Last Tuesday, the Court heard arguments in South Dakota v. Wayfair, a case in which several online companies including Wayfair are challenging a 2016 South Dakota state law requiring them to charge sales tax on goods and services sold to South Dakota customers even though the companies do not maintain a physical presence in the state.

South Dakota’s law has been struck down as unconstitutional by state court in South Dakota based on an older U.S. Supreme Court case, Quill Corp. v. North Dakota. In 1992, the Court ruled in Quill that out-of-state companies – at that time, usually a catalog company – did not have to collect sales tax from their customers in those states.

The Court in Quill also encouraged Congress to resolve the issue through legislation, but Congress has yet to tackle the issue. After waiting 25 years for congressional action, some states decided to take matters into their own hands. South Dakota not only passed its Internet Sales Tax law in 2016, but quickly went to court to enforce it against online retailers who failed to register with the state to collect taxes. The companies’ primary defense is the Court’s ruling in Quill, which the Court can now decide to affirm or overturn. Meanwhile, dozens of other states have lined up in support of South Dakota, claiming that Quill diverts billions of dollars every year from state and local tax-funded programs.

At oral argument, the Justices did not give a clear indication of which way they will rule. Justice Sonia Sotomayor noted that overturning Quill begs “many unanswered questions” and what may amount to a “massive amount of lawsuits.”

The Court can only answer the question before it. And the South Dakota law does not reach every online retailer with South Dakota customers, only those with sales of more than $100,000 in the state or more than 200 transactions with in-state customers. The South Dakota law also doesn’t allow retroactive tax collection. So even if the Court rules that South Dakota’s law passes constitutional muster, other state laws requiring much less economic interaction with a state or retroactive tax collection might not.

The Justices grappled with those concerns during oral argument, as well as what is fair to brick-and-mortar businesses who may be losing sales to online competitors and to small online retailers without the ability to navigate thousands of local tax laws.

What Does This Mean for Ecommerce Businesses?

If the Court reverses Quill, at least far enough to allow South Dakota’s law to stand, several other states already have laws in place to require state sales tax collection and online retailers should expect many more to follow suit. And even if companies challenge some of these new laws as unconstitutional for reasons left unaddressed in South Dakota’s case, the immediate new burden on online retailers could be substantial. There are more than 10,000 separate tax jurisdictions within the 45 U.S. states that currently collect sales tax, creating a complex issue that many small- and medium-sized companies may not have the bandwidth or financial resources to manage.

Free ebook: Managing the Complexities of Payment Processing

“The challenge that I see is cost. There are companies who stay current with sales tax rates, provide sales tax calculations, offer sales and uses return preparation and tax advice,” says cleverbridge Tax Manager Krystle Pelayo. “The bigger companies will be able to afford the cost or manage it themselves in-house, however smaller ones companies may have to opt out and only sell locally or in a much more limited number of locations.”

In terms of competition, says Pelayo, a passing win for South Dakota’s tax law may level the playing field among digital businesses themselves, but increase the ongoing fight for the consumer dollar between digital and brick-and-mortar.

Consider price points and customers jumping to a competitor for a better value.

“Ecommerce companies would no longer have to worry about their digital competitor not collecting sales tax in a state that they’re in,” Pelayo continues. “Consumers will be less likely to abandon their cart to go to another website who doesn’t charge tax. Though even as ecommerce competition may lessen, the likelihood of a consumer performing in-store research and then purchasing online at a lower price may lessen as well.”

Keystone

The Supreme Court is expected to rule on the South Dakota law by late June. But even if the Court decides that the law doesn’t pass constitutional muster, there’s no doubt states will continue trying to find a way to work around Quill. It would be wise for online retailers to begin planning for a more complicated future of collecting sales tax.

Kyle Shamorian is the content marketer for cleverbridge.

Katherine Minarik, Group General Counsel, contributed to this article.

The post Many Ecommerce Companies Don’t Have to Collect Out-of-state Sales Tax. But Will They Soon? appeared first on cleverbridge.

Wherever you find digital shopping, you will also find different regional requirements for succeeding in those markets. To accommodate those local customs across the global market, your customer experience needs to be flexible. Flexibility in this area does not mean your customer experience needs to touch its nose to its toes. A flexible global customer experience means that your business technology gives the best customer experience to anyone who visits your site, no matter where they come from.

Localization is one technique you should use for creating the good customer experiences. It is important for maximizing recurring revenue, because it provides more acquisitions up front and more renewals later on, thus reducing your churn rates and increasing your customer lifetime value.

To help you take your business to this next level of safe and secure customer experiences optimized for global customers, we put together this analysis of the seven most important aspects for creating the best customer experience to grow your global subscriber base:

• Languages
• Currencies
• Prices
• Payment methods
• Page elements
• Taxes
• Risk management

Localize Languages

Avoid making assumptions about which language to display to your customers based solely on their geolocation. Instead, rely on the preferences customers select in the browser. Then use those preferences to deliver the right customer experience for sign-up pages, marketing emails, customer account sections and in-app messages.

Localize Currencies

If you want to raise conversion rates and maximize renewal rates, you must let subscribers pay in their local currency. Depending on your base currency, a fluctuating exchange rate may be a problem for CLV, or it may be an opportunity for unexpected cash. Research your competition and test different pricing methods to see which prices work best for specific regional markets.

Localize Prices

You can price your service in a local currency but still not offer a competitive price. When you set prices in local currencies, don’t use a floating exchange rate to convert the prices of your product, and make sure the prices display in clean, round numbers. You also have to consider the purchasing power of the average customer in your target market.

Localize Payment Methods

Localizing payment methods makes the user experience of paying for subscriptions as simple as possible for the customer. Many subscribers in different regions of the world prefer to use payment methods other than credit card. You must offer those payment methods to reduce friction in the customer experience and increase recurring revenue rates.

Localize Page Elements

Page elements are easy to overlook, but they are essential to providing exceptional customer experiences to your global subscribers. The way you display dates, prices, and form fields must all comply with local conventions, which vary widely.

Localize Taxes

If you are the merchant of record for your online transactions, you need a system in place to correctly calculate, collect and remit taxes to the proper tax authorities. Displaying taxes the right way raises conversion rates and maximizes renewals. And complying with regional tax law mitigates the risk to your business. But the number of taxing jurisdictions across the world makes achieving compliance with all global tax requirements on your own a difficult challenge.

Localize Risk Management

More and more, companies are starting to realize just how important it is to both comply with regional privacy standards and secure crucial business data from hackers and breaches. The more you know about your obligations in the areas of data privacy and information security, the safer your customers will feel and the safer your business will be.

Keystone

Localization is crucial for creating better customer experiences and earning more recurring revenue. When you implement great customer experiences, you make it easier for people around the world to subscribe to your service, and that means more recurring revenue for you.

Download the full ebook to learn all about localizing your subscription business for international markets.

The post Seven Tips for Growing Your Global Subscriber Base appeared first on cleverbridge.

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.

Listen to the podcast

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.

Keystone

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.

The post Summer Rerun: Technori Sits Down With cleverbridge’s Craig Vodnik [Podcast] appeared first on cleverbridge.

Disclaimer: This blog post does not contain legal advice. The rights, obligations and liabilities of a business vary according to geography, industry, method of delivery, type of product, and all sorts of other variables that preclude us from using this blog post to tell anyone how they must act from a legal perspective.

Selling software online was more or less a tax free activity when ecommerce began in the mid-90s. The technology was new, there was no legislation specific to selling software online, and consumers flocked to the internet to purchase perpetual licenses for their favorite software programs which were delivered to them electronically.

It didn’t take too long before governments around the world realized they were missing out on revenue. Laws were gradually written or reinterpreted so that governments could obligate business to collect taxes for digital products or services from out of state and out of country customers.

If you are the merchant of record for your online sales, managing tax calculation, collection and remittance is a difficult and resource intensive activity.

Neglecting these tax issues can be extremely detrimental to your bottom line and vigilance is required.

How Much Tax Must Your Business Collect?

Figuring out whether the product or service you sell is taxable is one thing. Determining rates is another, and your obligations change according to the location of both your business and your buyers. To complicate things even more, the rules change frequently and repercussions for violating the rules can be swift and severe.

Taxes in the U.S.

The Marketplace Fairness Act has been languishing in Congress for years. That means that there is no federal law in the U.S. requiring online businesses in one state to collect taxes from consumers in another state. In the meantime, local governments are reinterpreting existing laws and instituting new ones to drive more revenue for their jurisdictions.

Traditionally, if a business lacked a physical presence (offices, warehouses, employees, etc.) in a state, it did not have to collect and remit a sales tax to that state. Over the last five years, many states established so-called Amazon tax laws that created tax nexuses for businesses in situations where they could traditionally argue that they had no physical presence in the state. For example, many states passed laws creating tax nexuses if a business had affiliates in that state.

Similarly, so-called cloud taxes were established in the state of Tennessee and the city of Chicago in 2015. These governments can now collect revenue from business that do not have traditional physical presences in those jurisdictions.

Taxes in the EU

Unlike the U.S., the EU has been collecting value added tax (VAT) on digital products for years. But much like the U.S., the laws have changed over time. Originally, customers paid tax based on the origin of the product, not its destination. This was turned on its head in 2015. Now EU customers pay VAT rates based on the residence of the customer, not the origin of the digital service.

Additionally, when it comes to the shopping experience for EU consumers, you have to indicate the entire full price customers will pay at checkout. You can’t display a price and then later add the tax amount to it. Also, you have to indicate which portion goes toward taxes. That isn’t a consumer preference. That is the law.

There are more countries in Europe than the EU member states to be considered: In Switzerland and Norway, electronic services have been subject to VAT since January 1, 2010 and July 1, 2011 respectively.

Taxes in the Asia-Pacific Market

Mature ecommerce markets in APAC are also starting to collect taxes on online sales. Japan assesses an 8 percent consumption tax on online sales while South Korea’s VAT rate is 10 percent. Last August, Australia’s Commonwealth Government announced that they are pursuing legislation to apply a goods and services tax on cross-border sales of digital products and services. They hope this new law will be adopted sometime in 2017.

There are more countries coming up in the near future with new VAT laws re digital services: New Zealand (starts October 1, 2016), Taiwan and Russia (starts January 1, 2017).

More and more, just like the EU member states, departments of revenues across the US, and governments in the Asia Pacific markets are looking to drive revenue by obligating online businesses to calculate, collect and remit taxes for online sales to local customers.

Regulations for taxing internet purchases of digital goods are relatively new and being reworked constantly, so what was true five years ago isn’t necessarily true today. And what is true today won’t necessarily remain so five years from now.

Keystone

All of this is just a small taste of what it means to comply with global online tax.  Expanding your subscription business globally has great appeal, but it’s clearly more complicated than it appears on the surface. Assess your risk and make sure you are prepared.

For further insight in what it takes to expand your subscription business beyond its current borders, download our complimentary ebook, 3 Compliance Risks for Global Subscriptions

The post The Complexity of Regional Tax Compliance for Your Digital Goods and Services appeared first on cleverbridge.

Subscription Billing

Uber pilots subscription pricing to lift loyalty | The San Diego Union-Tribune
There are lots of ways to slice and dice subscription pricing and billing. As Craig noted in our video on subscription billing last week, it was only a matter of time before Uber disrupted their own business model by looking at alternative ways to generate recurring revenue. Uber traditionally used on-demand, usage-based billing to monetize their service, but according to this article from the San Diego Union-Tribune by Jennifer Van Grove, Uber is piloting pricing and billing that is based on a regularly-scheduled flat-rate model. Begin asking yourself if there are any opportunities to provide more value to both your business and customers by experimenting with your pricing and billing models. Disrupting your business model might mean the difference between growth and stagnation.

Customer Experience

From Brand to Buy: Build Everything Around the Customer’s Experience | Advertising Week
To increase recurring revenue, you need to nurture customers through the entire customer journey from attract, engage and acquire to retain and grow. This article from Advertising Week uses an excellent metaphor of a bowl of spaghetti to explain that journey. Your buyers take a long and winding road toward becoming loyal subscribers, and it’s an eternal struggle for marketers to figure out what message results in a mutually beneficial long-term relationship between buyer and seller. That struggle is compounded by trying to figure out where and when to deliver that message. To reduce costs and the burden on your IT team, it’s necessary to create a network of connected data sources including your CRM, email marketing tool, payment platform and subscription engine.

Once your infrastructure is aligned, your job is to focus on what your customers need and what value you can provide. That value isn’t just about the user experience in the product. It’s about convenience at every stage of the journey. As the article says, it’s more than likely you don’t have the resources to approach each and every customer individually. That means you have to use your resources wisely.

Segment your customer database to support different needs at different times. You have free trial users, super users who need to upgrade plans, casual users who need to renew, and expired or canceled subscribers who you want to win back to your business. Each type of customer needs a different type of message. Your goal should be to increase customer satisfaction by providing a consistent brand experience from subscribe to renew.

Global Compliance

Data privacy and information security

PCI DSS – It Takes a Village | CSO
Do security standards like PCI DSS hinder or facilitate business growth? On the one hand, complying with these standards places a significant burden on merchants who rely on credit card payments for their revenue. On the other hand, without these standards in place, these businesses would be at greater risk from hackers and cybercriminals. This article from CSO makes the latter argument. While acknowledging PCI DSS as a work in progress, the author explains the different ways it protects businesses. The author also shows how PCI SSC works with businesses to reduce the burden of compliance.

Online sales tax

Goodlatte’s Internet Sales Tax Plan Is Better, but Still Falls Short | The Daily Signal
One of the major headaches for online businesses is staying current on constantly changing tax laws. Your tax exposure depends on the location of your business and customers, the type of product or service you provide and other variables. The debate in the U.S. has been going on for a while. Congress has tried several times to pass legislation to address the disadvantage brick-and-mortar retailers have traditionally felt against online businesses, but those bills tended to die along the way. Now it looks like a new bill will be introduced to establish “simple” federal rules for how online businesses calculate, collect and remit sales tax. This is clearly just the beginning of a long debate, but stay tuned for how it impacts your business.

If you are interested in learning more about the connection between subscription billing, customer experience and global compliance, check out our Resources section.

The post August Subscription Digest appeared first on cleverbridge.

So that’s what we did. We found that all of the everyday tasks and expenses involved with managing a solution in-house can prevent growth into new markets and can stunt ongoing optimization efforts.

Let’s Break It Down

Evaluating the costs associated with managing an in-house subscription billing solution is a major task, and involves looking at every aspect of your business. In this post, we look at three key areas: localization and front-end design, tax collection and remittance, and global data and legal compliance. These are only some of the areas a subscription business will need to manage, either on their own or with partners. But even without accounting for back-end development, accounting, IT administration and security, subscription management, fraud prevention and customer support, the costs of developing a home-grown solution quickly begin to spiral out of control.

Localization and Front-End Design

Important Considerations

Localization

Optimizing your subscription pages and purchase process for new and existing regions involves significant localization resources. This includes translating text, accommodating double-byte characters, and displaying relevant form fields in the right sequence. Displaying localized pricing, payment methods and currencies will inspire customer confidence and increase conversions.

Continuous Testing and Quality Assessment (QA)

Testing the design and layout of your online sales process is key to optimizing conversions. You also need to keep up with evolving design trends, customer demands, frameworks and features and test these regularly. QA is an integral part of launching redesigned or reconfigured subscription pages or purchase processes. If you’re testing internally, you’ll need a good six to nine months of user data before you can draw any real conclusions.

Responsive Design

Customers expect a seamless experience regardless of whether they’re using their PC, tablet or phone, so you need to invest in resources for delivering responsive design across devices.

Key Takeaway

The time and resources needed to effectively manage a presence in multiple regions on your own are significant. A subscription billing provider can rapidly deliver a customized, responsive customer experience — including design (fonts, colors, etc.), build-out and quality assessment. The QA period will be considerably shorter because your provider has market research (derived from working with multiple clients) on which configurations will attract and retain subscribers in each region.

Learn more about localizing for a global subscriber base with our illustrated ebook 7 Tips for Growing Your Global Subscriber Base

Tax Collection and Remittance

Important Considerations

Value-Added Tax (VAT)

The EU first started charging VAT on digital transactions that occur within the EU in 2003. Since then, VAT structure and standards have been continually evolving, and companies often have a hard time staying compliant. For example, prior to 2015, VAT assessment was based on where your business was located; now VAT rate is contingent on destination (that is, where your customer is located). If you have customers in the EU, it’s critical that you understand and comply with VAT regulations by collecting and remitting tax to the proper authorities. By not complying, intentionally or otherwise, you risk major fines. Your global revenue will take a hit, too, since prices without VAT factored in are not properly optimized for profit.

Tax Laws Based on Subscription Type

There are different tax implications depending on the type of subscription being sold (physical, digital, on premise software, etc.). Logic for calculating this kind of tax needs to be built into your subscription billing platform.

Regional Tax Laws

Tax laws vary from region to region and are subject to change. For instance, a new set of regulations in South Korea states that electronic services sold to South Korean customers are subject to a VAT of 10 percent. Laws like this go into effect immediately, and it’s mandatory that your business complies.

Sales Tax

In the United States, tax must be collected on all taxable sales, and tax rates vary from state-to-state. Collecting sales tax can be an enormous chore for online businesses because any customer in any state can conceivably purchase anything online. Sure, you can apply for individual seller’s permits in each state, calculate state tax on a per-customer basis and keep track of tax you collect — but that will take up significant internal resources.

Key Takeaway

Staying up-to-date on changes to global sales tax and VAT regulations is a task in and of itself. Actually calculating and remitting tax correctly is another. But you can rely on your subscription billing provider for both. Also, they’ll automatically factor your customer’s location and your company’s tax nexus into every transaction, and maximize recurring revenue in each region through optimized pricing.

Global Compliance

Important Considerations

Payment Card Industry Data Security Standard (PCI DSS)

Strict PCI DSS compliance is required for any business accepting credit card payments. Recurring auditing fees hinge on a variety of factors — company size, number of transactions processed annually, existing infrastructure, credit card data scope, etc. — and initial implementation is quite costly. Fines for non-compliance, however, can be catastrophic for your business: up to $90 fine per cardholder data compromised, suspension of credit card acceptance, loss of brand reputation, the cost of a PCI Qualified Forensic Investigator ($130-200 per hour for a one to two year project) and much, much more. Additionally, PCI DSS compliant infrastructure, processes and scope are updated at least every two years, so you can’t rest on your laurels.

Privacy Laws for International Sales & Data Transfer

Applicable privacy laws are another serious consideration. Because laws, regulations, standards and best practices around this are continually changing, they require constant monitoring. Your business needs to respond immediately to any sudden changes that impact business practices, like Canada’s recent Anti-SPAM legislation (for which violators face penalties up to $10,000,000).

Global Trade Compliance Regulations

These are constantly being updated, so you need to stay abreast of any countries in which an embargo or other specific trade rules apply. Without screening and escalation processes in place for identifying embargoed countries and individuals or organizations on the Specially Designated Nationals and Blocked Persons (SDN) watch list, you run the risk of non-compliance with U.S. export regulations. That can lead to 10 to 30 years of imprisonment and fines between $50,000 and $10,000,000.

European Privacy Laws

Even United States-based companies have to think about European privacy laws when engaging with European customers: European law requires an adequate level of data protection when collecting, processing or storing customer data from European citizens. The German Federal Data Protection Act (FDPA) fines your business up to 300.000€ per violation. Not complying with the European General Data Protection Regulation (GDPR) when it goes into effect in 2018 may audit a fine up to €20,000,000 (or up to 4 percent of the annual worldwide turnover, whichever is greater).

Data Breach Notification Laws

In the United States, these laws vary by state. Some states simply provide a maximum civil penalty per breach; other states calculate the penalty based on the number of customers affected. Under Michigan’s statute, a business that knowingly fails to provide the required notice to a customer is fined up to $250 per failure (with a maximum fine of $750,000).

Channel Partner Compliance

If you do business with channel partners (affiliates, resellers, etc.), you must actively screen them to make sure they’re also maintaining compliance with global standards.

Updating Security Infrastructure

Active maintenance of network security infrastructure is also required — for example, outdated versions of a firewall operating system may no longer be compliant.

Key Takeaway

In the unlikely event of a security breach, litigators can claim negligence if it is determined that your business violated compliance standards. A subscription billing provider will protect the personal information of your customers and react immediately to any sudden changes in legislation. Additionally, they will keep you in line with global trade compliance regulations, ensuring that you don’t conduct business in embargoed countries.

Keystone

We all get by with a little help from our friends. On top of offloading internal operations and reducing processing costs, utilizing a subscription billing provider actually creates revenue opportunities for your business. You might not have the internal resources required to expand into new markets, comply with global data privacy regulations and prevent fraud while continually nurturing long-term customer relationships — but an experienced provider can help with all of that and more.

To learn more about the hidden costs of global subscription billing, check out our interactive microsite.

The post The Hidden Costs of Subscription Billing appeared first on cleverbridge.

We’re not the only team publishing great content for the digital goods industry. Enjoy these selections from the past month.

B2B Ecommerce

Measuring Up: Benchmarking Your B2B Ecommerce Performance | Forrester

In their updated benchmark study, Forrester Research examined the state of B2B online sales, finding that the B2B online market is bullish. Online B2B sales enjoy healthy conversion rates, growing average order values and net-positive profitability, finding 47 percent of B2B companies believe profitability per online order is increasing. Even with these positive stats, B2B brings with it greater marketing and customer support costs.

Analyst Andy Hoar goes on to note, however, “It’s still early days for B2B eCommerce. Even those companies that have vaulted ahead of their competitors face significant challenges building the next-generation version of their business. B2B companies looking slightly over the horizon and positioning themselves successfully for 2016 and 2017 are focusing on:”

• Harnessing international growth opportunities
• Establishing critical metrics
• Understanding what tech infrastructure must be built-out over the next two to three years
• Shifting to an omnichannel approach

Predictive Analytics

Unified View Helps Execs Predict Customer Needs| eMarketer

A unified customer view allows companies to analyze the entire life of a customer’s relationship with their brand. Having all that information compiled into a holistic view is essential for companies that wish to jettison the traditional ‘transaction-centered’ perspective for a customer-centric one. With this perspective, a company puts customer experience at the center of their efforts.

But it’s more than just an attitude shift. Pooling customer data in one tool also allows for more complete customer analytics. Rather than the marketing team analyzing one slice of a customer, while the accounting team analyzes another slice, companies with a unified view can begin to see how their marketing efforts are impacting their revenue, or a how a feature release impacts customer support contacts.

With comprehensive data like this, a company can move from simply looking back at what customers have done to predicting what they will do. According to eMarketer, “More than six in 10 executives worldwide said that achieving a more complete view of the customer helped them more accurately predict customer needs and desires.”

IoT

Gartner: IoT Adoption Set for 50 Percent Growth in 2016 | CRN

If media buzz is any indication, then the Internet of Things (IoT) is big and getting bigger. Now Gartner has data to back up this trend. In their new report, they say that 64 percent of businesses they surveyed plan to implement an IoT strategy.

Chet Geschickter, research director at Gartner says, “2016 will be a very big year for IoT adoption. We are starting to see a wide range of IoT use cases across virtually all industries. But the big challenge now is demonstrating return on investment. Executives need to validate the contribution that IoT can make in order to justify large-scale rollouts.”

Subscriptions

Life, by Subscription | TechCrunch

Nic Milanovic over at TechCrunch provides a wide-angle view of the new subscription economy. Looking first at what is available via subscription, we see that far more than milk and newspapers can be had for a small, recurring fee. Milanovic looks at the technological and socioeconomic reasons for the prevalence of subscriptions today. Since the last economic downturn, most Americans have not rebuilt the savings they had before the collapse. The technology that made the sharing and gigging economy possible emerged just as these consumers were left with a dearth of liquid capital. Many younger adults, never having personally known the ownership economy, have fully embraced subscriptions as a way to taste the good life without owning it outright. As Milanovic says, “We may have to face the fact that it doesn’t make financial sense to own the things that we could instead simply subscribe to.”

This is the secret that digital companies have understood for years now. While from a consumer perspective, it may not make sense to buy something you can simply lease, from a business perspective it makes even less sense to make a one-time sale when you can earn recurring revenue. For customers, this means, “There is a financially shrewd Zen in not being tied to unmalleable objects. It frees people to spend money on pursuits other than that of saving to buy nice things.” So too, a subscription business model frees companies from the tyranny of the new sale, and allows them to focus on providing the best experience possible for subscribers — all with a stream of recurring revenue to support it.

Get help Navigating the Subscription Solutions Landscape

Global Compliance

Why a Tax Law Change in Australia Could Impact Online Revenues for US Online Retailers | Forrester

Beginning in July 2017, the Australian government will be expanding its Goods and Services Tax (GST) collection to purchases previously exempt under existing law. This March 10, 2016 blog post by Forrester analyst Lily Varon notes that not only is the value threshold of $1,000 being removed, but the tax will also be applied to new business categories — including digital goods.

“This GST change will also impact cross-border purchases of digital goods like software, gaming and media streaming. Merchants in these categories, like their physical goods counterparts, will have to calculate the impact of the increased GST and revise their pricing strategies and/or revenue forecasts accordingly.”

As online retail continues to grow, expect to see more jurisdictions applying their local sales taxes to digital goods.

Learn what you need to be prepared to sell globally and more in our Six Guides on Ecommerce Essentials

The post March Ecommerce Digest appeared first on cleverbridge.

Internet of Things (IoT)

Study: Rush to Connect to Internet of Things Could Open Security Gaps | Chicago Tribune

An AT&T study found that while many businesses are jumping into the Internet of Things, few have considered the significant security challenges that face connected device ecosystems. The survey found that, “only 14 percent of companies looking at or already using connected devices have auditing processes in place to track those devices and their security.” The study also found companies are behind in incorporating important stake holders in their discussion of IoT security, saying, “Only 17 percent of companies surveyed in the study involve their boards of directors when considering IoT security.”

Colm Lennon, founder of Haka Products, a Chicago startup that helps companies take new products and innovations to market, points out that without leadership involved, departments vital to the security of connected devices will fail to work together. “All of the roles in this connected Internet of Things space, they have to really work closely together if the company wants to innovate at great speed but also innovate with the intent of doing so to protect their customers, to protect themselves and to protect their partners,” he said. “It can’t just be engineering running with this thing and learning it on their own.”

For any business supporting connected devices, the key to securing your ecosystem is in crafting an agile strategy that involves all stakeholders. Succeeding in data security means increased customer loyalty and satisfaction while hedging against the massive financial downsides to suffering a serious breach.

The Future of Mobile Purchases

Most Digital Buyers Will Make Purchases via a Smartphone by 2017 | eMarketer

According to eMarketer’s recent study, 51.2 percent of digital buyers will use a smartphone for their transaction by 2017. They also say 2017 will be a benchmark year as $75.5 billion, or 50 percent of all retail mcommerce sales, will be transacted on smartphones. That will be up from 48 percent in 2016.

These trends are important for any digital goods vendor looking to capture the attention of consumers. Having a mobile optimized site or dedicated mobile app will be essential for future success.

According to Yory Wurmser, retail analyst for eMarketer, “In order to get people to make purchases on their phones, retailers need to make it as easy as possible for consumers … That means fully optimized mobile websites, a checkout process with few steps, and fully personalized merchandising.”

APIs

Why CIOs need to plan for API deprecation | CIO

CIO brings us an important reminder that APIs, like all other technical assets, can suffer from deprecation, or technical debt. In other words, antiquated code in your system, which may not be compatible with newer technologies being employed across the market, demands your programmers’ attention — either to fix, revise or replace it. The mere presense of outdated code represents a liability and a future expense. This is true for your APIs too.

In an interview with Brian Pontarelli, CEO of Inversoft, we learn about keeping APIs current and their users up-to-date. Even with the greatest care, sometimes the systems break down. “We try to do feature upgrades with API compatibility four to six times a year. We break our API compatibility once every two years,” said Pontarelli.

For any executives involved in the process, Pontarelli’s tip is simple: stay current. “If you’re staying current, the pain of a deprecation is going to be less than if you’re years behind. It takes communication and planning. I think that’s key to any relationship between a vendor and a company.”

Global Tax Compliance

Digital Goods Taxation | Taxamo

This piece from Taxamo looks at recent legislation in several countries that taxes digital goods and how their business is helping the market cope. As the digital goods industry grows, governments don’t want to be left out of the game — and it’s a big game. “Norway, one of the pioneers of such taxation, introduced its value-added tax on eServices (VOES) scheme in July 2011. It has since recouped €283.5m, as of August 2015.”

And this trend is likely to continue. Taxamo notes, “As traditional tax bases begin to erode, tax authorities across the globe are recalibrating their tax collection systems to include new types of services. There has been a domino effect of tax authorities adopting … digital VAT and this trend is not likely to change in the coming years.”

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To learn more about increasing revenue and reducing risk in the global marketplace, download our Six Guides on Ecommerce Essentials today.

EMV Chip Card Implementation

Feud Heats Up Over Chip Cards, FBI Warning | Computerworld

As we noted earlier in the month, new EMV Chip Cards are now in consumers hands, with implications for brick-and-mortar and online merchants alike. The security feature devised in Europe is meant to reduce the risk of fraudulent card transactions. The EMV cards generate a unique code associated with each transaction and are designed to work with a PIN. Whether or not to require consumers to use a PIN with their new cards has been causing some friction between banks and retailers, as detailed in this article from Computerworld.

The crux of the disagreement centers on how retailers and card issuers balance security and convenience. “The banks and card companies have come out against PINs in the U.S., saying that other technologies, such as encryption and tokenization, along with using a microchip-embedded card with signatures, would be more effective in fighting fraud than PINs. Retailers favor PINs, arguing that PINs will reduce fraud not only for lost and stolen chip cards, but also for online and telephone transactions.”

The difference between the two industries came to the fore over their disagreement with an FBI advisory statement about how to use the cards. Their original message contained several references to PINs, angering card issuers. The FBI quickly revised their statement.

Singles Day

What It’s Like To Watch Alibaba’s Singles Day Spectacle | Fortune Magazine

As American and other Western retailers dive headlong into the Black Friday and Cyber Monday kickoff to the holiday shopping season, we are weeks behind China and their instant holiday, Singles Day. The big player behind making Singles Day into an ecommerce phenomenon is Alibaba, headed by their eccentric and intriguing chairman, Jack Ma. While not every CEO may wish to emulate his style, Ma’s uncanny ability to raise revenue makes him a global role model.

When he wasn’t being interviewed by the President of the United States of America at the Asia Pacific Economic Cooperation summit in Manila, Ma could be found at Alibaba’s extravagant Singles Day Gala. Fortune Magazine sent reporter Scott Cendrowski to experience the day, which he describes as feeling, “similar to China’s campy Spring festival program, which commands higher ratings than the Super Bowl, but with a more commercial feel.”  The night included performances by none other than Adam Lambert, game show style contests between Chinese celebrities dressed in red or black, and a New Years Eve style countdown to midnight: the start of Singles Day.

Over the next few hours, it became clear that Alibaba won too, smashing previous sales and analyst predictions. As Cendrowski notes, “A communications person from Alibaba’s Alipay affiliate explains that in the first minute of selling, the payment system handled 85,900 transactions per second. Alipay was hoping to break Mastercard’s previous record of 60,000 transactions a second. Singles Day is shaping up to be the record day Alibaba hoped.”

By the end of Singles Day, Alibaba boasted $14.32 billion in sales in one day. The scale of business is a bit mind numbing. Econsultancy shares these 10 eye-watering stats, including the fact that “71% of Alibaba’s Singles Day sales came from mobile devices.”

If done right, there is no reason why Singles Day need remain solely a Chinese affair. eMarketer interviewed  Melissa O’Malley, director of global merchant and cross-border trade initiatives at PayPal, to explore opportunities and best practices for cross-border ecommerce with China. She admits that, “When I started at PayPal 18 months ago, nobody had heard of Singles’ Day.” The rapid rise of the holiday and its ecommerce trappings may inspire companies to try to get into the game, but O’Malley cautions reminds retailers how peculiar online marketing is in China. “Understanding the dynamics of the Chinese social media landscape is very important. It is so different from what Western retailers are used to doing. It’s just night and day. There’s no YouTube. You can’t just buy everything on Pinterest.”

Global Compliance

Life After Death (of Safe Harbor) – EU Data Protection in the Wake of Schrems | Cyber Law Monitor

Any business with operations, customers or data within the European Union or European Economic Area is grappling with the fallout from the European Court of Justice’s recent ruling that effectively ended the US-EU Safe Harbor agreement. In short, Safe Harbor was a framework agreement that allowed US companies to comply with customer data protection laws in the EU. Owing to recent government surveillance scandals in the US, the ECJ ruled in the Schrems case that Safe Harbor was not sufficient to protect EU citizens’ data. This change may expose companies to major compliance risks with hefty penalties.

The post above from Cyber Law Monitor examines temporary recommendations from the European Commission, which “offers alternative methods for compliance with EU data protection laws, while also highlighting the efforts the Commission is taking to develop a renewed and sound framework for personal data transfer to the U.S.”

Moving froward, no business has a clear idea yet of how the future of trans-border data will work. BNA shares this interview with expert James H. Koenig, who was a panelist on a recent Bloomberg Law webinar on the demise of the Safe Harbor Program. He recommended a keep calm and carry on approach.

“Despite the uncertainty, all companies are doing something on a risk basis in light of the ECJ’s decision. Some are moving ahead to devise a global solution without awaiting or depending on the promised Safe Harbor 2.0. Others are taking interim measures. The appropriate approach varies, depending on the type of company and the sensitivity of the data at issue.”

Keeping up with constantly changing rules and regulations can be a drain on a company’s resources, but the risks of non-compliance are high. UK authorities recently slapped publisher Trinity Mirror with a fine totaling over £70,000 for a VAT payment that was sent only one day late.

This decision could be a sign that regulators are taking a closer look at businesses, and expert Meera Rajah says, “It is really important that businesses recognize and understand the potential impact of either late submission or late payment…To avoid such a mishap, it is imperative that you understand the solutions available and keep on top of your VAT returns.”

To learn more about increasing revenue and reducing risk in the global marketplace, download our Six Guides on Ecommerce Essentials today.

The post November Ecommerce Digest appeared first on cleverbridge.

Things only get more confusing when sales tax is applied to intangible, digital goods such as music, ebooks or software. From iTunes to Netflix to Steam, we can all agree more online shoppers are turning to digital versions of traditionally tangible items.

Understanding when and how to collect sales tax on these purchases can be complicated for small business owners with limited accounting resources. In this post, we aim to explore this topic and offer a foundation to help you think more strategically about achieving and sustaining sales tax compliance.

Sales Tax Overview

Other than property and income tax, sales tax is the largest source of state tax revenue. As state and local taxing authorities are always on the lookout for new sources of revenue, the rise of digital goods sales has placed them fully under the microscope. Twenty-five states currently require sales tax to be collected on sales of downloadable digital goods. However, we can say with confidence that more states will join this group in the future.

In Tennessee, for example, the enactment of the Revenue Modernization Act led to cloud computing and downloadable games being subject to sales tax as of July 1, 2015.

The Sales Tax Compliance Process

What does it mean to be sales tax compliant? In short, it means you are collecting and remitting the appropriate sales tax to state and local tax authorities in locations where your business has nexus and where you are selling taxable goods or services.

It should be pointed out that the seller is responsible for sales tax, not the buyer. This is because state and local tax authorities aren’t interested in where the tax comes from. If you choose not to collect it from the buyer, then it is up to you to pay the required sales tax out of your own pocket.

This can be dangerous for small business owners. If you’ve turned a blind eye to sales tax collection in locations where you have nexus, then you’re on the hook for the sales tax associated with every ‘tax-free’ sale you’ve made. Moreover, if you haven’t taken that responsibility seriously, it’s likely you have missed filing deadlines and are accumulating late fees and interest on the outstanding tax.

Digging into nexus

Nexus is defined as “a physical connection to a state or local jurisdiction” and is triggered by such common business events as opening an office, hiring an employee or storing inventory.

As an online seller of downloadable software, you may be wondering where you have nexus. Let’s start with your home state. You have nexus based on wherever your business is located.

What about other states? This depends on your business activities. If you’re leveraging remote servers or a content delivery network (CDN), you’ll want to check with the state where those services are located to see what their policy is (every state may be different).

In Washington state, for example, storing digital content on a server in the state does not constitute a nexus triggering event. Owning, renting or leasing server equipment, however, “may be considered as a factor in determining nexus.”

Taxation of software

The world has yet to fully embrace the digital revolution. Netflix offering streaming services as well as DVD rental is a clear example of the split between the old and the new. Software is in the same boat. It is still regularly delivered in both  tangible and digital form. It’s fair to say old habits die hard.

There are two key criteria to consider when attempting to determine if software is taxable.

Software type

In many states, whether software is canned or custom has an impact on its taxability. Like other tax issues, this is unique to every state. Software vendors should check with the appropriate state taxing authority for specific details.

Method of delivery

The software delivery method combined with the software type, impacts the taxability everywhere in the U.S. Canned software delivered on tangible personal property, for example, is taxed everywhere. But if that same software is delivered through an electronic download, it is only taxed in some states. Again, software vendors should check with the appropriate state taxing authority for specific details.

As you can see, determining where and if the software you are selling is taxable is complicated. We didn’t even mention software hosted in the cloud. Don’t make assumptions here. Do the necessary research. The longer you wait, the more difficult and costly it becomes to get right with states and local tax authorities.

Keystone

As we move closer to an all digital world, the line between taxable and tax-exempt goods and services is becoming ever more blurry. Don’t turn a blind eye to sales tax compliance. Failure to collect and remit taxes places the burden squarely on your shoulders. Missed deadlines and late payments carry the risk of late payment penalties, collection fees, and interest payments.

Be proactive about sales tax management today by taking advantage of cloud tax management solutions like Avalara TrustFile.

Ryan O’Donnell is the Director of Marketing for Avalara TrustFile, a sales tax management SaaS. An engineer by training, Ryan has spent his career leveraging technology to support marketing efforts at various Seattle startups.

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