I live in the United States –North Carolina, to be specific– and am a one-woman show. Each day, I get up and put in 8 to 14 hours on various projects. Comics, short stories, novels, products… I do all of my own shipping. I answer emails (poorly, and usually in batches when I finally get a spare hour). I’m trying to salvage a simple Kickstarter that went so far off of the rails that I’ve had to start building new rails. You want to see me juggle plates? I will try to juggle plates! And then I will need new plates.
In other words, I’m exactly like every single other independent businessperson working for themselves in the creative economy. Sure, the tasks change: maybe you make music instead of comics, or put out .pdfs of knitting patterns instead of novels. Regardless of the flavor, we all put in the long, long hours because we love what we do.
(Lord knows it’s not for the money. This has been my first year as an independent full-time creator, and it’s been ridiculously rough. Sometimes I’ll search online just to learn what a dental hygienist or an actuary makes, and sigh.)
But as of December 30th, I’m making minimum wage for a typical 8-hour workday. In North Carolina, this works out to $7.25 an hour. That was my benchmark for whether or not I can (airquotes) make it (/airquotes) as an independent creator. I gave myself a year to see if I could do it. And I can! Woo hoo!
Here, I’ll save you the math: this works out to $290 a week, $1160 a month, and $13920 a year. Also, this does not include overtime. If I work over 8 hours a day, it’s unpaid labor.
(Did you know that an actuary can earn upwards of $250,000 a year?)
One of my steadiest sources of income are digital downloads. These are amazing! I create a product, bundle it in a handy downloadable file, stick it in my store, and forget about it. I don’t have to invest in maintaining an inventory or shipping. It’s an up-front investment of my time that can pay out again and again. Combined with Patreon*, digital downloads are a major component of my earnings.
are were also the best way for me to reach international readers. I no longer offer shipping anywhere other than within the United States. I will ship overseas when asked, but nothing turns a potential customer away more quickly than seeing that the shipping and handling on an item exceeds the cost of the item itself. There are no barriers to digital downloads.
Well, not until January 1, 2015.
I wrote about VAT-MOSS a month ago, when I first learned that new tax regulations would target digital products in the European Union. These taxes are… complicated. The stupid-short version is that taxes are based on where the customer is at the moment of purchase. Not where I, the seller, live and/or work. Not where the customer lives. It’s determined by the location of the customer when they decide to purchase a digital product.
I’ve been watching the subsequent VAT-MOSS clusterfuck like a dog watching that last pizza crust on the plate —Where’s it gonna go? How’s it gonna land? Will I be quick enough to take advantage of it?– and I’ve been hoping that the EU would simply decide to postpone the VAT-MOSS rollout for creators making less than X-Amount for another year. Since those supervising VAT-MOSS at the EU seemed surprised to learn that independent creators across the entire freakin’ planet had never even heard of this new legislation until it gained traction in social media, I felt that this wasn’t an unrealistic expectation. Allowing a one-year exemption for small independent creators would give everybody time to sort out the mess and prepare for the next stage in the creative economy.
As of December 29th, it appears that VAT-MOSS will roll out as scheduled.
There have been some minor changes to cushion the blow for small businesses, but these aren’t substantial and will have no significant effect on me. (I should point out that while the article I just referenced says “non-EU sellers are probably safe if they ignore [VAT-MOSS taxes]”, the breakdown from the gov.uk website states that “Businesses outside the EU (for example, the USA) that supply digital services to consumers in one or more EU member state are also affected by the changes,” and I’m gonna go with that one, thanks.)
So, I’m disabling digital downloads from my store to EU customers. This won’t involve much, since I use Big Cartel/Pulley as my shopping cart system and they are awesome. I change a setting, and EU customers no longer have the option of buying my digital products directly from me. Sorry, guys. I don’t want to be a dick. I’ll make sure you have access to these items through third-party vendors, Patreon, and by giving them to you free of charge when all else fails.
Finally, I don’t think this is a death knell for me as an independent creator. I was lucky enough to squeak in under the wire. But if 2015 were my make-or-break year… Well. It’s not. I got lucky. My sympathies to those who have to make major changes to their stores, or who have to abandon their creative pursuits altogether.
(I should tie all of this together with another joke about becoming an actuary, but that’s in poor taste when peoples’ livelihoods are a’splodin’ all over the world.)
*I should note that my Patreon has been lurking in the $750 range until mid-December, and the Spirit of My Readers are FREAKIN’ AWESOME! recently tipped it over the top.
ETA (5:15pm): Big Cartel also has a tax setting, and is aware of the VAT-MOSS changes. They are looking into workarounds so they can collect and report tax directly, but it will take time.
15 thoughts on “‘Twas the night before VAT-MOSS…”
Gah. I read (somewhere) that there’s one merchant is hoping to sidestep vatmoss by manually sending out her pdfs instead of having a program do it automatically, because that way it’s no longer an automatic purchase? (or… something)
Also, do you still do shipping to Canada?
I think she should read the laws a little more carefully. It governs digital products, not “automated digital downloads”. One of the articles I referenced said that if you tailor an item to a customer (e.g. custom web sites), then it’s exempt, but a static product (e.g. web template) isn’t.
Yes to shipping, when asked! But the option isn’t available in the store anymore.
“Tailoring an item”? To what extent does an item need to be “tailored” for it to receive the exemption? For example, is a watermark with the recipient’s name added to each page of the PDF sufficient?
The gov.uk site you link to above has a link to their VAT MOSS flowchart: https://whitehall-admin.production.alphagov.co.uk/government/uploads/system/uploads/attachment_data/file/390300/VAT_MOSS_Flow_chart.pdf which states that “communicating by email and sending attachments does not constitute Digital Services”.
So if you turn off automatic download for your UK/EU customers and just email them a PDF of your work once their payment clears then you’ll be exempt from these changes.
@ tanonev & Mark Roy
Additional responses posted below, as WordPress has a limit on threading.
You may find yourself reliant on paypal or other escrow system then…..( I trust paypal less than I do altruism in a tax agent )
One of the articles I linked to discusses this at length. There’s a LOT of confusion over this definition. The following section is quoted:
Your digital product is actually more of a one-on-one service.
That’s fairly simple. But to clear up a confusion we’ve seen elsewhere online, this does not include goods which are merely paid for electronically. They need to be electronic and be delivered electronically.
So if you sell physical books (rather than e-books), CDs (rather than MP3s), or any product that you can “touch,” you’re not affected. They are physically packed and shipped (rather than delivered electronically).
Another potential area of confusion revolves around the European Commission’s use of the term “electronic services.”
An e-book, according to the EC, is a “service.” Indeed, and this is an important clarifier…
Where they mention “goods” at all, they always mean physical goods.
The European Commission defines “Electronically Supplied Services” as follows…
… services which are delivered over the Internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology.
That bolding is added for emphasis. If you supply a customer with some sort of custom-/hand-made product, even if that solution is then delivered electronically, it requires more than “minimal human intervention.”
End quote. The takeaway is that if you make something for someone, it’s a customized digital product. If you make something for general sale, it’s a general digital product.
I had to look up what an actuary is. *hmph*
The tax thing sucks. It’s so easy for governments to implement these changes they forget that it will affect people, business and oganizations to varying degrees. One size rarely fits all.
That workaround has been addressed many times. Yes, VAT-MOSS specifically applies to digital delivery, but ALSO specifically applies as a business-to-non-consumer tax. Any product that is not heavily customized is subject to tax, even if it is delivered via attachment. Please refer to:
“where the sale of the digital content is essentially automatic, and the small amount of manual process involved doesn’t change the nature of the supply from an e-service.”
Yes, you are correct that manually attaching a .pdf falls within this workaround (https://www.gov.uk/government/publications/vat-supplying-digital-services-to-private-consumers/vat-businesses-supplying-digital-services-to-private-consumers#defining-electronically-supplied) but the issue is the CONTENT as well as the PROCESS which defines a digital download.
Graaaaaaaaaah. Looks like I need to move on converting my book to ebook variants and start distributing through amazon etc. I hate that; selling it on my site as a PDF means I can charge a minimal amount, so pretty much anyone can benefit (nonfiction with a limited audience, but the only source of this type of information).
I also hate the prospect of converting. It’s primarily text but image-heavy, and that makes for *messy* auto-conversions, so I’ll either have to do it automatically then edit, or do it all manually. Geeez. Oh good grief.
I sympathize on the complexity. Good grief again. Until my health said, “Hey, you don’t get to work anymore,” I did a lot of traveling for individual customers, giving seminars, or vending at events. I had both services and sale items, and it gets mucky when doing things like repairs to a client’s own possessions that don’t require selling them parts. Determining first, what is taxed… then, where the hell the transaction took place, and what the local taxes are… it is such a massive headache. I generally charged flat rates on the spot then worked out everything regarding taxes later; this involves algebra at best.
I did have a handy open-source program for taxes on web sales, based on the buyer’s address (been charging taxes domestically for as long as I have been selling books, since I was already responsible for sales taxes offline as well). Something like this may turn up soon for the new VAT sales.
… how are they planning to enforce collection of these taxes from non-EU citizens? I mean, I pay taxes *for* all over, but the way I do it is to calculate what I owe, and then pay it all to my state, with some headache-inducing paperwork. I am going to go read on this, but do they want sellers to mail checks to each province of each country where they make a sale? And are they going to demand that the US punish or extradite US citizens if we fail to pay a few dollars in sales taxes for European sales? They can’t exactly have customs seize it.
The more I think about it, the more of a headache this gives me. If I buy a physical product from outside the country, I am supposed to pay taxes if any are due. I am. Not the seller. If I buy something that requires sales tax but I buy it privately, I am supposed to report it to the property tax office and pay the sales tax myself. I’m responsible, not the seller. I know UK citizens and Canadians who’ve had to deal with customs after making a purchase–froma business–from outside the country, when the customs form showed it was an item that required sales tax. Even commercial entities weren’t required to collect the VAT in advance on these purchases, tho it’s being shipped to somewhere that VAT will have to be paid.
Making thousands of international small sellers collect a few cents on a digital download, because it is going into the EU, just… makes no SENSE. Argh!
… must think about somethibg else now.
Hey, are you likely to be able to convert your image-heavy PDF’s to ebook formats? Would you be able to sell them via distri utors instead? I confess I have a selfish reason for asking. I was given a kindle after I had started my ebook collection as mostly PDF’s, and end-user conversion is turning out to be an ugly ugly thing, whether all text, text and images, or images-only. (Example: all the words containing “ll” in /Digital Divide/ and /Maker Space/ became words with one “l” followed by a space. It was easier just to buy 🙂 new kindle versions.)
I have tried converting several PDF’s of graphic novels, but it is clunky and yields an enormous file that e-readers have trouble loading. And the image quality ends up terrible, despite the huge file size.
From messing around with it all, though, it looks like it could be reasonably easy to generate a reasonably-sized and properly formatted ebook from scratch, if you have the original graphic files (hopefully with predictable sequential numbering). So maybe that would be an option? Granted a percentage of a sale is much less than a full price from a sale 😦 But perhaps more exposure could mean more sales, to help make up for it.
No, unfortunately the conversion process is not a simple plug-and-play. It’d take about a full workday to generate a high-quality Kindle compatible graphic novel from scratch (this is why so many of them look like poop). You have to do Things to Other Things and build an entirely new file which STILL looks like crap on about half of the devices. It’s really not worth the time involved, unless you’re a formatting professional and can create a fully digital graphic novel in half a full workday or less.
As for enforcement? There’s no real way they can, IMHO. I just don’t mess around with tax laws when I can help it.
“It’s really not worth the time involved”
Like I said, I was futzing around with the conversion process, playing with the files that it spat out…it *looks* like it could be automated with a fairly simple script, with a template that shouldn’t be too intensive to put together and using the original images. I don’t have actual images, so I haven’t a chance to try it; if it’s not that straightforward, I don’t have the experience of having tried it the “right” way.
I *did* put about a week (…spare time…) trying to work out a way to make the Narbonic collections 1&2 come out as a decent kindle book, using the images as broken down by the PDF auto-converter. (With their blessing, fwiw; they said if I managed to convert it, they’d be delighted to see the end result.) I can be, um, a little single-minded when I’m trying to solve a problem. And stubborn 🙂
But the images that the auto-converter gave me were sets of 3 strips in a block, the best way to accomplish a readable page would have involved first editing each and every image to get 3 individual strips, then going back and starting over at the beginning with those images. Since that would have yielded pretty low-quality images (first converted to PDF, then back to images, then edited again) it didn’t seem worth it, when it *is* technically possible to read a PDF on the Kindle 🙂
But oh, man…if it’s a primarily text based file? I now want the actual kindle version, every time–it makes a huge difference.
“I just don’t mess around with tax laws when I can help it.”
Oh, indeed, I get where you’re coming from. I agree, I do. I’ve learned all kinds of headache-inducing crap in order to make sure my sales taxes are done as well as I can manage, and that’s with less than $100 in taxes due every year.
I’m just very perplexed by the whole issue. It makes me think of, say, the NJ Turnpike requiring California to collect tolls, if anyone is driving east out of the state, with amount based on how much of the NJ Turnpike the car might travel. The amount of added infrastructure and interrogation of customers would be sort of comparable.
And then the NJ Turnpike goes on to say that /just/because/ a car is going north, there’s no telling if they MIGHT go east after that, so California had better be able to verify the destination of the northern-traveling cars, too.
I mean, the tax is bizarre and nonsensical. The whole premise–requiring residents/businesses of non-EU countries to collect tax for EU jurisdictions–is bizarre and nonsensical, even leaving aside the “you have to know where they are at the time of purchase, even though you don’t have access to that information, AND charge tax that varies wildly based on how we’ve determined to charge it.”
It doesn’t make sense to pass laws that you can’t enforce, either.
I’m not even convinced this new sales tax complies with international law, trying to get non-EU businesses to collect tax on sales [for which the person inside the EU should be responsible, not the outside party] and then send money to EU countries. Looking into THAT is definitely beyond my migraine tolerance, though.
So wat happens if i live in say… England and just lie ans sya i am un the US?
I sell on Kindle Direct and I do not worry about tax issues, at all.
That said, I am an American who live in Switzerland. Switzerland has its own huge issues with the EU, as well as the US (FATCA, anyone) and basically, they don’t like collecting anyone else’ taxes. As a part of my marketing, I will put up a WordPress author’s site. However, because of Kindle Direct agreements, I will not be offering direct downloads from that site.
I thank you for publishing the issues that you have had. It’s been eye-opening.