Taxes for Digital Products
Need to charge VAT to your customers in the EU? No problem, we’ve got that covered! Check out this article for more information: Digital EU VAT
Payhip handles digital EU VAT for you, but what about taxes for countries outside of the EU? Whilst we don’t remit this tax on your behalf, we do make it easy to collect that tax on top of, or within, your product pricing.
We also give you a monthly sales report that summarizes how much tax you’ve collected, making reporting a breeze!
In this article:
Set up custom taxes
To start collecting tax for a new country, head to Account > Settings > Taxes and click + Add Tax Rate.
Then select which country you’d like to add from the dropdown list and click Continue.
On the next screen, enter the tax rate, tax name (i.e. what will show at checkout), and choose which product types you’d like to apply the tax to.
Click Save Changes when you’re done. And that’s it! Tax will now be collected for any purchases from that country.
Payhip will automatically detect the customer’s location at checkout and add any applicable taxes that you’ve set up.
United States tax
If you’re setting up tax for the United States then things will be slightly different - firstly you’ll have to choose whether you’re adding a tax for a digital product, physical product, subscription, or coaching service. Here we’ll just cover the process for digital products, subscriptions and coaching as it’s different again for physical products.
Once you’ve selected the product type, you can add a country tax rate. This will apply to all purchases unless you choose to charge a state tax instead (see below).
To set up tax rates for specific states click Add states to apply taxes for. Then select the states that you’d like to set up and click Save States (don’t worry, you can come back to this to add other states later).
We’ll automatically populate what we think is the correct tax rate for those states, but please keep in mind that this information may not be up to date. We would recommend always checking with a tax expert to be sure.
If you need to edit the tax for a state then click Edit.
On the next screen you can change the tax rate, tax name, and the rule (i.e. whether the tax rate is added on top of the country tax or used instead of it).
You can also add overrides for specific zip codes if you need to charge a different rate for a certain zip code within the state.
Once you’ve set this up, if we pick up that the customer is based in one of the states you’ve set up, we'll add a dropdown for state to the checkout form as well as a field for them to enter their zip code.
Things are also slightly different for Canadian tax. Once you’ve selected Canada and clicked Continue we’ll take you to a screen where we’ve automatically populated the tax rates for different provinces.
Again, we’ll automatically populate what we think is the correct tax rate for each province, but please keep in mind that this information may not be up to date. We would recommend always checking with a tax expert to be sure.
If you need to change the tax rate, name, or rule (i.e. whether the tax rate is added on top of the country tax or used instead of it) you can do that by clicking Edit.
From here, you can also select which type(s) of product you’d like to apply tax to (digital, physical, subscription, coaching).
And that’s it! If we pick up that the customer is in Canada, we’ll add a dropdown where they can select their province.
Charging tax on top of/within your product pricing
By default, we’ll charge tax on top of your pricing. If you’d like it to be included within your pricing, scroll down to Tax Settings and select the checkbox for “Include taxes within product price”. (Be sure to hit Save Settings when you’re done).
Alright, we hope that helps you with setting up taxes for your digital products! And, just to hammer this message home: Here at Payhip we’re not tax experts. Please always check with your accountant to understand exactly who/what you need to charge.