Businesses selling digital goods must pay tax based on the customer’s location and the seller’s location. As a platform offering OTT services, Vimeo is responsible for collecting and remitting taxes in countries and US states where we have a tax obligation (also known as nexus). Please check with your accountant to understand if you have any additional legal obligations to collect and file taxes.
- Why is sales tax collected where Vimeo has nexus rather than where my business has nexus?: Vimeo is the merchant of record for OTT transactions. Taxing jurisdictions generally place the withholding and collection responsibilities at the “source” — the party that receives the taxable revenue in the first instance. That’s us in the case of OTT. The only way customers can opt out is to collect payments directly by providing their own payment stack.
All sellers are in an Inclusive International Tax model for non-U.S. taxes. This means all new international customers are charged tax as part of your set price, whereas existing customers may be charged tax on an exclusive basis, meaning they are charged tax in addition to the price you set. Read on for more details.
Note: US taxes are always handled exclusively regardless of the seller's location.
- What is Exclusive International Tax?
- What is Inclusive International Tax?
- Where are taxes collected from?
- How can I protect against revenue loss due to inclusive taxes?
- I have existing subscribers who are being charged VAT on an exclusive basis; how will these subscribers be impacted?
- How should I set prices if I sell to countries where Vimeo does not have nexus today?
What is Exclusive International Tax?
Vimeo will collect taxes exclusively in non-US countries where we have a nexus for existing customers grandfathered into the old tax model. This means taxes are added on top of the price you set.
As an example, on a product price of £10, assuming 20% VAT tax rate, the buyer would pay £12, and the seller would receive the full £10, with £2 remitted towards tax.
In this model, the seller receives the full price of £10 (net of any fees) set by the seller against the currency United Kingdom (GBP) on the product -> pricing page.
What is Inclusive International Tax?
Vimeo is collecting taxes inclusively in non-US countries where we have nexus. This means taxes are part of the set product price.
As an example, in this model, on a product price of £10, assuming 20% VAT tax rate, the buyer would pay £10, and the seller would receive £8.33, with £1.66 remitted towards tax.
In this model, the seller receives £8.33 (net of any taxes and fees), against the £10 set by the seller for the currency United Kingdom (GBP) on the product -> pricing page.
Where are taxes collected from?
We have a reference table here detailing the locations where we collect and remit tax, including the various rates and rules that apply to them.
How can I protect against revenue loss due to inclusive taxes?
Sellers can protect against revenue loss due to inclusive pricing by adjusting the product price for the respective currencies to compensate for taxes. All new transactions will be charged at this new price, while existing subscribers will be renewed at their grandfathered price.
I have existing subscribers who are being charged VAT on an exclusive basis; how will these subscribers be impacted?
Existing subscribers currently charged on a tax-exclusive basis will continue to pay the same product price and tax on a tax-exclusive basis. In other words, existing customers will be grandfathered into both their current price and their tax mode.
How should I set prices if I sell to countries where Vimeo does not have nexus today?
In countries where we currently do not have nexus, the price you set against the corresponding currency will be received in full. However, since our tax obligations are constantly changing, we may be required to start collecting taxes at any point.
When we start collecting inclusive taxes, you will receive the transaction amounts net of taxes. In order to avoid this loss in revenue, we recommend that you set the price for each currency by factoring in the inclusive taxes. As an example, if you are expecting €10 per transaction, assuming 20% inclusive taxes, you would set the price to €12.
Separate from Vimeo’s tax collection, your business may have its own tax requirements. We strongly recommend consulting a tax professional for confirmation on how your business should handle taxes.
How can I see how much tax was collected and remitted?
You can see how much tax/VAT was collected and remitted by checking your statements (Settings > Billing > select a statement).