Please read below for more information on Sales Tax added to your Wodify Subscription (Last updated: September 24, 2019).
Q: Why will I be charged sales tax on my monthly Wodify subscription invoice?
A: In a recent Supreme Court case (South Dakota vs Wayfair, Inc) the Supreme Court ruled that states may charge tax on purchases made from out-of-state sellers, even if the seller does not have a physical presence in the taxing state. As the seller, if Wodify has an economic nexus in your state, and SaaS is taxable, we are required to remit sales tax for our activity within your state. To collect this tax, we need to add it to your monthly invoices.
Q: Why has Wodify never charged me sales tax before?
A: Prior to South Dakota vs. Wayfair case, a business' physical presence in a state were required for states to require sellers to remit tax. However, as a result of the Supreme Court case, the physical presence requirement has changed to an economic nexus. An economic nexus is is a sales tax nexus determined by economic activity, i.e. - the amount of sales you make in a particular state.
Q: Can you provide an example of an economic nexus?
A: Various forms of economic activity within the state can trigger an economic nexus. The most common one is some form of annual sales in the state followed by the number of transactions in the state. Each state has the ability to pick what they want these thresholds to be.
Q: How much sales tax will I be charged?
A: Starting on October 1, 2019, sales tax will be added to your monthly Wodify subscription invoice, if your place of business is located in the following state(s):
- PA (8%)
- CT (6.35%)
- TX (8%) on 80% of SaaS Subscription
Q: Does my business need to collect sales tax if I am in one of the states mentioned above?
A: This article is specifically referencing Wodify's requirement to charge sales tax as a SaaS (software as a service) and is unrelated to an individual gym's requirement for collecting sales tax. Your requirement as a business to collect sales tax from your customers depends on several factors. If you have questions about sales tax for your individual business, please speak to your tax professional.
Q: My state is not included on the list. Will I be charged sales tax eventually?
A: Our software services are only subject to tax in certain states. Also, our economic activity varies from state to state. For us to charge you tax on your invoice, our services need to be taxable AND we need to to have an economic nexus in your state. If your state requires that tax be added to your monthly invoice, our team will notify you via email.
Q: Is Wodify benefiting from this?
A: Implementing these changes are costing us money in administrative time as well as increased operating costs. 100% of the tax collected from you is paid directly to your state.