Hi All,
I am going to try to make this as short as possible. Please do ask me questions and I will do my best to answer them.
On Jan. 1, 2015 a new EU VAT law will kick into effect that requires all sellers of digital products (worldwide) to collect VAT (European Tax) to be paid to the buyers home country.
There are 28 EU countries, and 75 different VAT rates. There is a ZERO minimum threshold. That means every single penny we sell digitally to an EU customer must be charged VAT and VAT must be filed quarterly, no matter how small the earnings. The fine for breaking the law is unlimited.
Note: There are some minor deviations from what I’ve laid out here, but this is the core of the law.
Why am I just now sharing this with you? I only learned of this myself 3-4 weeks ago. Many in the digital industries only learned of this in late November. This law was designed to stop big companies (ie Amazon, Starbucks, Ebay, etc.) from selling their downloads through low-VAT countries Luxembourg (3% tax rate… now increasing to 15%, this will still obviously hurt Luxembourg’s financial income), thereby increasing other countries VAT income. What appears not well thought out is how this will hurt small business and micro businesses in the digital arena.
Note: Also, I can’t help but think what will happen to, for example, Hungary’s VAT office when all those €1 VAT forms start flooding their desks every quarter.
Obviously I do not agree with this law. That does not put me above the law. I must comply. I worked countless hours, as did my team, to make this happen before January 1. It is not possible to become VAT compliant before then:
- Digital Scrapbooking Studio is not registered to collect VAT
- Digital Scrapbooking Studio is not registered with a Mini One Stop Shop (MOSS); This will assist us with filing the quarterly returns to each EU-nation I collection VAT from
- We are not currently charging VAT
- We are not currently retaining identifying data, let alone for 10 years
- In addition, EU-residents are accustomed to seeing the VAT price included in the cost of the product.
I have chosen to temporarily block all purchases by EU residents. I have done this with two steps:
- I have removed the “Add to Cart” button from all customers with an EU IP
- This message displays at the top of every product page:
Note: We are sorry, but at the moment this site does not deliver digital downloads to your region. Please be patient as we work hard to become EU VAT 2015 compliant. This is a complex process and we are working diligently to make our site available to our EU Customers. You are very important to us. Our sincere apologies for the delay.
What is next?
We are taking steps to fill out the necessary paperwork to become EU VAT compliant. We will then revamp our store interface to integrate VAT requirements directly into our pricing. Our current estimate is that this will be completed by the end of the first quarter in 2015.
Until then, theStudio will need to block our EU customers. We are truly sorry for the inconvenience and the trouble this is causing you.
Please note that we did not take the blocking of our EU customers lightly. However, if we continue without being EU VAT compliant we risk unlimited fines and losing our store altogether.
What is important is that we are not giving up on our EU customers. We are fighting to keep you and work with this new law. It will be done legally and above the law every step of the way.
What now?
We hope you continue to read our Studio Newsletters. Our NL are a great way to keep up with us and our designs, and the freebies in the NL are still available to our EU customers. Likewise our blog, Facebook and Google+ freebies continue to be available and downloadable to our EU customers.
You can subscribe to our NL and click “within EU” to receive special EU-only newsletter updates: Subscribe HERE!
You can download these free cardstocks as part of our Thank You for being our customer and supporting us during our transition.
Big smooches,
Toiny
theStudio Owner
Thank you Toiny, this new law is making things very difficult for Digital shop owners, especially as most are small one person shops, this is why a lot of these stores are closing, too much hassle concerning it, in making it viable for them. That is why I had to comment and say how appreciative I am that you are going to all that is involved to bring about an arrangement for EU customers.
Thank you and I hope you and the Designers have a successful 2015.
I agree with Faith — thank you, Toiny, for doing what needs to be done to be compliant with this new law (even though it is so very cumbersome) & for working hard to be able to service your EU customers. I feel bad for EU customers as many small digital shops will just stop selling to them altogether.
Wishing you all the best in this new year!
I had read about this several weeks ago, but forgot about it until I received the store newsletter today. It is affecting lots of stores and sellers, including those like myself who sell on Etsy. Toiny, your post is very informative. Thank you. From what little information I have seen, making the necessary changes to a store is not an easy task, something your post has made clear. I wonder if the EU has any idea how many small digital businesses it may be forcing to close or at least causing them to shut off selling in the EU? It may lose more than it gains.
I am confused. If you are not registered as a VAT payer, do you still have to impose VAT on your goods?
Sorry to hear of this…. the effect on anyone selling digital downloads in Europe is horrendous, especially as many small businesses do not currently pay VAT. However, this has been talked about in the press etc for months now and many of us knew back in June this was happening. An interesting link about it here http://ec.europa.eu/taxation_customs/taxation/vat/traders/e-commerce/article_1610_en.htm#a3 It is also not likely to be restricted to Europe, in the next few years there is talk of it being world wide. It is not only going to put people out of business, but put prices up… are you going to have different prices for EU customers which adds on the VAT for their respective countries and one for the rest of the world… it is all so unfair. Also a pity you couldn’t have allowed us Europeans to at least have had a last ‘blowout sale shop’ until this evening…..I wish you luck anyway.
Ignore my previous comment, I did some reading and I can see now that indeed, you have to. Eh.
How do I know if I’m within that range? I am a faithful customer and buy a lot of your kits.
Thanks, Joyce
Joyce, if you live in one of the EU member states, this will affect you. If you do NOT live in one of the EU member states, or non-EU European countries such as Switzerland and Norway, this will not affect you.
One more remark – doesn’t this only apply to non-EU business that RESIDE in the EU? From what I’ve read it seems to me it might be so. Does DSS actually reside in the EU?
This applies EU-to-EU and US-to-EU, anyone selling digital downloads worldwide (as B2C, business to consumer). We are a US-based business out of North Carolina.
I am utterly confused I confess. Thanks for replying.
So sorry about this.
Thanks for all your hard work.
Thank you so much for the beautiful kit in the newsletter.
Thank you for the clarifications. This is so burdensome. (I want to know how on earth the governments think they can enforce this!) Best of luck in getting this all sorted out. You and all thr designers are greatly appreciated.
Sorry to hear of this…. the effect on anyone selling digital downloads in Europe is horrendous, especially as many small businesses do not currently pay VAT. However, this has been talked about in the press etc for months now and many of us knew back in June this was happening. It is also not likely to be restricted to Europe, in the next few years there is talk of it being world wide. It is not only going to put people out of business, but put prices up… are you going to have different prices for EU customers which adds on the VAT for their respective countries and one for the rest of the world… it is all so unfair. Also a pity you couldn’t have allowed us Europeans to at least have had a last ‘blowout sale shop’ until this evening…..I wish you luck anyway and thanks.
We apologize, we had hoped to be able to do so, but making sure that the system was working prior to January 1 was important, so we were fully compliant with the new law. I wouldn’t be surprised if there isn’t a welcome back blow-out though!
I’m stunned !!! ….. I don’t know what else to say …. my heart goes out to all the sites, especially since most purchases are small, we aren’t talking about something that costs $100 so the tax on each will be tiny. What a headache for you. I know though you will find your way around it … you are woman 🙂
Thank you!!
I am also stunned but mainly because I had no idea I was doing business with a company in Germany. I think it is deceptive not to include the location of your company on your “About” page. The fact that you didn’t implies to me there is some reason you don’t want it to be known.
Aw! c’mon does it REALLY matter that much where we get what we want and has there been problems in the past? I’m in the UK and get my digis ALL over the world. Most of the time I don’t know where they are from, but it doesn’t concern me. Designs are designs and if I want them – well I get them.
As it is, the Digi world is being massively affected and also put out of business because of the laws of the UNELECTED European Commision, which is affecting not only digis but Laws centuries old, here and in other EU countries. There is a lot of anger with the Laws they are changing and inconveniencing the countries concerned. And all from, as I said, UNelected members of the Commision.
We are not located in Germany, we are based out of North Carolina. Toiny is living in Germany while her husband is stationed there, and she is not shy about sharing this fact!
This law has nothing to do with where a company is located though, it’s about where the customer, the purchaser is living.
I just would have appreciated knowing where the company is located and it doesn’t say on the About page.
“This law has nothing to do with where a company is located though, it’s about where the customer, the purchaser is living.”
So you are saying every digital store in the US who sells to people in Europe has to collect and pay VAT?
.
Yes – every business, no matter where in the world it is located, has to collect and pay VAT.
Btw – the location of the company is at the bottom of every newsletter….
That is true it is the country the customer lives in which is important, but as I said there is talk of this being applied worldwide eventually, so Australian customers for example will have to be charged tax in US as well. The only thing that affects an owner is paying their Govt dues/cotisations etc in the country of residence re their employment.
The only other way to deal with this is to have a European store set up and choose the UK (simply because it is English speaking) VAT Moss system to handle all the tax issues for Europe.
I have been dealing with The Studio for years, and if you receive the newsletters, which are chock full of freebies and great insights into Toiny’s life, we are under no illusions whatsoever about where she lives. I am sure if you read the blog, it is probably plastered all over the blog as well (although I can’t guarantee it). I have never known Toiny to be deceptive about ANYTHING .. in fact, I would have to say she is the most open person I “know”, and a very genuine person. I am sure you would not have to “dig” to find out all about her and The Studio! Although, for the life of me, I cannot understand why it would matter where a digital store is situated (which in this case, IS America). I find it really upsetting that someone would infer any sort of underhandedness 🙁 Keep up the good work Toiny, and all at DSS !
I am in Europe, and seen one shop in UK closing for other Europes customers!
This is so bad!
For a very small business as many designers are, it is not possible to obey to this law.
Well for all this discussion, I want to reiterate my deepest THANKS to Toiny and the designers for all the work that is going into making this happen for those of us who reside in the EU.
So how on earth would this be inforced
It’s not U.S law
Shelly that is a BIG unknown, however it is law and I cannot endanger my Designers or the Studio by ignoring this law.
Thank you so much for the beautiful collab in the newsletter.
Toiny I believe there may be a loophole, if you email me I will give you a link which seems to say that it is to do with “downloaded files”.
well apparently this EU tax law is going to be extended in 2016 to cover physical goods and services as well… Etsy sellers are in uproar, as Etsy say it is their sellers problem. Nor can you get around this by shipping pdf’s containing a link, it has to be the actual goods attached. So many graphic designers and stores closing or banning customers it is just wrong… Guess I will have to wait patiently for the Studio..xx
Disappointed that I am unable to purchase the Morning Mist @ $1.00 and by the time that eu countries will be able to they will probably be at full price. It doesn’t seem fair that we have to miss out.
When we are VAT compliant we will work hard with all our EU customers to price match any sales you miss. Please do keep note of Coordinated Collections like Morning Mist, DOTDs and any other special items that pass through. I cannot promise 100% all products will still be in the store, but I can promise to match the sales on all products available.
Thank you
What a mess! It will be interesting to see how this all pans out, and who’s left standing in the end. I don’t envy you having to deal with this, but thank you for keeping up with the laws, and for keeping your customers happy. We love the Studio!
How do you bock EU orders on Etsy for digital downloads? I can’t figure it out
I have no idea. From what I’ve read this is not possible. The common wisdom seems to be to refund an EU order on Etsy. There is also the ability to use paypal to geo-block the EU, but this works only for US business paypal holders.