No pretty pictures today, instead, tax facts and info- hmm, really got your attention with that! Read on, this is stuff you need to know. In January, a European law comes into effect that impacts on digital sales from anywhere in the world to Europe. Why am I mentioning this? If you buy or sell PDF sewing patterns, video tutorials, ebooks etc this is going to have some sort of impact on you.
You can read a concise explanation and a quick break down of the implications here. It fundamentally means that for all digital sales to European customers that VAT is calculated at the customer's country, rather than the seller's country. The rate of VAT varies hugely across the EU. There is the option in the UK of registering for VAT with MOSS- Mini one stop shop. At present, you only have to register for VAT in the UK when your taxable turnover reaches £81 000. Once registered, quarterly VAT files would have to be prepared and ultimately the costs for each country involved in a transition would be worked out and then paid- in the currency of that country. For the sales I am involved in for my own patterns and Sew-Ichgio, this level of record keeping and accounting ( I would need to pay for accountant services I think) is way beyond the income I receive, it is way way below £81K!
For small businesses, it looks like a solution is for a third party to offer an internet portal/shopping cart which automatically calculates the VAT for the customer's country at point of purchase and takes liability for that. This is not available yet. It is going to be a race to see who will offer this facility first as there will be a lot of sellers waiting. However, there seems to be no rush from Etsy, Craftsy or shopping cart providers like E- Junkie. Each of those links takes you to their responses to this, I couldn't find anything for Craftsy. Otherwise, it seems there is not much more we can do. This change in the law takes out the option for people to add a Paypal button to their webpage or use a shopping cart/download provider like e-junkie. Once there is a suitable market place provider that can offer this, everyone's prices will need to increase because their fees will go up to cover VAT and administration of the service. I am imagining a developing situation with this next year with the hardest bit being at the start of the year when VAT liability kicks in on your first sale of 2015. Lots of sellers will not be able to sell to European customers until a solution is found and it may put some sellers off permanently and they will just sell outside of Europe.
If anyone else has other ideas on how to deal with this situation please leave a comment.
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