The protest against this in the UK is gathering pace, it's made The Guardian:

http://www.theguardian.com/small-business-network/2014/nov/25/new-eu-vat-regulations-threaten-micro-businesses

The comments from many small business owners are revealing about just how badly wrong the authorities have got the impact of this.

On top of that, this EU document makes clear there is no enforcement mechanism: http://ec.europa.eu/taxation_customs/taxation/vat/traders/e-commerce/article_1610_en.htm#a12

"The VAT system is based on voluntary compliance and this tradition will continue. The reality is that legitimate business will want to operate within the law and satisfy audit obligations to ensure that their commercial rights are respected. Legitimate operators certainly do not want to give credence to the idea that Internet is a zone where laws do not apply - the role of voluntary compliance should not therefore be underestimated. Tax administrations must create an environment where compliant operators do not face unfair competition. Where businesses choose to operate outside the law, enforcement efforts must ensure that this is detected and rectified."

So, the EU thinks everyone in the world will want to comply because it's nice and fluffy to do so. And if they don't "enforcement efforts will be made" - when there is no mechanism to do so. Does whatever breed of nincompoop wrote that also believe in unicorns, Santa Claus, and fairydust? The rest of the digital world is going to point and laugh, and happily undercut everyone in the EU.

Clusterfuck is the only word.

thank you i will forward on the relevant info.

That sounds interesting. So would assume that those of us using UMD, Mothership and Clips 4 Sale are going to get caught up where its an automatic process.

I'm glad i live in the Land Down Under.

our GST (VAT equivalent) is only 10%, with some stuff (mainly fresh foods and such) exempted and when ordering from overseas if the value is under AU $1000 it doesnt apply.

and the EU is wondering why most of the member countries economies are unhealthy. the VAT rates are mind boggling.

is the EU trying to drive trade and economies into the toilet?

If you read SoundGuy's somewhat testicular response over on Page 1 of this thread, I don't think anyone using a US based portal needs to worry about it, knowing the history of American responses to European taxation attempts (a certain tea party in Boston comes to mind ), I would expect most American businesses, other than giant ones like Amazon who worry more about perceived reputation than the bottom line, to take exactly the same line.

Turns out there is no enforcement mechanism. Eventually there might be, and the IRS in the USA will enforce EU taxes on US sellers in exchange for EU tax authorities enforcing US sales taxes on EU sellers when they sell to US based consumers. The drive for all this is coming from the G20 and the OECD, and the idea is that eventually all on line sales will be regarded as taking place where the purchaser is, regardless of where the seller or payment processor are located, as a way of closing the loophole that has allowed multinational corporations to set up shop in low tax jurisdictions and avoid paying their fare share.

Which is all very laudable. Except there should be an exemption for small turnover businesses, as there is for physical goods. And implementing this when there is no international enforcement other than "hoping businesses won't want to be seen as tax cheats" is complete insanity and means that non-EU businesses will now have a 20% price advantage over EU based ones, and nothing and no-one to stop them undercutting.

Clusterfuck doesn't even begin to describe it.

Still deciding what to do but closing down the website and going US-based download store only is an attractive option. I already have a UMD store. Poss I should have a Mothership one too? Still deciding, will make my mind up when I speak to the accountants.

The ONLY good thing about this whole farce will be if it means that Great Britain wakes up & realises that the way forward is to follow Mr Farage out of the EU ASAP so that we can be free to nurture business rather than strangle it!!!

I wonder if the 'Membership' model is now a better choice for UK producers.

I can't imagine that happening, and actually feel sorry for any politician that tries that when they face reelection. It would be the very definition of "taxation without representation" and if you look at US history, we tend to respond badly to that. The outcry would be considerable.

I think this applies to membership sites just as much as download stores, though that's one of the details I'm going to talk to our accountants in London about, the week after next. I'll let people know their advice on it, I don't want to see any of us get hammered by this thing.



I think the principle is sound, the idea that when someone buys something, regardless of who or where the seller is, the same local-to-the-buyer taxes apply, so a business in China selling on-line to someone in Wisconsin has to apply exactly the same sales tax as a local Wisconsin shop would charge, so the Chinese firm can't undercut the local one by leaving out the tax. It's not taxation without representation because the tax is being charged to the consumer (the supplier adds the tax on to their sales price, and then gives it to the tax authorities, so the supplier still gets the same profit, it just costs the consumer more), and as the tax being charged is the local one, it's going to the consumer's local state or national government, so to their own representatives.

Which is a very laudable idea, and goes a fair way to eliminating unfair foreign competition. You want to sell something to someone in country X over the Internet, then the point of sale counts as country X and their taxes have to be applied, no matter who or where the seller is.

BUT it only works if there's a global international agreement in place for all tax authorities to enforce each other's taxes on their own sellers. Getting big multinationals to pay it is easy, as public pressure will force them to. But extending that to every mom-and-pop business on the Internet, all across the entire world? Anyone who thinks that's remotely possible without having full enforcement mechanisms already in place is about eight cans short of a six-pack.

When I first heard about this I assumed that full joint enforcement deals had been done between the EU and at east the major other governments, USA, Canada, China, Australia, New Zealand, South Africa, Russia, Brazil... Hence the warning. I never even considered that anyone in Europe would be insane enough to try and do it before such agreements had even been requested, much less put in place.

Madness, complete and utter madness.

As somebody has already pointed out, the United States issues domestic taxes on American citizens elsewhere in the world, including the Mayor of London Boris Johnson, who (despite not having lived in the US since the age of 5) is being told to pay Capital Gains Tax on his UK home (in Britain, at least, there is no CGT on your main residence). Speculation is that he will also be liable to US income tax, and at a high rate.

I bet *he* doesn't get a vote.

He DOES get a vote. If he is a US citizen, he gets to vote for representatives which ultimately decide the types of taxes that he will pay. Nobody gets to vote directly on tax rates (except for possible ballot measures on local option taxes and the like). I don't know the full process of how foreign residing US citizens vote, but they do retain their rights including voting.

My comparison to taxation without representation might be a little loose, as it is true that US citizens won't have to pay this tax, but it is still in the ballpark, as it makes businesses responsible for having to familiarize themselves with tax laws and register for submitting taxes to foreign entities. It is a giant hassle, and even if a business decides to just decide no EU member states may buy from them, there are ways for a customer to get around that, and then they are in the same situation. If the EU wants to do this, it should be up to the customer to file and pay the taxes and not up to the seller.

For the third time This is an ILLEGAL tax in the US. Federal law specifically prohibits taxes that apply only to internet sales, and that seems to be written into the EU law exactly. It's a non-starter and isn't even worthy of discussion. There can NEVER be a mechanism for enforcement under current US law.

Furthermore, Ex Post Facto laws are unconstitutional in the US (unlike the UK from what I can gather), so no one here can ever be held liable for "unpaid" VAT prior to a whole truckload of new legislation being passed here and YEARS of legal wrangling between the various governments. Keep in mind that our entire legislature is currently under the control of conservative anti-tax Republicans and the right-wing extremist fringe of that party even named themselves after a specific tax revolt (Tea Party), so this is another argument for non-starter status.

It's also diametrically opposed in principle and practice to virtually all sales taxation laws in the US, where the sale always occurs at the location of the seller, not the buyer.

It's clearly an attempt at protectionism (i.e. limiting cheaper foreign competition) which is currently out of favor in the US (see NAFTA, rampant off-shoring, etc) so nobody is going to buy that argument over here right now

Lastly, our courts have ruled repeatedly that an IP address is absolutely not a valid identifier of an individual, and there are literally millions of proxy servers all over the world, so there is no possible way to prove exactly where a buyer is physically located at the time of the sale.

The EU legislators who passed this abortion have made it abundantly clear that they don't have the slightest idea how the internet actually works. You should probably fire all of their ignorant asses during the next election cycle.

Basically.

No matter what way I look at this I just don't see the U.S abiding until government starts looking at changing that, and their will be a revolution should it be tried.

People often ask me why I would leave the U.S. This kind of ill judged bullshit is part of it. The cost of living is another. The major part is an amazing woman, but we had a choice.

Slight change to the rule

http://www.telegraph.co.uk/finance/businessclub/11268706/Victory-for-UK-micro-firms-as-HMRC-tweaks-EU-VAT-MOSS-rule.html

May not make anybody very happy, but at least it increases the options a tiny bit.

On the other hand, now you can't do any of these things

http://www.independent.co.uk/news/uk/a-long-list-of-sex-acts-just-got-banned-in-uk-porn-9897174.html

(see thread in Off-Topic forum)

Interesting.

This is a useful collection of Twitter Q&A from HMRC's Twitter session on it last week.

www.mynewsdesk.com/uk/hm-revenue-customs-hmrc/blog_posts/eu-vat-changes-twitter-q-a-31555

Note particularly section G on enforcement, where they claim to have been enforcing it with US companies since 2003 - clearly they've missed a few!

I had word from my accountant (who is an expert on US as well as UK tax systems), they tell me that technically this is law, as soon as someone makes a sale to a customer in the EU, this does apply. Which is why lots of American companies are complying with it and will start to add VAT to their prices, and send the resulting revenue to one of the EU MOSSs (mostly UK or Ireland as those speak English). However at the moment there is no enforcement mechanism so if a business, esp a small one (and the biggest WAM business is small fry to these bureaucrats) choses to ignore it there's not a lot anyone can do about it at the moment, as far as we know.

And if at some point in the future the scatology does impact the turbine, for those of us running download stores it's the portal operators, rather than the store owner, who is liable for the tax.

Another mate who is a musician reckons the enforcement mechanism might be part of TTIP, the huge free trade agreement currently being negotiated between the USA and the EU, but that's not even finished negotiations yet, far less been ratified.

Meanwhile as someone posted above HMRC have agreed that for UK sellers while it's still necessary to register, if UK sales are less than the UK VAT threshold they can be reported to the MOSS as zero, and no vat needs to be added to prices for UK consumers. However make just one sale to someone in an EU member state, and that sale must have correct VAT added and paid to the MOSS.

It's only "law" in the EU and UK. The US companies who are going along with it have Nexus of some kind within the geographical boundaries of the EU. Most large companies utilize enormous commercial CDNs (content distribution networks) like Inktomi that have nodes in virtually every major data center in the civilized world. The largest operate their own systems.

The Mothership mostly serves data from within the US, primarily from our own data center on the west coast. We've been working on our own CDN for a long time and HAD some startup equipment in Amsterdam, but thanks to this stupid bullshit, it's being shut down and moved to New York on December 31st. We won't be back and neither will our hundreds (and potentially thousands) of dollars a month in equipment rentals. Good job, EU. You really know how to make an economy flourish :ohbruther:

FYI, a bigger threat to UK distributors is the new childish, misogynistic, anti-porn legislation that just kicked in on Dec 1st. I'm told that C4S (who most likely has a CDN presence somewhere in the UK) no longer allows UK debit cards to be used for download purchases because of it. Not sure if it's true or not, but it doesn't look good for you guys over there.

That's this one: http://obscenitylawyer.blogspot.co.uk/2014/11/the-following-content-is-not-acceptable.html

There's already a petition to have it repealed but I doubt it will get the number of signatures it needs to force a debate. And as you say, very misogynistic.

Which would be tit-for-tat, bearing in mind the scare stories the British newspapers have been putting out about how TTIP is essentially the EU issuing total economic surrender to the US!

Ok, I met the Hall's accountants in London last week, and meanwhile HMRC have issued updated guidance. What follows is my understanding of the rules and how they affect us in this community. I'm not an accountant or a lawyer so I'd advise anyone planning to take action based on this to talk to your own professional advisers, but this is my understanding after detailed conversations with a qualified accountant and detailed reading of EU and HMRC documents:

As far as any of us know, there is no international enforcement mechanism for sellers outside the EU.

However, any WAM producer in the UK or EU who delivers content via their own website must comply.

De-automating the sign up process and sending the users their login info by hand does NOT get round it - it doesn't matter if you send the login details written in Sanskrit on a piece of parchment and have it delivered by a combination of steam train and carrier pigeon, if the user accesses the content by logging into a website and downloading it, it counts as an e-service and VAT is due.

It turns out it's the customer's usual country of residence, and not where they happen to be when they make the purchase, that determines which state gets the VAT (and what rate to charge and pay).

One change that's been made to help UK businesses: While you still must register for VAT and make payments for all EU sales, as long as you can identify and account for UK ones separately, and they come to less than the UK £81,000 per year threshold, you don't need to charge or pay VAT on those, and can just enter a 0 in the UK box at the MOSS. Though if you do that you lose the ability to claim back VAT on purchases, so whether it makes sense to do so or not depends on your exact business model.Full details, including examples of what data is needed, are in Briefing Note 46 from HMRC: https://www.gov.uk/government/publications/revenue-and-customs-brief-46-2014-vat-rule-change-and-the-vat-mini-one-stop-shop-additional-guidance/revenue-and-customs-brief-46-2014-vat-rule-change-and-the-vat-mini-one-stop-shop-additional-guidance

Personally I still think this is a clusterfuck of unimaginable proportions that is going to utterly destroy an awful lot of the EU's digital microbusiness sector, and I'm still writing to MPs and supporting the last-ditch campaign to have it reversed. But I don't think that's going to happen, so we are going to comply with it.

Saturation Hall memberships for UK and EU customers will become 20% more expensive ($60 for six months instead of the current $50) from the 1st of January 2015. So anyone in the EU who likes our work and wants cheaper access should visit http://www.gungemaster.com and sign up before New Year's Eve. We did very seriously consider closing the membership site entirely and going download only, but we're traditionalists and looking forward to celebrating a decade of messy mayhem at the Hall next Autumn.