The man is always trying to keep you down.
At least that’s how the EU’s new VAT MOSS nightmare feels too many small businesses throughout the world.
Here’s a what they’re saying over at Twitter:
@GdnSmallBiz It will kill my writing resources business. Can’t manage the admin burden, can’t prevent EU buying: can’t stay open. #vatmoss
#VATMESS says it all – it will end a lot of small UK businesses. #VATMOSS /cc @GdnSmallBiz
@GdnSmallBiz new EU VAT laws will force many small digital retailers to close or stop trading with EU #VATMESS #VATMOSS
There are plenty of people complaining about the new law, and with good reason. But this article isn’t about trying to fix this mess. That’s way beyond the scope of my expertise.
Instead, I want to share what eCommerce platforms are doing to fix the problem. This isn’t the end of online businesses and it’s not the end of selling to EU customers. With the right eCommerce solution, you can find a solution that allows you to keep running and growing your business.
In a nutshell, the EU’s new VAT laws are a tax nightmare for any micro business that sells digital products anywhere in the EU. Instead of charging VAT (Value Added Tax) based on the seller’s location, the EU will now collect VAT based on the customer’s location.
Dramatic pause to wrap your head around that one…
That means that if you’re a U.S. based micro business, and you sell digital products online from your website, you’re supposed to file EU VAT fees in a designated EU country. And you have to figure out where your online shopper lives so you can file taxes in the proper country.
And it gets even better…because each EU country charges a different VAT rate!
It’s up to you, the small business owner, to figure this stuff out. YOU are the responsible party, and these changes affect any business who sells digital products to any person in any EU country.
This is a completely unfair law and targets the smallest businesses. Lots of people are trying to stop it right this minute. Who knows what the future will bring and if they will eventually change it. But for now, it’s a harsh reality for all digital businesses around the world.
Unfortunately, many digital businesses have decided to close their doors (which sucks!). And as a microbusiness owner myself, I can understand their fear and frustration.
One of the main reasons some micro business owners have decided to close their business is the hassle of registering for VAT MOSS, the online portal for submitting quarterly returns. Registering for VAT has implications for their entire business. It’s a big deal.
Anther reason for closing is being overwhelmed by bureaucratic red tape, and trying to work out their compliance. Which is to validate the location of the consumer, with 2 or 3 pieces of data, and then to calculate the VAT due based on that country.
Oh and store it for 10 years. All this without negatively affecting the checkout process.
You may feel like you have no choice. They are forcing this law on you (and you’re completely right!). But what if there was a way around this mess? What if you could find a partner that needs you as much as you need them?
Before you make any drastic decisions, check out what eCommerce platforms are doing to solve this crisis. Some are doing more than others, so choose a provider that works best for your needs.
WooCommerce is releasing two solutions for the new EU VAT laws. First, they are going to update their current EU VAT Number extension to collect where the buyer is located. They will provide users with a CSV file with the relevant EU tax information so it doesn’t need to be entered manually. Secondly, they are releasing a new extension that integrates with Taxamo. Taxamo isn’t a free service, and has several pricing structures including 2% per transaction fee. This would be on top of any credit card processing fees you normally pay now.
There is also a new for WooCommerce, WooCommerce EU VAT Compliance, that is currently in testing. You can download it for free right now, and a premium version will also be available.
update 12/18/14: the WooCommerce plugin is sold by a third-party developer and both the free and paid version will be available for users
Selz has a new free VAT reporting system, designed with simplicity in mind. The new solutions will identify the customers location, automatically apply the appropriate VAT rate, store the location evidence and generate a sales report showing the location and VAT for each sale according to that country. One major difference between Selz and Taxamo is that Selz is providing this service for free. All it takes is one or two clicks and it’s done. Plus, they plan on releasing further features to help with EU VAT, including exclusive and inclusive pricing.
Selz will also allow its users to block specific countries or an entire region like the EU. That may be a solution for businesses outside of the EU, but Selz is trying to make the process as painless as possible. According to their blog, they would “like to think that we’ve made the EU VAT reporting sufficiently painless that you don’t have to miss out on any potential sales by blocking the EU”.
Recurly is a subscription based selling service that currently has an entire resource section on the upcoming changes. They already have an EU VAT feature, but are moving all customers to a new feature with the 2015 rules. They also have a plan to validate all customers location based on two non-conflicting pieces of information. This is one of the best supported EU VAT eCommerce systems available.
Magento, an eBay company, also has several EU VAT extensions. If you use Magento, Firebear Studio has put together an extensive list of extensions you may need to handle EU VAT regulations. This includes the EU VAT Enhanced extension, which is €99.00.
Kyrptronic’s EuropaCart shopping cart software is tailored for the EU market and supports EU VAT out of the box. It’s EuropaCart says it is 100% UK/EU legal, and has specific UK/EU VAT support. It has a $99 license plus any extensions you may need. Plus, Kyrptronic has multi-tiered service, including forums, videos, email and phone support.
While Easy Digital Downloads recommended solution is VAT for Easy Digital Downloads. It’s a plugin for EDD that supports EU VAT digital services rules, and reports information for quarterly VAT sales.
update 12/18/14: EDD also has a Quaderno integration, and upcoming solutions include integrations with TaxCloud and Taxomo, as well as some “block those EU people” solutions
January 1st, 2015 isn’t the end of digital eCommerce. Not in the UK, EU or anywhere else in the world. And it’s not the end of online microbusinesses.
It’s certainly a time of stress, frustration and doubt. It’s not time to give up.
If you want to sell directly from your website, find the right eCommerce partner that supports the new law. Many microbusiness owners feel like there is nothing they can do. But giving up on your business shouldn’t be an option.
Ask questions: Contact your eCommerce provider to see exactly what they are doing to help. That’s their job!
Find a Solution: Change eCommerce platforms if your current provider isn’t supporting your business needs. There is one that will work for you!
Don’t Stop: If you must stop selling worldwide, just stop selling to consumers in the EU. Don’t stop selling everywhere else!
Disclaimer: This post isn’t meant as any legal or financial advice. Contact your accountant for specific tax advice.