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.

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.”

Don’t forget to check out our Subscription Resources page today.

The post February Ecommerce Digest appeared first on cleverbridge.

2003 VAT Rules

The interesting thing about the 2003 EU VAT directive is that it made calculating VAT rates a source-based system. A source-based system means a VAT rate is determined by the seller’s location. For example, if a business is headquartered in Paris, all their online store transactions with European consumers would include France’s 19.6 percent VAT rate in the price.

While these 2003 regulations simplified VAT calculations for online merchants selling in the EU, they created a loophole for businesses looking to charge the lowest VAT rate. Some companies set up shop in a country with a lower VAT rate to allow the legal transaction to occur in that country. For a company in Luxembourg the VAT rate is 14 percent, thus lowering the cost of a digital product when compared to countries with higher VAT rates, like Hungary or Denmark.

2015 VAT Rules

To combat companies setting up dummy corporations for tax sheltering purposes, the EU created new rules that changed VAT assessment to a destination-based tax structure. Starting in January 2015, VAT rates will be based on where the customer resides, not on where the legal entity selling the product is located. This change eliminates corporate tax gymnastics while likely providing EU governments with higher revenue.

So how does this change impact your online store? We have identified several pricing issues we believe will affect your online store’s performance.

Pricing Challenges

When a European customer sees a price on a product page, they assume they are looking at the gross price with taxes included. This contrasts with US consumers who assume the price on a product page is the net price and that taxes will be added on to the price later.

With the 2003 regulations, as long as you presented gross prices to EU consumers, the net price in your cart was static because you were only assessing VAT according to a single rate. The 2015 VAT rules make pricing your product more complicated. There is now an inherent conflict between making things simpler for the business or the consumer.

If you want to make things easier for the consumer, the solution is to configure every single cart to always display a single VAT inclusive price to European shoppers, say 22,95€. This price is displayed on the product page, when the customer enters the shopping cart and after the customer fills out all their billing information.

So, if you’re selling to a German customer, they are paying 22,95€ and when you sell to an Danish customer, they are also paying 22,95€. The difference is in how much actual income you are collecting and how much VAT you are collecting.

With the German customer you are collecting 19,29€ in revenue and 3,66€ in VAT, and with the Danish customer you are collecting 18,36€ in revenue and 4,59€ in VAT. You can see why this could be problematic for merchants trying to maximize profit.

The alternative approach is an abrasive customer journey that create ugly price displays, but maximizes merchant revenues. It means that you as a seller are looking to generate the exact same net revenue on every single transaction. With this approach, different consumers from different countries are paying different gross prices in your shopping cart.

For example, a merchant wants to generate 20€ of net income on every transaction. When a German consumer buys from this merchant, they will end up paying 19 percent VAT and a gross price of 23,80€. When a Danish consumer buys the exact same product, they will end up paying a 25 percent VAT and a gross price of 25,00€.

Every business must make the decision regarding which direction they want to take. The choice falls into a decision of whether to make business operations easier for the merchant or make the checkout process easier for the consumer.

Keystone

Make sure your ecommerce partner is keeping your business compliant in Europe. While most of the complications from VAT rules in Europe will be handled through your ecommerce partner, you, as a merchant have to begin rethinking how you display prices to European visitors.

Please note: This blog post contains no actual legal advice. This is our interpretation of the impact of the 2015 VAT regulations. However, you should still contact your tax adviser for any questions you have about the impact of new VAT rules on your business.

The post Know the VAT Rules? Think Again, They Are Changing appeared first on cleverbridge.

Effective localization creates customer comfort and convenience at every stage of the buying process.

The Internet facilitates international trade like nothing in the history of humanity. As a software vendor, you’re offering a valuable product to customers around the world. But you know that you can’t just enter a market and expect over night success. You need to understand the local culture in which you are trading and adapt your selling techniques accordingly. The process of adapting your offering to a new market is called localization.

With all that being said, there are many areas of your ecommerce business that require localization. For example, the text of your actual product might need to be translated. Your paid search advertisements also need localization. And, of course, your checkout process and shopping cart need to be localized.

“Localization is the process of adapting internationalized software for a specific region or language by adding locale-specific components and translating text.” –  via Internationalization and localization – Wikipedia, the free encyclopedia.

It’s important to understand that localization is far more than mere text translation. It requires localized elements and placements aside from text translations – something that provides a familiar experience to the online shopper. Designing the ultimate localized shopping experience depends on:

• Knowing who your visitors are
• Knowing which visitors are converting
• Offering local currencies
• Setting the right price
• Allowing preferred payment methods
• Localizing form fields
• Complying with tax laws

Thanks to a revolutionary growth in pervasive Internet technology, the borders of our global village have collapsed. Though this growth and pervasiveness has created a new paradigm of international trade, it has not created a homogenous set of shoppers.

Each community still retains their particular preferences for marketing and buying that fuel local trade. You’ll need to discover the best methods of tapping into regional markets, and we hope this overview of localizing for global ecommerce will be your guide for optimizing your current offering.

If you partner with a third party ecommerce solution, its imperative that they have capabilities to help you manage your target markets to help increase revenues from those locations.

Did You Know?

The cleverbridge ecommerce platform provides extensive localization capabilities with 30 languages, 29 currencies and 27 payment methods enabling clients to maximize their global sales. 

Get our complimentary cleverbridge white paper to see if you have the capabilities you need to maximize online sales in foreign markets.

The post Localizing Ecommerce [White Paper] appeared first on cleverbridge.

Tax prices are presented in a variety of different ways depending on which country buyers are from. And you must present the taxes in the way buyers are used to seeing them, so as not to raise suspicion and risk abandonment.

Customers want to make sure they are buying from a legitimate source. Presenting taxes incorrectly raises a red flag in their minds. Think about it, would you purchase a product from a site that displayed your local tax in a way you have never seen before?

In the U.S., sales tax is added onto the marketed price. Customers who go to a brick-and-mortar store are used to seeing a price of $99 knowing they will pay more than that for the product. In Illinois, the sales tax is 9.75 percent, which means that the tax on a $99 product is $9.65. So, on a website, the product would be advertised for a price of $99. However, once the U.S. customer enters the shopping cart, the tax is displayed and added to the price. This is how U.S. customers are used to seeing prices, so this is how they expect it will be displayed in the cart.

In the U.S., sales tax is set at the state, county and city levels, so the rate varies widely across the country and within individual states. For example, the sales tax in the state of Indiana, which shares a border with Illinois, is between 8 percent and 9 percent.

In the European Union, however, Value Added Tax (VAT) is a tax on the perceived value of a product and is marketed as a component of the final price. Customers who see an advertised price of €99 will pay exactly 99€ at the register. Often times, an additional note on the marketed price indicates how much of that marketed price is actually the VAT.

For example, a €99 product for sale in Germany appears with a disclaimer that €19 of that amount is due to the 19 percent VAT in Germany. EU VAT varies by country. For example, the UK VAT is set at 17.5 percent, Germany at 19 percent and Denmark at 25 percent. There are a few exceptions to these flat, country wide rates for restaurants and food, but these are accurate for most products.

Keystone

As you can see, it’s important to be aware of not only what the tax rate is for a country when selling globally, but also how to present it to customers. Make sure your ecommerce store supports these small details; they make a huge difference in abandonment rates.

The post Selling Globally? Tax Tips You Need Now appeared first on cleverbridge.