VAT stands for Value Added Tax. It might as well stand for Very Aggravated & Ticked-off. On the whole, I’d much rather be tending an indigo vat than talking taxes right now. But on January 1, new rules go into effect in the European Union that effect me, an independent artist and writer in rural northern Wisconsin in the U.S. (Sorry — it’s hard to take a suitably serious selfie when my husband is making kissy noises.)
Starting January 1, people who sell digital products to buyers in the European Union are expected to collect and pay VAT based on and to the buyer’s country, not the seller’s. So even though I’m in the US, I’ll be liable for the VAT — which varies by EU member country — in each and every country of residence for buyers of the ebooks, PDFs and online classes I sell as digital downloads on Etsy. There is no threshold for reporting, so there’s no such thing as “too small” to file VAT. And the documentation requirements for proving the buyer’s location are onerous. Etsy say they’re working on this issue, but for now anyway I can’t count on them to make my compliance simple.
Etsy has been a great way for me to get found by a global group of people interested in looping, so I don’t want to leave the platform. And I don’t want to break the law, even though many people say it’s unenforceable. (If you want others to obey the laws in your country, you make every effort to obey the laws in theirs.) I could register with a VAT MOSS (mini one-stop shop) in an English-speaking EU country and just do quarterly reports there, to be dispersed to any of the 28 EU member nations to whom VAT is owed for that period. But since I’m not able to meet the data collection requirements, that seems pointless.
A lot of small ebook and pattern sellers are wondering whether to remove their products from the marketplace, break the law, or make do with alternative delivery methods. I decided to go with alternative delivery methods. The research I did indicates that as long as the services you offer have “more than minimal human involvement,” i.e. they are not primarily automated, they are not considered e-services so are exempt from VAT (at least for now). So I’ve added new Etsy listings for EU buyers of my ebooks and online courses. Those listings are now classified as “physical items” and will be delivered via email instead of as Etsy digital downloads. I’m hoping the file sizes are lean enough to deliver without headaches on either end of the transaction.
I’m keeping my fingers crossed that my EU customers use the EU listings, and buyers in the rest of the world use the listings that let them get their purchases immediately as digital downloads via Etsy.Comply (or at least try) and move on: That’s my intention. All the new listings are now live on Etsy. And as the clock ticks down to the end of 2014, I hope my ducks are mostly in a row for now. At some point, I hope Etsy and/or the EU find some room for the realities of small sellers in regulations intended to keep large sellers (like Amazon) from evading taxes. So I’m viewing this as a work-in-progress and subject to change.
But in the meantime, I intend to start the new year with bubbling cauldrons of natural dye and do some stitching, which is always Very Agreeable Time.