Slashdot Mirror
U.S. E-Commerce Sites To Collect EU VAT
A concerned US-based e-commerce company with inter writes "While we have all been fighting the Internet sales tax battle here in the U.S., the European Union of 15 countries has recently required that all U.S. companies with web sales to EU citizens start collecting the value-added tax on July 1, 2003. The Washington Post has a good article about this. It seems Ebay, AOL, and others caved in on this without much complaint. Can U.S. Internet taxation be far behind if we have to start collecting and reporting 15 different VAT taxes? And sorry Mr. or Ms. EU Citizen, your website subscription now costs 15% to 25% more, starting July 1. Hope you like this added value."
This new taxation only concers eletronically transmitted goods. Like an MP3 file or a program. There is no change for physical goods, like books, DVDs or Computers. Those are still taxed when they come through customs.
Since non-physical, i.e. transmitted via the net, goods don`t go through customs, they have to find another way to tax it.
***Quis custodiet ipsos custodes***
Let me explain how this VAT thing works as i've read a few incorrect statements.
When you are an EU customer and are importing goods, or buying a service, from a company in another EU state you will have to pay the VAT to either your own state, if you have a VAT number (i.e. you a re a company or a professional), or to the state from which you're buying from.
Let me give a few examples:
Company A in IT buys from Company B in DE:
A pays the net price to B and IT VAT to the Italian state.
A, because is a company, will subtract the VAT payed from the amount it owes to the state.
Individual A in IT buys from Company B in DE:
A pays the net price + DE VAT to B.
B will in turn forward the DE VAT to their own state.
Now that's the situation in the EU. If you're buying from the USA the things are a little bit different:
Company A in IT buys from Company B in the USA:
A pays the net price to B and the IT VAT + customs to the Italian state.
Individual A in IT buys from Company B in the USA:
A pays the net price to B and should pay IT VAT + import tax to the Italian state.
What really happens is that, often, A will not pay the VAT nor the import tax because the package is not checked at the customs.
This is, however, illegal.
What is going to change:
This may seem strange, but is just a way to enforce the law which will, however, put some hassle to USA companies.
My suspicion is that this is also the reason why the EU wants to add this tax: It is a way to force citizens to buy stuff from the EU instead, thus supporting the local industry.
That's very much the reason, just add the word fairly to supporting. Just like all American companies have to pay VAT for the stuff they sell, all domestic European companies have to pay VAT when they sell online services. As these American companies apparently do not, they would have a clear unfair advantage in competition.
It would be rather idiotic to support the competitiveness of foreign companies with tax-free status, while taxing domestic companies. The situation would, of course, be different if online services had a tax exemption status also in Europe.
The case is somewhat similar as the hormone beef quarrel. European farms are forbidden by law to use hormones to beef up the beef. American farms are not. Therefore, if hormone beef imports from America are allowed, they have an unfair advantage over domestic producers, and the actual result is that consumers get the unwanted hormone beef on their tables anyhow, regardless of the laws that intended to prevent that in the first place. That's why they have changed the target of prohibition from production to selling and importing. USA of course doesn't like that.