Patreon and Sales Tax

Hi all!

If you haven't already heard, Patreon will be required by law to charge sales tax to patrons, depending on the types of rewards they receive, starting on July 1, 2020.  Patreon will send you a separate email on June 1 to let you know how you, specifically, will be affected.

According to Patreon: Less  than half of all patrons will be charged sales tax, and for most, the  amount will be very small. For example, sales tax rates in the US range  from 4% to 11%, so on a $5 pledge, that would be between 20 cents and 55  cents.

HOWEVER, because I've optimized my campaign by assigning specific values to every reward I offer, most of you who are charged tax will be charged even less than that amount!

My Patreon is primarily a support-driven campaign.  Patrons pledge to keep the project running, and I apply only a fraction of the value of your pledge toward rewards.  I count 75% of everyone's pledge to be general support, something that isn't taxable in most states.  The remaining 25% is broken down depending on the rewards available in your tier, most of which are still not taxable in many states: early access, community access, and exclusive digital content.

The tiers most likely to be taxed are the Sketch Tiers.  But, because the sketches are delivered quarterly and are only a small fraction of what you receive as a patron, I've applied only 5% of the value of your tier to the sketch (or 2% if you're in the $50 tier).  So if you live in a state that allows Patreon to charge tax only on the portion of the pledge that goes toward the sketch, you will be taxed on only a small percent of your pledge.

Also, taxes only apply to recurring rewards, so the custom card portrait, for example, will not be taxed because it falls into the category of a one-time thank-you gift.

The changes will not take place until July, so your June pledge will go through exactly the same as it always has.

If you have any questions, please feel free to ask, and I'll do my best to answer them! 

[EDIT] To answer a question about whether this applies to only the US:

It applies to the US and 17 other countries.  Since you're in the EU, you've already been paying VAT, so you won't be charged more on top of that. Patreon's statement: 

"On May 6th, 2020, Patreon announced that we are being required by law to start adding sales tax to more patron pledges starting on July 1st, 2020. This affects patrons in some parts of the US and 17 other countries (see list).

Patreon already handles charging and paying VAT (European sales tax) for patrons in the EU, and has been doing so since 2015 when the laws changed in the EU. Over the past couple of years, many countries and many states in the United States have passed similar laws that require “online marketplaces” to apply sales tax to transactions."

Here are the countries: Australia, Belarus, Iceland, India, Japan, New Zealand, Norway, Canada (Quebec only), Russia, Saudi Arabia, Singapore, South Africa, South Korea, Switzerland, Taiwan, Turkey, UAE, US (36 states plus DC)