Update on the EU Digital VAT Situation

As I've written about this previously at the end of 2014, businesses that scrambled to deal with the implementation of this EU law, which put the burden of collection and remittance of the VAT on the sellers, regardless where THEY were located, so long as the sales were made to customers in EU nations, are finally coming up with solutions - or agreeing to grudgingly abide by - now that we are in the second month of 2015.

Etsy has finally came out with an official stance that I had hoped they would eventually come up with. They will collect and remit the VAT to each of the EU member nations' tax authority in a quarterly manner and keep the record for 10 years (Yes, that's what the Eurocrats expected the businesses to do... Simply amazing, what they came up with.). Initially, Etsy stated, "as we've historically dealt with local tax laws, we're going to leave it up to individual sellers". Outrage ensued, while some pointed out what the tax authority (HMRC) in the UK at least (What the UK government says may not be the case in other countries of EU, and that's what makes this all such a headache.) had already said, which was "Etsy is responsible to collect, not individual sellers/service users.". Later, they changed their tune a little bit to say, "OK, we'll do this for you for sellers located in the EU nations, but we don't know what's going to happen to the rest of you". This stance was particularly unsatisfactory for many of us in the US, since we've all read the EU law and took notice of the sticking point, "The digital VAT rule applies to any business selling to consumers in the EU, regardless of where the business is located." THIS has been the cancer that sucked the joy out of my holiday 2014. THIS has been the nightmare that caused a lot of digital goods sellers to jump to the gun and close shop. Although I still think this is so wrong, as business analyst who writes blogs for Forbes have said that all legalities aside, for the sake of reputation, businesses outside EU would want to be compliant.

So the most recent position announced by Etsy is this. "We are now announcing that we will collect and remit VAT on behalf of all Etsy sellers providing digital goods to buyers in the EU by automatic download, whether or not the seller is based in the EU." (source: Etsy blog, Feb. 9, 2015 titled Update: European Union Rules on Digital Item Sales) *collective sigh of relief from all those who were keeping an eye on the issue* I'm glad that they've reached the conclusion to take this course rather than dancing around it and stressing us, the micro business owners, out. My business has already seen the negative effect of this EU digital VAT law in the behavior of the buyers. It is true that for many people, it was business as usual, but for those who are informed (Seriously, there was practically no media coverage whatsoever, but we saw a lot of discussions on the web from a lot of worried small businesses.) either asked the sellers as to what was going on (I did get messages from customers in EU regarding this new law.) or stopped buying for whatever reasons.

Looking at the comments on Etsy blog post, I can see that some sellers are still confused whether they'd have to figure in the VAT into their product price. I would imagine from the blog post that Etsy means to come up with an upgrade to their system so that each different country's rate will be figured into the final total, based on the list price, and be collected from the buyers.

Just yesterday, I was green lighted to migrate my products to the new platform by DGS (Digital Goods Store). They're a UK company, so they came out early in the game, ... well relatively early, back in October or November of 2014, to say, "We'll change our business model to be compliant". So now they are rolling out the new marketplace. While we transition, they are not taking on any new sign ups. After the transition, all new sign ups will be initially limited to 6 products and be reviewed before they can sell. The existing customers (people like me) had to request to be invited to the new platform by submitting our intent so they can give our products a quick review and decide if they are appropriate for the new marketplace. Luckily, they saw no problems with my products and gave me a green light and migrated all my existing products to the new account. *big sigh of relief* I'm grateful that this went without a hitch. (I don't know if it's the Mercury Retrograde or bad Feng Shui, the beginning of 2015 has been full of annoying mishaps and glitches for me...)

The good news, although it came late, after so many headaches and so much stress over the last few months, is that as far as this stupid EU digital VAT law is concerned, all of my shops will be compliant. And thanks to businesses like Etsy and DGS (who charge transaction fees so they can implement this kind of change to their system, thus offer their 'service' to small businesses and micro businesses), individual content creators can remain in business and make a living.   (Oh, look, Mercury is about to begin the post-shadow phase of the retrograde.  Things should start going smoothly once again. ^_^ )


  1. So happy to read this and that there is clarity from the stores, this must be such a relief, not just for you, but also for the buyers, lots of hugs, marion


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