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How to Calculate Taxes on Easy Digital Downloads

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How to Calculate Taxes on Easy Digital Downloads

Selling a digital product is supposed to be easy. After all, one of the major advantages of developing and delivering digital products is that you can create them once, and then sell them again and again to new customers.

All of that ease and simplicity grinds to a halt when you take taxes into consideration. Depending on where and how you sell your digital products, you may be subject to different tax requirements. Even if you’re using a system like Easy Digital Downloads (EDD), staying compliant can be challenging.

Setting Up Tax Rates in Easy Digital Downloads

Within the EDD dashboard inside WordPress, sellers have the option to enable tax collection on purchases by checking a box and then configuring the applicable rates by country, state or province, and county.

If you’re a seller who retails a single digital product to sellers exclusively in one area, this setup may be sufficient for your needs. 

But what if you sell to consumers in multiple tax jurisdictions? What if you sell a combination of physical and digital products? Even EDD acknowledges how complicated tax situations can become, noting in a blog post that, “many US states do not tax digital goods at all, while others tax them anywhere from 1-7%. Definitions of ‘digital goods’ may vary as well, and some states have very specific requirements when it comes to taxing them.”

This complexity could put you in a tricky situation if you sell across the country. How on earth are you supposed to keep track of all the different tax situations your sales may be subject to?

Managing Taxes with EDD Quaderno

A better approach to managing tax requirements as a retailer of digital products is with the EDD Quaderno plugin.

You’ll need a Quaderno account to use the plugin, but once you’ve installed the plugin on your site, all you’ll need to do to configure the system is to enter your Quaderno API keys into the fields found at EDD > Settings > Quaderno:

You’ll still need to make sure the “Enable Taxes” button in EDD > Settings > Taxes, but you’ll no longer need to manually set up tax rates for every area you might sell into.

For more on setting up the EDD Quaderno plugin, check out our resources on how to calculate sales tax on Easy Digital Downloads with Quaderno.

Test it out yourself with a free trial to Quaderno. You won’t believe how easy sales tax compliance on digital download purchases can be!

Note: At Quaderno we love providing helpful information and best practices about taxes, but we are not certified tax advisors. For further help, or if you are ever in doubt, please consult a professional tax advisor or the Tax Agency.