What’s not to like? ClickBank has several advantages for all Internet marketers — not just Canadians!
1. You can accept credit cards without a merchant account. ClickBank charges a $49.95 setup fee (less for additional accounts) plus $1.00 per transaction and 7.5% of sales. You can sell several digital products through one ClickBank account. This is a bit pricey but you don’t have the recurring, fixed costs of a merchant account.
2. if you sell your own digital product through ClickBank, you have your own built-in affiliate program. You decide what commission (from 1 to 75%) you want to pay your affiliates and ClickBank handles all the payments.
3. As a digital product owner, you can receive free advertising exposure through the ClickBank marketplace and various ClickBank portals and search engines.
4. Affiliate marketers have a large variety of products to chose from and assurance of regular and timely payment from ClickBank — a reliable, stable, third-party provider.
5. ClickBank simplifies your tax administration. Affiliate commissions are paid by ClickBank (not the Internet marketer). Also, any Value Added Tax (VAT) applicable to European Union countries is charged and remitted by ClickBank.
Canadians have even more reason to love ClickBank.
Canadian Internet marketers with $30,000 or more in revenue (or who are registrants) have an obligation to collect Goods and Services Tax (GST) or Harmonized Sales Tax (HST) on certain Internet transactions. (They might also have an obligation to collect Provincial Sales Taxes in many instances.)
For example, if you sold an ebook to someone in Ontario for use in that province, you should collect 13% HST. The HST on physical books (after the point-of-sale rebate) is only 5%. These are not the only rates in effect in Ontario.
Additionally, each province and territory in Canada has its own rates and rules.
Canadian affiliate marketers are also subject to GST or HST on commissions earned from Canadian sources.
Can you imagine the logistic nightmare trying to collect, remit, and administer all these constantly changing sales taxes? Is there even a shopping cart in existence on earth that is sophisticated enough to do all the calculations required?
There is where ClickBank comes to the rescue for Canadians.
As a digital product owner, you agree to sell your product to ClickBank. They, in turn, resell your product to THEIR customers. ClickBank thus becomes the retailer responsible for collecting sales taxes — not you.
Since ClickBank is located in the United States, your sales to them are zero-rated export sales. This means you don’t collect GST or HST from them but you may be entitled to claim GST or HST Input Tax Credits on your business expenditures.
By using ClickBank, your Canadian sales and other tax administration problems have been minimized.
Located in the United States, 2CheckOut.com (2CO) also acts as the vendor of your products. Thus, the situation with respect to tax administration is identical to that of ClickBank.
2CO can handle both intangible and tangible products. For 5.5% of sales and $0.45 per transaction, you can accept credit cards without a merchant account.
(Tangible products crossing the Canadian border may be subject to sales taxes.)
Keep in mind that this is not about evading tax obligations (illegal). This isn’t even about arranging your affairs to reduce or eliminate taxes (legal tax avoidance and legitimate tax planning).
This is about making your business profitable.
Assume that a Canadian Internet marketer sells an ebook through PayPal to a Canadian customer and that the place of supply for GST/HST purposes is Nova Scotia. That Canadian marketer must charge 15% HST and collect $115 from the customer.
Let’s further assume that the same Canadian customer sees the same ebook on ClickBank for $100. He pays just $100 and downloads his digital product. (Whether Canadian customers should self-assess sales taxes is another matter.)
Why would a customer pay 15% more for the same product? Can you see how the Canadian Internet marketer is at a competitive disadvantage?
Additionally, can you see how this increases the complexity, administration, and costs for the Canadian Internet marketer? This is likely not your vision of the Internet lifestyle.
(By the way, this article is not legal advice. To determine your liability for sales and other taxes, do consult your lawyer and accountant.)
Should Canadian Internet marketers take the easy way out and deal exclusively (or mainly) through ClickBank or 2CO to simplify tax administration?
For that matter, should we conclude that ClickBank is the best solution for all Internet marketers?
This will be the subject of a future article.