What are you going to do about VAT?
 

The European Union is going to start collecting VAT (value-added tax, basically sales tax) on digital goods from the U.S. and other non-EU countries. This means companies without an office in the EU will have to comply with 15 different tax codes if they wish to sell digital goods (like porn) to EU residents. I am curious what the IPSP's plan to do about this? I don't see how this could possibly be enforced?

http://www.washingtonpost.com/wp-dyn...-2003Jun9.html

I'd like to hear how they're going to enforce this as well.

any idea how long this will take to be effective within EVERY EU country AND explained to the local IRS ? the whole vat or not question was a big deal years ago already, we talked to the irs to big time accounting ppl and they said UH we dunno, only thing they could come up with was "the place where the actual transaction takes place is where the vat has to be paid"

Now, how are you gonna control that ? is it at the subscribers house or the ISP or the cc processor ? theyll never find a way to control vat over electronically gained info, all they did in the last years is set up import duties for stuff bought over the inet thats it...

EBay is going to start collecting it in a couple of weeks and AOL is moving their European HQ to Luxemburg since they have the lowest VAT. The VAT charge is based on:

a. The location of the business, if they have an office in the EU.
or
b. The location of the customer if the business doesn't have an EU office.

I think mom-and-pop type operations will be able to get away with not charging this, but the big online companies dealing in digital goods / services (AOL, EBay, etc) are going to have to collect it.

It will really hurt when the dollar is strong again and your EU customers have to pay an additional 15-25% VAT.

I called Netbilling and 2000Charge. Neither one had heard of this. Neither one I talked to has yet responded with what they're going to do. We have a lot of overseas business and I suspect any internet business would, and the response I got from one of them was

"I am fairly sure that would not apply to the vast majority of our merchants"

It's a sales tax, they're the gateway and get country information as well as make the charge there. There's no control that realistically would work on our part without their intervention, I can't even get reliable detailed stats from most of our processors on a per-country basis. Tracking by language/country code is at best moderately accurate, and I can pull some of that data from our affiliate program database manually but it won't be accurat.

I also don't get this one. Verotel and Inet-Cash, who we both deal with, are Euro companies. Verotel does not appear to be charging VAT, Inet-Cash does charge us MehrWertSteuer (VAT) though, 16%, on their fees but I don't see it passed on to the end user. I was under the impression that they both already have to charge the end user, based on the country they're in.

I want to comply with this, but it's going to be virtually impossible to do so without our processors and gateways' help.:Oh crap

-doug

Google adwrods are starting to collect, ebay, all the big boys are starting to roll with it. Accept it, it's gonna happen.

Most of what we ship throughout Europe is illegal to import there anyway, so we just mark the shipment "gift" and put a "go fuck yourself" note inside if opened by anyone other than the customer.

Fuck the EU. I don't collect taxes outside of my state now, and I am not collecting it there either.

They can kiss my Vat ass.

OK...there's a winner. Posting in a public forum that you're sending illegal content through the mails. Not even going to touch that one.

Here's some stats for those of you who don't think the VAT law will be enforceable and that in any event you shouldn't pay it.

The EU has a population of 491 million people. The US, 270 million. This means that 62% of the majority of customers are in the EU. Let's be a bit draconian here - and with one more "old Europe new Europe" comment by the administration fresh on the minds of Europeans, it may not be far-fetched - they decided to enforce this law by blocking traffic. Internet access is much more regulated by the government there - the illusion of internet privacy is created here but there in order to get an account you need residence permits, etc. in many cases. (I've tried). They would not be enacting this law if they didn't think it was enforceable.

Yes, it's steep.

Yes, it's specifically targeting US firms doing business in Europe - which is most of us to some extent. We know whose fault that is.

Yes, you might be able to get away with it.

But if the processors have no solution in place to deal with VAT, how quickly do you think they'll deal with US sales taxes which are already popping up? And when your state passes that sales tax law, and you write to the processor, get a response of "hmmm", suddenly it's your ass on the line because the situation never came up before.

The reality is, sales taxes on the internet are also imminent in the US, and many of the current strains on the industry are there because too many people tried to ignore things.

-doug

Internet sales tax will happen in the U.S. - the U.S. is a bigger problem though, with effectively 50 territories (and thus 50 different tax codes) instead of just 15. It is all a huge mess and this is the reason it hasn't been done yet, but with bankrupt states in the U.S. (like California) it is just too tempting for the taxmen.

Pretty much all states in the U.S. already have a "use tax" which stipulates that buyers are responsible for remitting sales tax to their respective states (so if I buy something from another state, I am supposed to send the sales tax I would have paid in my state straight to the state government), but this is totally unenforcable and nobody pays it, except for some large companies.

I see no way for the EU to enforce this on U.S. companies with no EU presence, as there is no way for them to gather the data or audit companies run entirely in the U.S.

I doubt this has much if anything to do with the recent Bush VS "Old Europe" fiasco as it has been in the works for awhile.