Although we originally ran this blog post in July 2016, the challenges and complexities of taking your digital business global are still very much relevant. Read the excerpt and then listen to the podcast.
Taking your business global is filled with complexity. With each new market you enter, you multiply the challenges of complying with tax and privacy laws, or even just being able to process customer data. cleverbridge Co-Founder Craig Vodnik sat down with Technori’s Scott Kitun to discuss when and how companies should address their global tax and privacy compliance.
Podcast Excerpt: The Alarm Bells of Global Compliance
Craig talks about when a company needs to think about compliance. He identifies two alarm bells that will alert your business to this need. First, are you selling online in the United States? If so, then you need to worry about state sales tax wherever you have a tax nexus. Second, are you attracting customers from global markets? If so, then you need to worry about data privacy and data sovereignty.
As Craig puts it:
When a company starts seeing that they’re getting interest from other countries, that’s when the second alarm bell should be going off. The first one is actually taxation in the U.S. Sales tax — where is your nexus? Where do you have a physical presence? And it’s no longer just physical presence, it could be you’re using an affiliate that creates a tax nexus in another state that you’re unaware of …
… So that’s the first thing: If you’ve got affiliates, you need to be worried about tax nexus around the U.S.
As you start going global, when you see interest from other countries – whether it’s Canada, whether it’s the UK, Australia – that’s going to start to create additional problems that you should be aware of. Particularly around taxes — that’s the first thing, as we just discussed — but the second thing is global privacy policies and data sovereignty issues.
Countries around the world are starting to pass laws that say, I want my citizens to be protected. I want their data to stay within the confines of my country or my region. The EU would be a good example of that. And that’s why Brexit is such an important thing.
Edward Snowden kind of elevated data privacy and data sovereignty to be much bigger issues in peoples’ minds. Data sovereignty means keeping the customer data within the walls of that country. Data privacy asks what are the rules by which you can operate with that customer data when they’ve signed up for your service? It starts to get very complex.
And then throw on top the same issue you have in the U.S., which is taxation. How are the VAT rules in the EU changing? They just changed, by the way, six months ago. What’s happening in South Korea? They passed a law that says if you’re selling an online service or digital product into South Korea — even if you have no presence — you have to charge 10 percent VAT and remit it to the South Korean government. We don’t have a nexus in South Korea, yet we still comply with that law. Japan? 8 percent as of last October 1.
Their conversation was wide ranging. Listen to the whole thing to find out what softball and double byte characters have to do with global subscription billing.