Sales Tax Tips for Affiliate Marketing, Google AdSense, eBook Sales, and More
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| Sales Tax Tips for Affiliate Marketing, Google AdSense, eBook Sales, and More |
A big topic is sales tax, which I want to focus on in this article. In particular, I will show what different types of income are possible and what consequences result from this, in particular the different tax effects on domestic and foreign trading partners. Here I will also go into the billing and what to consider when spending.
What Are The First Steps Towards The Tax Office?
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| Sales Tax Tips for Affiliate Marketing, Google AdSense, eBook Sales, and More |
Basically: As soon as you become self-employed, you have to report this to the trade office of your city or local authority and the tax office. There is no formal requirement for this, in principle it is also possible by telephone.
You will then receive a "questionnaire on tax registration" from the tax office, in which you must provide personal information, and you should also quantify your sales and profits for the current year and the following year.
The tax office also knows that these are only rough budget figures - I recommend being cautious here, because, based on this, advance payments for income tax are set, which could then be too high. In case of doubt, this also applies of course to all of the following considerations, the help or information from a tax advisor should be included. This creates security and reassurance from the outset.
Small Business Owner - What Does That Mean?
For tax registration you have to think about whether you want to be a "small business owner" or "entrepreneur", i.e. show sales tax on your invoices. If you have earned less than € 50,000 in sales in the current year and less than € 17,500 in the previous year, you can start as a small business owner. The advantage here is that you do not show any sales tax in the invoices - and that the sales do not have to be reported to the tax office on an ongoing basis.
If you indicate to the tax office that you waive the application of the small business regulation, you are first of all obliged to submit a so-called “VAT advance return” every month.
The "entrepreneur" solution sounds uncomfortable at first, but it has a big advantage: As an "entrepreneur" you can have the sales tax included in the invoices for items and services that you buy for your self-employment reimbursed directly from the tax office. If you are a “small business owner”, you will not get the sales tax back - that means you will have higher costs for business expenses.
The operational expenses can be incurred for a computer, for software, the Internet connection, external consulting costs, furnishing or renting an office or coworking space, entertainment costs, a car, etc.
In return, as an "entrepreneur", you will possibly invoice your customers (see below) sales tax: Because your customers will in most cases also be entrepreneurs, it is irrelevant whether sales tax is added to your invoice or not, because the customer the tax also gets back from the tax office.
In sum, I can advise that you waive the small business regulation. Although it is fundamentally simpler, the “ElsterOnline” program from the financial administration is relatively user-friendly.
If you have decided in the questionnaire to act as an entrepreneur, please also apply for "taxation according to the collected fees" as well as a sales tax identification number - the number is used for processing in international traffic; even if you only appear at national level at first, you can apply for it "in advance".
Which Services Are Subject To Sales Tax?
Whether sales tax is to be shown on the invoices is essentially determined by where the place of performance is from a sales tax point of view. I am examining some services as examples:
- Affiliate Marketing and Direct Marketing of Advertising Space:
Here the entrepreneur mentions the partner (= customer, in terms of sales tax is always referred to as the "service recipient") and thus creates a platform for him where he is noticed, or offers the advertising partner and service recipient an advertising space on his website, a digital advertising wall so to speak. This service is carried out at the customer's registered office. Incidentally, the same consequences arise when selling links.
If the customer is based in Germany, 19% sales tax is due. For example, if you advertise Amazon as part of a partner program and receive commissions for this, the place of performance is Luxembourg, because Amazon S.á.r.l. as the company responsible for Germany sits there.
For foreign customers, the customer has to pay the tax - this means that the German entrepreneur only writes the net amount in his invoice, and the foreign recipient of the service (here: Amazon) is responsible for the taxation. On the subject of "invoicing" see below. - Google AdSense:
In principle, Google AdSense is just an intermediary platform for advertising. But because the advertiser himself does not appear at all for the entrepreneur, as an entrepreneur you only have to do with Google - Google is, therefore, a customer. This also applies to all other advertising platforms.
For AdSense, the place of performance is where Google (for Germany: Google Ireland) is located, i.e. Ireland. The result is the same as under a) on Amazon - Google has to declare sales tax in Ireland, the German entrepreneur does not pay German sales tax. - Selling E-Books or Self-Developed Tools:
The provision of digital products (e.g. information, software, media, games, e-books), services generated automatically via the Internet (e.g. comparison and betting portals as well as search engines), services from online marketplaces, online data Warehousing, the provision of storage space via the Internet and automated distance learning are so-called "electronic services" within the meaning of the Value Added Tax Act.
The place of performance is in Germany if the recipient of the service is located there - a sales tax rate of 19% must be shown in the invoice (this also applies to e-books, although a tax rate of 7% generally applies to books).
If the recipient of the service is based abroad, a distinction must be made as to whether he is an entrepreneur or a private person. For entrepreneurs, the solution is the same as under a) and b), namely that they pay the tax in the recipient country, the entrepreneur, therefore, issues the invoice in Germany “net equal gross”.
For private individuals, the place is taxable abroad, but the German entrepreneur has to register this tax - luckily you don't have to register abroad in this case, at least as long as you only deliver to the EU, because the Federal Central Tax Office has this (BZSt) introduced the Mini-One-Stop-Shop-Procedure (MOSS). This means that after registering with the BZSt, you can register and transfer your sales there every quarter, from where the tax is forwarded abroad.
If you deliver to non-EU countries, you have to register there for tax purposes, taking into account language and bureaucracy barriers, declare the sales and pay the sales tax. In practice, there is therefore a major problem with the implementation, in particular, one is faced with the problem of registering sales in exotic countries. To make matters worse, there is no "non-acceptance limit" for sales that may be undershot without consequence - a single sale in e.g. China must be reported there.
How Is The Invoice Billed?
If the German sales tax is due and the customer is an entrepreneur, the entrepreneur is obliged to issue an invoice with German sales tax.
If the place of performance is abroad, the tax does not need to be shown, but in the case of the "reverse charge procedure" mentioned above, the text that the "tax liability is transferred to the recipient of the service" must be included in the invoice.
Incidentally, the invoice must meet the usual standards, the individual points are listed very clearly in Section 14 (4) of the Value Added Tax Act:
- Name and address of the supplier and the recipient of the service
- Tax number (or sales tax identification number) of the supplier
- Date of issue
- consecutive unique invoice number
- Scope and type of another service
- Time of the other service
- The fee for other services broken down according to tax rates and individual tax exemptions
- The applicable tax rate as well as the tax amount due on the consideration or, in the case of a tax exemption, a reference to this
Special Case Credit
Now there is the special case that the customer bills automatically for most of the above services. These statements represent “credits” in the sense of value-added tax; Not to be confused with the commercial credit, here it means: "Invoice that is issued by the customer himself".
This also means that the risk of misrepresenting the tax is passed on to the customer. The entrepreneur himself must keep the credit note, which contains the details of the billing. The general retention period for entrepreneurs of ten years applies here.
If the recipient of the service makes the transfer but does not provide an invoice, the entrepreneur does not have to document anything further. However, it is advisable to keep at least one receipt for your files ("pro forma invoice" with all the information available, but not sent to the partner) or an Excel list of the income received, for several years later, in case of doubt, to be able to reconstruct the amount of income and the thoughts that were made about sales tax at the time of receipt. In addition, the bank documents must also be archived over the period.
What Do The Bills For Expenses Have To Look Like?
Just like the outgoing invoices to customers, invoicing is subject to the above-mentioned standard of the Value Added Tax Act. If you buy something for your business, e.g. tools, and one of the points is missing on the invoice, you will generally not be reimbursed the VAT included.
You are entitled to the invoice itself, at least under German law. A foreign entrepreneur is given his sales tax identification number when making a purchase; This means that this entrepreneur will create his invoice without a tax ID, and you as a customer owe the sales tax in Germany, but you can (because you are an entrepreneur) have the input tax reimbursed at the same time; the process remains completely neutral.
Conclusion
Whether and in what amount sales tax is to be shown in the invoice depends primarily on where the customer is based and whether he is a private customer or an entrepreneur.
Relief is when the customer takes over the billing because then the duty of correct invoicing is passed on to the customer. As already mentioned, this article is only a general overview; in case of doubt, an examination of the individual case should be carried out in any case.
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