookkeeper might get by just fine with “picking out” which expenses were for the forum. How hard could it be to remember what that charge to Amazon was on February 12?
(Sorry for hijacking the topic–this really isn’t what he’s asking! And sounds like the least of his worries.)
I use Freeagent.com and do it all myself. (No affiliation!)
The inescapable issue seems to be that Stripe applies sales tax to the appropriate goods type in any given territory. That’s leading me to think about this as a (very) small business with a forum, not the other way around. At least for accounting purposes.
Right, and not all territories/states have sales tax such as Oregon state if you sell merch there it won’t be taxed with stripe (except for federal tax).
Otherwise you could use a different platform besides stripe for payment.
In the U.S. tax is generally added to sale price for the customer to pay, different than in Europe where usually tax is deducted from list price by the merchant instead.
I created a $10/month subscription option for forum with stripe, subscriptions aren’t taxed the same as physical merchandise. You could do this and then offer “free calender” as a gift to mail out to paying subscribers, that would probably be ok with tax collectors if you did that.
That’s a good idea. I might try that.
Retailers in the UK have to show the price the customer will pay, for most things, anyway. It catches me out in the US when I go to the checkout and the price goes up by 10%.
To avoid paying tax on the same items twice the official way to do that is with a reseller permit:
With this then you would not need to pay tax when purchasing materials from a supplier, but then you become responsible for paying tax for retail sales.
Jay, I’m going to take issue with your bookkeeper.
I wonder if this is just to make their life easier?
The thing is, some things (especially as sole trader) are inevitably co-mingled.
Take for example a mobile phone purchase.
Now Discourse works on mobile and you might use that mobile for (not limited to):
- testing out your plugin
- dealing with customers, responding to their emails
Now, you could arguably charge back the cost of your mobile phone to your claimable expenses, but it would almost certainly be unreasonable to claim the entire cost of the mobile phone and the cell plan to your business as you are likely to have one mobile phone and use it for personal calls and activities too. Having a two mobile phone is kind of wasteful and it would be very annoying to have to carry two all the time! (incurring double the depreciation too!).
As a result you are going to need to split the expense, and that’s why you need software that is able to document that split and claim an appropriate proportion as an expense against your business.
Moreover, you might want to enjoy the convenience of using a personal credit card to purchase that phone and then later document the breakdown of that cost appropriately in your books.
Software like Freeagent really helps with that.
For many folks that is probably true.
This seems to be going sort of off-topic, but to set up a company phone account in the U.S. they need an I.R.S. employer ID# for that.
I think I’d summarise it as -
- Asking fellow Discourse forum admin how they handle community merch and tax for their forum On topic for the forum
- Discussing some of the details of how that’s set up On topic for this topic
- Diverging into how to set up a company phone in the US - Off topic
I’m in the UK. Not sure if anything similar exists here.