Earlier today, my buddy Ursula linked to this article, What You Need to Know, If You’re Relying on Your Payment Processor to Dig You Out of the VAT-MOSS Mess. If Ursula didn’t post quality content, I never would have clicked. VAT-MOSS? Mess? Obviously this was Somebody Else’s Problem.
Nope. It was mine. And apparently had been since 2006 when the Sixth Directive of the VAT was recast and these directives put into play. (Possibly earlier: one article noted that a similar arrangement has been ongoing regarding “businesses who are selling into the EU from outside, [and] this has been the case since 2003″.)
In a nutshell, this is a Value Added Tax (VAT) imposed by the European Union on providers of certain digital products. It is business-to-consumer specific, meaning the provider is responsible for the tax; and location-dependent, meaning the location of the consumer at the time of purchase determines how the tax burden will be allocated. “MOSS” refers to a “Mini One-Stop Shop”, or a store which is registered to participate in the VAT and which sells digital items to customers. The legislation goes into effect in January of 2015.
The non-nutshell version is extremely knotty and I’ve spent most of my Saturday yelling at my monitor about how if I wanted to study international tax law, I’d have a lot more money and wouldn’t be so invested in how international tax law was about to screw me over.
(If you want specifics of how the VAT-MOSS works, I recommend starting with this Q&A held by HM Revenue and Customs. It’s a good breakdown of most major issues. If, like me, you had one question–I am located in the United States, so does the VAT-MOSS even apply to me at all?–I can answer that for you. Yes. Whether the tax applies depends on where the customer is located, not where the content provider is located.)
The VAT-MOSS impacts me directly, as I sell PDFs direct to customers. In fact, since October 2014, PDFs of ebooks and bonus comics are my only store items available to overseas customers, because international shipping and handling costs have become prohibitive. (Not that I won’t ship if asked: just this past week, a reader in Estonia asked how much it would be to send a copy of MAKER SPACE to him. I replied that it would be more than the book. He very reasonably declined.) If I register as a MOSS, I could still sell overseas, but I would be responsible for everything required by the VAT.
I will now relink to that first article to show why voluntarily registering may be a sign that you are certifiably mad. It is also worth noting that the main point of this article is that your payment portal (e.g.: Paypal) is not a solution.
So. It seems I have three options.
1) Registering with VAT-MOSS and complying with their tax laws.
2) Restricting all of my digital products so they are no longer available to EU customers.
3) Use a third-party content distributor.
(Okay, okay, there’s a fourth option, which is to ignore the whole thing and hope it goes away. Shall not be doing this, because Legal Reasons.)
I’m not happy. I don’t sell comics or bonus stories anywhere but through my own store. The products look the way I want them to look, and I can accurately track sales. I’m already paying service providers (Big Cartel, Pulley, and the finance people), in addition to my own tax responsibilities. Going through additional service providers to do what I’m already doing will nickle-and-dime me to death.
Finally, I am extremely concerned about how this might affect my Patreon campaign. On the one hand, Patreon is arguably set up as a monthly donation service, rather than a subscription service, and all digital content set up and distributed accordingly. It is not a shop per se, and nothing is being sold. On the other hand, taxes. I think the VAT-MOSS will shake itself out for a few years before Patreon-like service providers are directly affected, but as I’m becoming increasingly reliant on Patreon, this is a cause of concern.