Overview
If you sell memberships through TapWyse, it’s important to understand how and when sales tax should be applied. A common mistake is to apply sales tax at the time of the membership sale. However, sales tax should only be applied when the actual goods (like beer, merch, or other tangible items) are delivered to the customer—not when the membership itself is purchased.
Why Memberships Are Not Taxable
A membership is essentially a prepaid agreement between your brewery and the customer. It grants the customer access to benefits, discounts, or future products. But no physical goods are exchanged at the time of purchase, so there’s nothing taxable yet.
Sales tax laws only apply to the actual delivery of taxable items. When a member redeems their benefits—say, for a monthly beer pickup or a T-shirt—that’s when tax is due, because goods are being transferred.
How to Properly Handle Tax
Do not charge tax at the time of membership sale. Instead, apply the correct local tax rate when items are fulfilled or redeemed through your POS. This ensures you’re compliant with tax laws and not overcharging your customers up front. It also means that you do not have to adjust any of your all your existing accounting and tax processes. Win-Win!!
Real-World Example
Let’s say you sell a $150 annual membership that includes:
- A free mug
- One 4-pack of beer each month
- 10% off all taproom purchases
Here’s how tax should be handled:
- Membership Sale ($150) – No tax applied
- Free Mug – Tax applied when the item is delivered through your POS
- Monthly 4-pack – Tax applied on each redemption through your POS
- Taproom Discounts – Tax applied as usual on any purchase made through your POS
Summary
Don’t charge tax when selling a membership—only charge tax when the customer redeems goods. This approach avoids double taxing your customers, ensures a better experience, and helps keep your business compliant with tax regulations.