VAT..EU..MOSS – What’s Up With All the Acronyms?

Maybe you’ve heard the buzz in the digital products community, and maybe you’ve been blissfully unaware.  But if you’re an EU, or European Union, consumer of digital products, or a seller of digital products to EU customers, you might want to read on:

VAT, or Value Added Tax, are taxes applied to products from B2C – business to consumer.  Recently, the European Union decided to take a strict stance on enforcing the collection of VAT by the business for sales of digital products to EU customers, regardless of the country the seller resides in.  I am a US seller and I will now be responsible for collecting and paying VAT taxes to the appropriate countries.

A few countries are trying to help sellers comply by offering to be a portal called a MOSS or Mini One Stop Shop.  I have registered and received a MOSS tax ID in the UK.  My understanding of this is that quarterly I can just report and transmit all taxes for EU countries to my MOSS and they will take care of distributing everything to the various countries.

I have a platform for my shop that allowed me to install a couple of simple plugins and I am now ready to comply.  Not every seller of digital products has this capability, so they are left with one of several unapealling options: close up shop, discontinue sales to EU customers, or ignore the requirement and hope for the best.

On top of that, the laws indicate that if a seller uses a platform like Etsy or Craftsy, the platform is responsible for collection of taxes.  Unfortunately, it appears that Etsy is sidestepping this edict and has made vague references to making tools available for sellers.  I don’t know Craftsy’s stance on the issue.

That’s my synopsis of the situation.  I am an Accountant, but I am not a tax professional, nor am I an expert in VAT.  I did research this situation in order to put my small business in the best position for 2015.

Happy New Year folks!