Dating apps: You can’t swipe left on taxes
Online dating often requires energy, commitment, and patience. It might also include paying taxes on one’s electronic search for love.
“Today, most states that charge sales tax apply those taxes to online dating apps,” says Kevin Hess, who is director of Product Management for Avalara.
It’s not that legislators in those states are heartless, Cupid-hating demons. “I don’t know of any state that specifically passed taxes on dating apps,” Hess says.
Instead, as taxes have been extended to more online services over time, dating services fell under states’ general tax rules for all subscription-based memberships, he explains.
Love and taxes
Real taxes — sales tax, primarily — are tacked on to the subscription fees folks pay for online dating services and are typically described in the fine print of the apps’ terms of service.
A lot of people are paying these taxes. Pre-pandemic, some 30% percent of U.S. adults reported having used an online dating app or website, according to Pew Research Center, which didn’t distinguish between ad-supported free services and premium pay sites.
That number has likely increased since the pandemic started. During the height of the lockdowns in March 2020, Tinder reported its users swiped (right or left) on a whopping 3 billion profiles.
People definitely find love online. About 12% of American adults surveyed told Pew they ended up in a real committed relationship or marriage with someone they met virtually. And it’s not just a U.S. phenomenon. Globally, revenue from dating apps more than doubled between 2015 and 2020, growing from $1.38 billion to $3.82 billion. It’s expected to exceed $10 billion by 2026.
Nexus, subscriptions, and dating apps
Today, the terms of service for dating apps make it clear users are going to have to pay taxes to use the service.
The fine print at Bumble.com, for example, notes that the price users are quoted for its premium service doesn’t include any “Sales Tax that may be due.”
It goes on to specify, “if Bumble determines it has a legal obligation to collect a Sales Tax from you in connection with these Terms, Bumble will collect such Sales Tax” on top of its monthly subscription charge.
If a user decides not to let Bumble collect and remit the tax to the relevant jurisdictions, then it’s up to the user to figure out how much tax they owe and where the money needs to be sent. Bumble also puts users on notice that it’s not responsible for paying penalties or interest users may incur.
It’s pretty much the cold-shower section of the dating app.
“States took two main paths to taxing dating apps,” Hess says.
For states that already had a tax on membership services (like a monthly gym membership), it wasn’t a big stretch to extend that tax to online services that bill on a subscription basis, like Ancestry.com or dating apps, he explains.
And — as with every other form of ecommerce — the U.S. Supreme Court’s decision in South Dakota v. Wayfair, Inc. opened the door for more states to extend taxes to cover dating apps, Hess continues.
Before the Wayfair ruling, an online dating service “never had to charge tax, because they never had physical nexus in those states,” he says.
After Wayfair, dating apps had economic nexus wherever they had a critical mass of online seekers of love.
To every thing there is a season
Today actually marks the end of online dating’s peak season, which typically runs November or December through Valentine’s Day. (The pinnacle is “Dating Sunday” — the first Sunday of January, when everyone who resolved to find love in the new year goes online to create dating profiles.)
If you’re one of the millions who still will be looking for love online after today, we wish you success and companionship. And for those of you who aren’t going to be on Tinder, Bumble, or OK Cupid anytime soon, well, that’s just one more reason to let your valentine know how grateful you are that you don’t have to pay those dating apps sales taxes.
Dating apps may be big business, but Avalara loves small businesses too. Check out our Small Business FAQ for information to help you understand sales tax compliance.
Cover photo by Canva
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