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."

Comments

last week's news?

[flokemon]

http://news.bbc.co.uk/1/hi/business/2968106.stm

Re:last week's news?

[jeffreyporter]

I was under the impression that in the UK VAT is not applicable to second had goods. i.e. you buy a car from a guy down the road, you don't pay VAT on it.

So why would EBAY have to add VAT to second hand goods sold online?

Re:last week's news?

[brain159]

eBay have to charge VAT on their fees as paid by the seller, not the final item price as paid to seller by buyer.

Re:last week's news?

[TheRaven64]

I was under the impression that in the UK VAT is not applicable to second had goods. i.e. you buy a car from a guy down the road, you don't pay VAT on it.

This is true, the VAT is charged on the eBay fees, which are a service. You would be amazed, however, at the number of VAT-registered people who sell goods on eBay and charge VAT on all of them, even the second hand ones. This is technically known as fraud.

What will happen?

[jolyonr]

if companies in the US, especially small etailers, don't bother?

Re:What will happen?

[wakebrdr]

The U.N. Blue Helmet army will roll them.

Re:What will happen?

[aug24]

Pretty much what happens now:

if I buy something from the US and have it shipped by air freight to me in the UK, then I am supposed to put my hand up and give Her Majesty's government the tax.

Back in reality, Customs can and do stop parcels and insist you tell them what's in it. However, they ignore most of the stuff for private citizens and only go after the stuff for companies.

This is a good demonstration of why Income Tax is a much better form of taxation than Sales Tax: it's easier to enforce local taxation that way.

J.

Re:What will happen?

[SkArcher]

Economically, however, Sales Tax (or VAT as its called here in the UK) is a vital tool for regulation of the economy, as lower Income Tax and higher VAT encourages people to save (especially in conjuction with a higher base rate of interest on borrowing to discourage people to take loans out and encourage them to keep money in bank accounts)

Re:What will happen?

[aug24]

That's the theory, but I don't buy it.

VAT was introduced as a temporary measure (a tax on luxuries) over two centuries ago to fund the Napoleonic War. We have little or no idea what people's spending patterns would be like if it had never existed.

<an aside>:
We only have VAT still because governments never remove taxation that is not being protested. So this temporary measure has been expanded till razor-blades and tampons are taxed as luxuries!

Don't let me start on Inheritence Tax!
</an aside>

J.

Re:What will happen?

[Ben Hutchings]

VAT was introduced as a temporary measure (a tax on luxuries) over two centuries ago to fund the Napoleonic War.

That's income tax you're thinking of. VAT is a recent innovation.

Re:What will happen?

[JaredOfEuropa]

A very good question, especially since this tax concerns non-physical goods such as web subscriptions, downloaded music and software, etc, that cannot be taxed at the border. I see three possibilities:

1) The small retailers will not bother with the hassle and expense of collecting tax for a foreign nation. The EU will not bother going after these retailers either, and all will be well.

2) The EU will force all EU ISP's to block net access to the small retailers' sites.

3) The EU (perhaps even with help from the US) will try and make these retailers reject sales from the EU.

This sounds like an administrative nightmare. The beauty of the Internet is that I can sell goods to anyone in the world who wants them, with a minimum investment in a website and the means to process credit card payments. This requirement could spell the death of that idea, and I find it incredibly selfish of the EU. What if every country made this a requirement? As a small retailer, I would suddenly find I have to collect taxes for the EU, certain US states, Russia, the Ukraine, Zimbabwe, Thailand, Australia, Venezuela... imagine the nightmare of doing administration for all this. Are they somehow counting on no other country implementing a similar policy?

Re:What will happen?

[Hittite Creosote]

VAT was introduced in 1973. Oh, and income tax was removed a year after the Battle of Waterloo, but was reintroduced in 1842.

I should read the news

[Max Romantschuk]

Either I haven't been reading the news, or this hasn't made the news at all... I'm not outraged by the VAT thing, but I am a little disgruntled that I'm reading about this on Slashdot, and not in the local newspaper or on TV.

Anyone in Finland catch this on the news?

Darn

[YeeHaW_Jelte]

I've been buying a lot online in the States lately because of the bonus I now get with the Euro being valued so high against the dollar. This will neatly compensate for the savings I make on the exchange rate.

However, there's nothing really new actually, because officially you were supposed to pay the VAT taxes when the product went through custom. The thing was, some packages would be intercepted in customs, and you'd get a bill for the VAT, and others wouldn't. Profit!

Re:Darn

[Guppy06]

"However, there's nothing really new actually, because officially you were supposed to pay the VAT taxes when the product went through custom."

Where "you" means "customer." This is different because they're now requiring the shops to collect the tax at the POS.

At this point, I'm think it's easier to simply say "sorry, we don't sell to Europe" than it is to try to figure out "please add 20% for EU shipments."

Re:Darn

[RobinH]

At this point, I'm think it's easier to simply say "sorry, we don't sell to Europe" than it is to try to figure out "please add 20% for EU shipments."

You think? In case nobody has noticed yet, the U.S. and the EU have been gearing up for a major trade war, and this is just the latest step. This is essentially the EU trying to stop its' citizens from buying U.S. products.

The last big thing was the war with Iraq. Before the war, a significant amount of Iraqi oil was purchased with Euros, and that meant the oil money was probably spent purchasing European products. After the war, the U.S. has control of the oil in Iraq, and most of the oil will be bought with U.S. dollars, meaning more Iraqi GDP will be spent in the U.S. instead of the EU. I'm not saying that was the ONLY reason for the war, but it was an interesting side effect.

Just don't expect economic relations to be too cozy between the U.S. and the EU anytime soon.

Re:Darn

[Jon Chatow]

Sorry, but that's not entirely true. The EU is funded from VAT, and it wants the money; whether the money comes from sales to local or foreign companies is very much a secondary concern. This will avoid a tax loophole, nothing more (that is, that customs don't have the man-power to manually check every single non-VAT-registered import shipment).

Of course, on another note, VAT isn't a flat tax in many (most?) EU countries, but varies from product to product (for example, books in the UK are VAT-free, clothing is at 5%, and most other things are at 17.5%)..../P.

Re:Darn

[1010011010]

3. U.S. States begin requiring collection of state sales tax by Euro companies. EU decides this is actually all too difficult and anti-trade, and backs off.

A Note to Europeans about taxes....

[adzoox]

A note to europeans about eBay:

How can you collect sales tax on a used item? The tax was already paid here by the original purchaser.

Most items I sell are used or "prepurchased" or involve a service. None of these items are taxable here and are considered sold at yard sale or at auction. Neither of which in my state are taxed. For some reason, some live (in person) auctioners charge tax here, but they aren't suppose to. They are told to by local governments who "slip it in"

Again, if something is used, taxes have already been paid and it's benefits to society have also created revenue generation, which in turn, is more tax collected. Say I buy a printer at retail. I pay the sales tax. Then, I use said printer to print my envelopes, receipts, business cards, correspondence, pictures to sell, etc etc - generating more income for my business. I have also used said printer purchase to make more money to spend and thus taxed, giving even more money to the government for the printer!

A lot of people that collect tax on eBay and especially Yahoo NEVER pay that back into the government. This is like the bogus people that collect tax at flea markets or for service calls.

I will hope that eBay will just add the VAT to the total bill so that we don't have to collect it and pay into some sort of escrow.

Re:A Note to Europeans about taxes....

[REBloomfield]

The tax is paid on the service ebay provides, not the goods that it allows to be sold through it.

Re:A Note to Europeans about taxes....

[nmg196]

> How can you collect sales tax on a used item?

You can't. And no-one's saying they will. They're talking about eBay themselves collecting the VAT - not the *sellers* on eBay! You never pay eBay for the items - you pay the seller. The seller then pays eBay a listings fee and this is what will be taxed - not the item.

The exception perhaps would be new goods, but that would be up to the selling vendor to ensure they charge people the appropriate tax for their region.

Already being avoided...

[AmiMoJo]

Some companies have already found a way around this. For example, Play.com is located in Jersey, an island off the cost of the UK and France which is a tax haven. They can thus not pay any VAT, and still easily ship to the UK.

MoJo

Well, will only make me stop shop

[Anonymous Coward]

Living in sweden, the only reason that I buy stuff from Amazon is that (even including costs for transports), the books are like 10-15% cheaper, and that music cd:s are like 25% cheaper. If VAT is added, this price difference will be void, and thus I will simply stop buying stuff from USA. It will simply be faster, cheaper and more convenient to buy stuff locally. 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.

Re:Well, will only make me stop shop

[Hackie_Chan]

This doesn't suprise me. These kind of things are to be expected because the US put on a hefty steel toll on their exports around a year ago. The European Union got pissed at that and since that, it's been quite a war between us. But I don't care, right? This is what the European Union was all about: Creating a unioned power that would balance out the American superpower on the international market.

Re:Well, will only make me stop shop

[magi]

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.

Re:Well, will only make me stop shop

[pcaylor]

If you are buying music CDs 25% cheaper than what the RIAA has determined to be the correct price for your country, you are obviously a pirate. At least one quarter of every CD you own is illegal. With the current strength of the Euro against the dollar it could be as much as one third of every CD. A RIAA audit compliance team will be dispatched to your home to calculate the damages you owe and to cut out the pirated portions of your CDs. You will be notified of the damages you owe us in our press release entitled âoeSurvey shows one third of all CDs in Europe piratedâ

Re:Well, will only make me stop shop

[csteinle]

Legally, you should be paying import tax on this at the moment - or at least that is the case in the UK. I understand that EU law is harmonised on this.

There is an allowance of £18 (or £36 for "gifts"), but any package worth more than that is subject to both import duty and VAT at the point of entry to the EU. The importer (i.e. you) is responsible for paying this.

The issue here is around services and products with no tangible substance. When do these enter the EU? The ruling basically means that sales of these items takes place within the EU, and therefore the vendor is liable. The other option would be to say the purchaser is importing the goods, and make them liable. Obviously, this would be much harder to actually collect on, as you have to rely on individuals to a) declare it, and b) know they need to declare it.

It's all about levelling the playing field between EU and non-EU vendors. Previously, we had the perverse situation of EU vendors having to pay more tax on sales in their home market than non-EU vendors.

Re:Well, will only make me stop shop

[magi]

The real question is, why would a regressive tax like VAT ever be a good thing in the highly civilized countries of Europe? 15%? 25%? It seems to me that the only reason for a highly applicable and highly regressive tax like this, that is also combined with a high income tax is to keep poor people poor and dependent on the state for most of their needs. Heaven help us if somebody try to rise above their proper station in life.

Nonsense, that's the exact opposite of the reality. Where on earth did you get that idea? Strongly progressive income taxing acts as a way to even out income. That means reducing the number of poor people, which means giving them and their children reasonable chances to advance towards prosperity.

Evening out income results in social equality and equal opportunity, which is the basis of true democracy. That's the basic idea behind European social democratic ideology, to my understanding. Ironically, equal opportunity is also the required basis for economic liberalist ideology, so I'm not quite sure what they're whining about.

VAT isn't progressive though, so it doesn't act towards evening out income. It apparently has other purposes, such as controlling the use of income towards investing and certain favourable forms of consumption, instead of fostering a culture of conspicuous consumption. There might be other factors too.

Re:Well, will only make me stop shop

[mark2003]

You confuse equality of opportunity ("everyone can get rich, some will, some won't") with equality of results ("social equality", "social justice", or "evening out income"). The two types of equality are emphatically not the same thing. I would argue that one is the antithesis of the other.

I think you are missing the point. Social equality and social justice are the bedrocks of democracy (I take issue with evening out income). You cannot have equality of opportunity without giving everyone the same starting point. In (most of) Europe anyone with high enough grades can go to any university. In the US, Forest Gump can go to Yale because his dad is wealthy and the director of the CIA whereas as some poor kid with an IQ of 200 may never be able to afford to go to university (may have to look after sick parents who cannot afford health care for example). That is not equality of opportunity.

Re:Well, will only make me stop shop

[loucura!]

If your family makes $20000, and you pay no tax (as is presently the case in the US),

I call bullshit on you. I make less than 20 000 dollars a year, yet I still pay Federal, State, and Social Security taxes. Perhaps, if you'd look at the facts rather than listening to liars with an agenda...

Re:Well, will only make me stop shop

[swillden]

The fact of the matter is that billionaire CEOs routinely get cars, jewelry, real estate or other valuables without paying for them.

More accurately, they get use of valuables without actually obtaining ownership, since obtaining ownership would equate to income. No tax law can touch this.

BTW if I knew of the specific loopholes I would not be posting here

Well, I do know a couple of people who are accountants for large (multi-billion $) companies, and they are the source of my knowledge about how the wealthy avoid taxes. Your view is the common urban legend and is, according to people who should know, groundless.

This is a Good Thing (tm)

[levell]

People in the UK (and presumably the rest of the EU) have always had to pay VAT on things they have physicially imported. Why should the internet be any different. VAT is an important component in the EU model of taxation and closing this loop hole can only be good for our public services like schools and hospitals. People always moan about taxes, it can't be that complicated to implement.

Re:taxes

[5.11Climber]

Like universal health care and education. I for one wouldn't mind paying higher taxes for this kinda stuff. I'm paying ~$950USD per month just for health insurance for my family. Go Sweden!

Simple Greed

[valisk]

So let me get this straight

When I order goods from the USA in future, I will have to pay:

• Import Duty
• Import VAT
• Member State VAT

In truth this sounds to me like an alternative method of adding a 15-25% Tarriff on non EU Goods and services and really should face reciprocal tarriffs from the USA etc.

Whatever happened to the British idea of Free Trade, looks like we've sold it down the sewer for a piece of the Euro pie :(

At least I won't have to charge these silly fees to my customers in other EU countries as I come under the UK Vat registration level at the moment.

Re:Simple Greed

[radish]

You only pay the VAT once. As it stands now, you pay the tax free price to the retailer, then (supposedly) pay duty & VAT during import. Of course usually you don't do that because the package is just waved through (I've NEVER had to pay duty or VAT on any imports).

What will happen next month is that the VAT will be collected by the retailer, and they will be responsible for sending it to your government. The duty will still be chargeable on import (I assume), but you won't need to pay VAT twice.

Re:Simple Greed

[valisk]

I was always under the impression that the British were quite happy about free trade when it benefited Britain and Britain only.

How about the fact that Britain refused during the late C19th and early C20th to put tarriffs on imports, even from countries like the USA, Australia, Canada, France, Germany etc. who did have tarrifs, and very high ones at that, against British finished goods?

Or the fact that 'Imperial Preference' The British tarriff system, did not, infact begin until the mid 1930s

You could of course be referring to 'Customs and Duties' but these apply equally to goods produced in the UK as to those imported.

Or maybe the British policy of looting goods from Imperial posessions like India, but that is Free Trade only in a satirical sense, and unrelated to external Imperial Trade.

I do understand your criticisms, but they truly only apply prior to the repealing of the Navigation Acts in 1849 which allowed non British ships to dock at British ports for the purpose of trading goods and wares, and the repeal of the Corn Laws in 1846, which set a precident followed by all future governments until the 1930s of removing all barriers to the import of goods.
Which is the era commonly referred to when discussing British Free Trade.

Why collect here

[uspsguy]

I've got to wonder why a US company would collect EU taxes. Wouldn't the destination country just do it when the merchandise is picked up?

Damn Euros!

[GMontag]

From my cold dead, er, wait . . .

Give me Liberty or give me, er, hold on . . .

If I had a hammer, I'd hammer, no, not that one . . .

No taxation without representation! No tea for me!

Crap! Isn't there an old bumper-sticker worthy phrase for this nonsense?

Re:Damn Euros!

[GMontag]

We will give you back Mosaic, no problem. But Mozilla, and Apache are ours.

VAT

[pubjames]

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."

Assuming that governments have to collect taxes somehow, why is this a bad way to do it, as opposed to income or corporate tax?

Although many Americans give the impression that they think all taxes are evil, over here in Europe we quite like having things like free health care for everyone, tidy streets etc. We think that it makes for a fairer and more civilized society, even if it means that we are all a little poorer (in monetary terms) than you guys. Many of us find the attitude of some Americans - that taxes and social government are 'evil' - frankly a bit bizzare.

Although I guess it is understandable looking at the current state of politics in the USA. How is it that you guys no longer seem to be bothered about such essentials of democracy as transparency and avoiding rid of conflict of interest in your political leaders?

Re:VAT

[GothChip]

Because we also pay Income tax.

I don't mind the idea of paying tax. It's just the idea of paying tax when you earn it, paying tax when you spend it and paying tax when you even save it.

Why can't we just get taxed once.

But the most evil tax has to be inheritance tax. Even when you die you end up paying tax.

Re:VAT

[Anonymous Coward]

Although many Americans give the impression that they think all taxes are evil, over here in Europe we quite like having things like free health care for everyone, tidy streets etc. We think that it makes for a fairer and more civilized society, even if it means that we are all a little poorer (in monetary terms) than you guys. Many of us find the attitude of some Americans - that taxes and social government are 'evil' - frankly a bit bizzare.

I live in Amsterdam, Holland, where the high income tax bracket is over 40% and VAT is 19%. Health care is not free, and many streets are quite dirty.

Re:VAT

[Guppy06]

" They are saying "if you want the _privilege_ of selling products to the EU, you will have to follow the rules". This is exactly as if the US would charge import duties when you receive expensive goods from overseas by mail... "

No, it's not. Customs and duties are collected at the point of entry, not the point of sale. This means the cost of the infrastructure to collect these is paid for by the destination. The EU wants VAT collected at the point of sale, which means that it's now the store's responsibility to conform to EU laws, not the purchaser's.

"In the case of products bought from non-EU companies that are physical items, customs collect the VAT and import duties."

Again, note that it's collected from the purchaser, not the store.

"but since nobody would actually bother to do it, now non-EU online services will be required to collect the VAT for the government if they want to sell to EU consumers."

So what you're saying is that international businesses are being penalized for the actions of the EU's own citizens? What, it's OK so long as it's not the US doing it?

"VAT is not a tax on the stores, it is a tax on the consumer."

It's a tax on the stores because the stores are the ones that have to pay for the infrastructure needed to collect some other country's tax.

Re:VAT

[Surak]

Although many Americans give the impression that they think all taxes are evil, over here in Europe we quite like having things like free health care for everyone, tidy streets etc. We think that it makes for a fairer and more civilized society, even if it means that we are all a little poorer (in monetary terms) than you guys. Many of us find the attitude of some Americans - that taxes and social government are 'evil' - frankly a bit bizzare.

I find it frankly a bit bizarre that Europeans constantly use this argument. The fact is that the U.S. government pulls in FAR more money in tax revenue than ANY country in Europe, and we *should* be getting the services you guys get, but we *don't*. That's because our government is so corrupt as to waste billions and billions of dollars on things such as paying $10,000 for a perfectly ordinary toilet seat.

Paying more in taxes will only *exacerbate* the problem. Throwing money at a problem seldom solves it, and often makes it worse. Look at it this way: if your wife was spending WAYYY to much money on clothes due to shopaholic syndrome, to the point that the both of you could barely afford to eat, would you solve the problem by giving her MORE money?

Nothing...

[Cpt_Corelli]

I can see a lot of consumers picking stores they know won't collect the VAT. After all, those stores will have a 15% discount on their items compared to the stores that collect VAT.

Living in Sweden (where VAT is a heft 25%) it has always been lucrative to order stuff on the internet from the US. I remember when buying a single CD from Amazon (inluding shipping) was cheaper and faster than ordering it from a local e-merchant.

This is especially true for software where you can download the product immediately after buying it. Last week I purchased Norton AV from Symantec. Price on Symantec's swedish store = SEK 620. Price on symantects US store = 350 SEK, That's almost a 50% discount just a few clicks away!

Re:Nothing...

[kevin lyda]

let me get this straight. the swedish vat is 25%. the price of the widget in sweden with vat is SEK 620. the price in america w/o any tax is SEK 350. if the price in america were to have swedish vat on it, it would cost SEK 437.50.

so that means that even with vat, the makers of the widget are jacking the price up about 42%.

sorry to muddle the discussion with silly things like math, but i guess i'd just wonder why you aren't more annoyed at american companies ripping you off then at the rate your gov't charges for vat.

Only for digital (non-physical) goods

[mocm]

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.

This is uncalled for...

[dirtydamo]

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.

That 15% to 25% is a tax which (theoretically) will go to fund other services, just like any other tax.

I appreciate Slashdot doesn't pretend to be unbiased, but can we please keep the flamebait out of story submissions.

Re:Eh? Do you really TRUST them with your money:?

[Hrshgn]

>Why would you want to give your hard earned money to a government? Because you want the government to be able to provide services to all citizens. That's what a social democracy is all about. I for one have just received my university degree and I still have money on my bank account because education is supported by the government here in Switzerland. Thank you society! Hrshgn

Re:Restraint of trade?

[JanMark]

> you have to manage 15 different tax rates,

Actually it is worse! In my country, The Netherlands, there are two tarifs, a low and a high. Low tarifs (6%) are for food, drinks, books and some services. High tarifs (19.5%) are for other goods. (There is also a third tarif, but that is for construction, so not likely to be applicable.)

Other EU countries have two or three tarifs, so it can be hard. Not all goods fall under the same tarif in every country, so it will be hard to know what VAT (btw BTW is the Dutch acronime for VAT) to apply.

What kind of tax do you prefer?

[MaPfJa]

Well, government just has to get its taxes somewhere. So you either tax the money the moment it's earned (income tax), or the moment it's spent (VAT, special taxes on gasoline, alcohol, tabacco...).

Income taxes can easily be enforced locally, but people don't like to have their hard-earned money taken away before they even saw it.

VAT and their likes _could_ be enforced locally, i.e. the place where the money is actually spent. So if I buy a TV in Luxembourg, I pay 15% VAT to the the local government, and if I buy it in Sweden, I pay 25% VAT. But this difference in taxes would create a shift of consumption towards the low-VAT countries, so the idea of locally enforcing VAT was frowned upon by several governments (usually in countries with a high VAT). Thus it never happend. VATs are due where you live, not where you spend your money.

"Tax-free shopping" is possible because of this. As a German citizen, you can buy that camera in Japan, get back that 5% VAT you payed, return to Germany, and pay the 16% VAT at the German customs . (Nobody does it and everyone claims that they had the camera before they left the country...)

Extending this idea of "pay VAT where you live" to the internet is only logical, as not doing so would open a loophole, and shops would go online just to save the VAT. Also, requesting that the individual customer pays his taxes (as it's done with tax-free shopping) somehow doesn't work as advertised, so goind after the businesses and requesting them to collect the taxes makes sense, in a way :).

Personally, I prefer VATs over income taxes, because _I_ can decide the time my money is taxed. If I want to save money, I can earn interest on my full income and I can pay the taxes the day I buy that new computer/gadget/house/whatever.

(On a sidenote, in Europe you usually see the prices printed including VAT, so nobody notices how much VAT they pay. You'd have to read the fine print on your receipt.)

Governments being what they are, obviously like to tax both ways instead of deciding on one sort of taxes. But I disgress...

Re:Nop...

[Branc0]

That's exactly what the EU wants with this law. To support the local industry and diminuish the imports of goods from other contries, especially U.S.A.

Re:The EU is a real mess....

[LeftOfCentre]

I do not believe that Europeans generally dislike the governmental structure of the United States, but rather the policy of the government which is significantly more to the right on the political scale. The way I feel is, if we have to become a big federal country in order to stand up to the US (which I sadly feel is increasingly necessary, for many reasons), then so be it. There will be drawbacks as well but we will have to accept them as the alternative is worse. Small independant countries are shark meat in today's world.

As for socialism, well, the EU institutions as such and the treaties that founded them really are fairly liberal (in the non-American sense, where liberalism is considered freedom, etc).

I think your comparison with the USSR is quite a bit off. We're talking about old and stable democracies with market economies.

US now subject to same laws as EU - bug deal

[fiddlesticks]

>"These remain challenging times for many American Internet companies," wrote Rep. Cliff Stearns.... "We ask that they be given a fair chance and a level playing field."

Yep, and so do the EU businesses (living in equally challenging times)- who want VAT levied on purchases made outside the EU, just as they currently are on purchases made within the EU

So, although this will hurt my wallet, as I buy good online from outside the EU, I will benefit by the increased taxes raised by my government, and by the level playing field which now operates between Us/ EU companies.

It *wont* affect US purchases, so US readers can continue flying the 'no-tax' flag all they like

Reading the actual article?

[Anonymous Coward]

Im surprised... for a long time I really did think that most Slashdot posters actually thought about what they replied to... Do people really not bother to read about the subject first?

1) This is a tax on *digital* goods. Downloadable content. Online services. Nothing changes for physical stuff like books. VAT was always charged on those. Just like if you had ordered an item by snail mail.

2) What is all this nonsense about a sudden unfair trade advantage? EU based companies have had to pay EU VAT on their digital goods for ages! Finally the 15-20% advantage that the non-EU based companies were enjoying, has been rectified. Although I admit that having to work out 15 different VAT rates does present an extra administrative hurdle. Still, what are computers for if not to automate these administrative tasks?

Re:Reading the actual article?

[fuzzybunny]

The unfair trade advantage comes from the fact that the U.S. government does not require EU-based company X selling digital goods to collect and remit state sales tax to the State of California finance department when a kid in San Francisco buys a copy of Opera.

As it stands, when I buy online from an EU company, I either pay no sales tax, or the VAT is pocketed by the government in which the company is based. That's hardly what I call fair.

Nonetheless, what surprises the hell out of me is that, given most EU countries' base income tax rates, not to mention the EU's execrable record of fiscal discipline, nobody even questions the idea of charging 15%-20% VAT in the first place!

It makes me shudder.

AOL UK's unlevel playing field

[WIAKywbfatw]

AOL is one of the UK's largest ISPs. They got into the UK market early, at the time when most UK ISPs were small private companies, and have continued to be a major player in the UK market ever since.

But, because AOL UK is based outside the UK, AOL doesn't have to charge its customers VAT.

Good thing right? No. Bad thing. Very bad thing.

Whereas the UK-based companies, including almost all of the small private startups (many started by people who had previously run bulletin boards, etc), had to charge their customers VAT and then pass on that tax to the government, AOL used loopholes in the VAT legislation to avoid having to charge VAT yet it charged its customers the same amount that the tax-paying ISPs did.

In effect, AOL was able to charge its customers more for its services yet compete at the same level as everyone else - whereas the competition's prices included 17.5 percent VAT, AOL's prices included 17.5 percent extra profit.

Clearly, this has provided AOL with an artificial competitive advantage.

Breaking down the costs shows this more clearly:

AOL: £15.00/month charge, £15.00/month to AOL, £0.00 VAT to government.

UK-based ISP: £15.00/month charge, £12.76 to ISP, £2.24 VAT to government.

To make the same amount of money from each customer, the UK-based ISPs would have to charge £17.63 (£15.00 plus 17.5 percent).

Obviously, providing internet access costs money, and it's the difference between what you can charge and what it costs you that generates your profit. Well, in this case, it's like AOL has an extra £2.24 per customer for free. This isn't so much of a problem if operating costs are small, but it's a pretty big one when costs and charges are almost similar - and we all know just how cut-throat the ISP industry is don't we?

It's clearly ridiculous that two companies both providing the same service to the same customers in the same country should be effected by taxation so differently. And, of course, this point has been made by many within the UK internet community many times. However, until now, nothing's been done about it.

Some of the larger ISPs disadvantaged by this situation have threatened to take their operations overseas too, so as to put themselves in AOL's priviledged position, but this has never really been an option for the smaller guys that have been around from day one and that have hung on in there - relocating your business overseas isn't cheap and easy.

Even if AOL starts paying VAT now, the damage has already been done. Almost a decade of tax-free operation has allowed it to become one of the most dominant UK ISPs - all that extra cash has bought it a lot of extra TV and radio advertising as well as CDs.

I'm not in favour of taxation for taxation's sake but I am in favour of a level playing field. And, in AOL's case, the field's finally being levelled out.

Re:AOL UK's unlevel playing field

[WIAKywbfatw]

AOL UK is, on paper at least, based outside the EU. Therefore, when it sells goods (in this case, internet access) to customers within the EU it isn't required to collect the taxation due (in this case, VAT) at the time of purchase. That tax can be collected by the purchaser's home country at the point of entry, but where do you define the point of entry to be in this case?

AOL UK uses the same setup as other UK ISPs - the same infrastructure, hardware, backbone, etc - and an AOL customer's experience is the same as that of a non-AOL customer. The only difference between AOL and the rest of the pack is that AOL UK isn't registered in the UK. It's this "offshore" quality that gives it its advantage.

Of course, that shouldn't exist and it's great to see that it's finally being looked at. But a similar situation exists in the US, when a customer State A has to pay State A tax to buy a PC shipped by a State A company but doesn't pay a penny in tax if that same PC is bought from a company based in State B.

At least in the US case, what a company in State A loses in local sales it can make up for in out of state sales from customers in State B and elsewhere. In the end, the playing field is pretty even (even accounting for states that have negligible or no sales taxes). But in AOL UK's case, it's a win-win for AOL and a loss-loss for everyone else.

Does anyone have a link to actual info about this?

[ColmanReilly]

I know this is probably a vain hope, but I'd like to see some actual infomation on the regulations. I'm quite suspicious of the things the media are saying - they don't sound right at all. In particular, I don't see that the EU can require a body not actually trading in the EU to pay VAT. They could and can require their own citizens to pay/charge it, but I don't see they can require overseas entities to do so.

Note that both AOL and EBay actually operate and provide services in the EU, so bloody well should have been charging VAT in the first place. These are not US entities, they are EU entities owned by US entities, so are subject to EU law.

I can't see it affects small US businesses at all. Or Slashdot subscriptions. It's not up to you to pay EU taxes, though the people you sell to might have to.

Of course, it's possible the EU have taken a leaf out of the US book and decided to enact extra-territorial laws ("Don't trade with Cuba because we say so, or we'll break you.").

Actually, we don't care...

[Anonymous Coward]

We Europeans simply don't care about the US, we don't spend out days wishing we were Americans, we don't envy the US, we are not always comparing ourselves to Americans, we don't think we have a lot to learn from America, America is on the periphery of our consciousness.

We organise things (like health care) the way we like them, and we organise things (like taxes) the way we like them.

We are big and economically powerful enough that major (and minor) American companies *have* to comply with our laws if they want to benefit from our large market.

And if Americans don't like it, don't like us, don't like the way we do things, don't like the EU, guess what? We don't care...

Re:Actually, we don't care...

[Xenna]

Yeah right, as if we Europeans agree about anything. Speak for yourself please.

There's a lot to like & dislike about the US and there's a lot to like & dislike about Europe too.

I don't like euro-socialism one bit and I agree with the American/British invasion in Iraq and I'm still a European.

X.

Re:Nop...

[Guppy06]

"You have to check shipping rates for each country now, don't you? Can't you check tax rates at the same time (maybe even in the same place)?"

I somehow doubt either the USPS or my PC Postage software is going to add this to their existing services. Nor do I want them to, because this will raise their operating expenditures and in turn raise their rates.

The whole thing explained

[azummo]

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:

• - For EU companies: Little or nothing.
• - For USA companies: They will have to collect VAT tax from the UE citizens and forward it to the EU.
• - For EU individuals: They will have to pay the taxes because the law will be enforced at the point of origin.
• - The market: EU companies will gain the advantage they had lost due to unfair practices of the UE citizens (or customs offices).

This may seem strange, but is just a way to enforce the law which will, however, put some hassle to USA companies.

Why Sales Tax is Bad

[Jonathan]

Assuming that governments have to collect taxes somehow, why is this a bad way to do it, as opposed to income or corporate tax?

Because in a fair tax, the rich pay either the same, or more than the poor. Income tax handles this -- either with a flat percent or with increasing brackets. The problem with sales tax is that while Mr. Millionaire might buy more things than you do, he doesn't buy *proportionally* more things -- a man can only drink so much beer, after all.

So as a total percentage of income, Mr, Millionaire pays *less* sales tax than you! Not very socially progressive, eh? Not surprisingly, the rich have always hated income tax and preferred sales tax for exactly this reason.

Re:Why Sales Tax is Bad

[geekoid]

" Those that earn more than others do so because of hard work and the will to explore their potential."

no, the rich make there money from the work of others.

Sales tax is not proportianal enough to make a healthy society. A healthy society is neccessary to maintain balance between classes.

"They pay more money while it is they who drive productivity and wealth in our society"

please explain to me how cutting a work force from a profitable company and paying CEO's millions, if not Billions of dollars drives productivity and wealth?

We already pay VAT - just not direct

[erroneous]

If we in the UK (and I presume the rest of the EU) order from US companies we already have to pay VAT and other import duties at customs.

Just because it ships from the US retailer without paying that tax at, say $100, doesn't mean that is the end price for us the consumer. As well as paying your retailer in dollars I have to pay my customs in pounds. It's not a simpe one-click purchase and then delivered two weeks later.

This is a procedural change to close the loophole by which many packages get through without duty paid, and to stop the customs warehouses being clogged with unclaimed thinkgeek.com packages, and which will mean, hopefully, that my parcel doesn't wait in customs a week while I arrange to pay additional import fees.

Currently importing from a US retailer is not worth the hassle for me as a consumer. Perhaps this change will make those retailers more attractive to me.

You're so silly

[Anonymous Coward]

"why is this a bad way to do it, as opposed to income or corporate "

Because income tax is based on your ability to pay. It is graduated based on levels of income. Thus, the person who makes $1M per year pays a higher percentage of income than the person who makes $30K per year.

The funny part is stores in most of Europe can't display the VAT tax separately, because your government is afraid if you saw how much tax you paid every day on necessities, you'd rebel in 6 months.

But hey, you've got "free" health care. And like most of life, you get quality commensurate with what you paid.

Re:You're so silly

[joonasl]

The funny part is stores in most of Europe can't display the VAT tax separately, because your government is afraid if you saw how much tax you paid every day on necessities, you'd rebel in 6 months.

That's complete BS. All receipts that are to be kept in any kind of official records MUST have the VAT amount and precentage shown, so all the stores are obliged to write such a receipt if asked (due to which allmost all modern cash registers print it automatically).

I guess, it's also a question of what you are used to, but I really got irritated in most US shops due to the fact that the listed prices did not contain VAT. IMHO it's nice to know how much the thingy your are about to buy will eventually cost with out calculator..

That is the whole point

[FreeUser]

Living in sweden, the only reason that I buy stuff from Amazon is that (even including costs for transports), the books are like 10-15% cheaper, and that music cd:s are like 25% cheaper. If VAT is added, this price difference will be void, and thus I will simply stop buying stuff from USA.

That is the real point of this. If the governments in question were really interested in collecting taxes, they would be doing so at the customs level, improving oversight and checking of incoming packages. Something that, given the amount of smuggling that goes on wrt drugs, weapons, and who knows what sort of biotoxins and other nice things in the decades to come, they really ought to be doing anyway.

Instead they have laid the burden on US shopkeepers who are not under their jurisdiction. It is no different than the US belligerence in enforcing US laws outside of its own borders, and while it may be refreshing to see the US get a taste of its own medicine, this isn't the US government that is being negatively affected, it is US businesses.

But this is all really besides the point. This is really about protectionism, and keeping folks like yourself from shopping online, outside your own borders, by artificially inflating the costs of shopping abroad. Local and regional governments, including our own here in the US, don't like their citizens shopping outside of their jurisdiction, where their control (and profits) are reduced. In short, our governments don't really like globalism in any real sense all that much ... only when it allows them to bypass the concerns of their local citizens, or constitutional limits on their power, not when it means people might actually shop abroad. It is quite remeniscent of DVD Region coding in a way ... the media cartels don't like globalism either, except when it lets them sell to folks abroad, but only if they can keep the local folks overpaying for exactly the same material.

All that having been said, I would prefer the elimination of income tax and capital gains tax in favor of a federal sales tax (even if said tax were 30%), as it would eliminate the governments ability and excuse for examining our personal finances and private lives with a microscope at their whim, and leave only public financial transactions within their pervue. The gain in privacy and personal security (no one fears any part of the government more than the IRS) would be well worth the sticker shock.

Re:That is the whole point

[aaarrrgggh]

All that having been said, I would prefer the elimination of income tax and capital gains tax in favor of a federal sales tax (even if said tax were 30%)...

The whole problem with tax code is that there are special considerations to help stimulate the economy.

If you tax sales rather than income, that has an unfair effect on people scraping to get by, while assisting people that save their money, not contributing back to the economy.

Flat income taxes are the only way to go. In Hong Kong, you pay (IIRC) 15% flat tax on income. It really sucks your first year (when you effectively have to pay tax for two years with one check), but it's a great system. People are still afriad of Inland Revenue to some extent, but the tax dollars aren't wasted on a huge auditing system. Filling out your paperwork takes a couple minutes, then a half-hour in line if you need to file in person.

Actually... no import taxes != VAT

[morzel]

The parcel gets stopped because you have to pay import taxes, not VAT.

Up until now, you were supposed to notify your taxing agency yourself that you purchased a product abroad, and that you were due VAT on that purchase. Of course nobody (except the extremely silly) ever did this, and pocketed the VAT he was supposed to pay.

From now on the burden of processing and declaring the VAT is put on the retailer side (as it is in the EU now). You are still due import taxes, and your parcel will still be stopped for customs. For the consumer point of view, this will increase prices with 20% - 25% for all goods acquired overseas.

Mind you, that companies with a VAT number do NOT have to pay VAT for these operations if it is deductible. The extra burden in online shops will not be the VAT percentage they are supposed to add (which is relatively simple), but checking valid VAT numbers.

Re:Value Added

[xelah]

What kind of oxymoron is this? What do I get for the extra money? Not a damned thing. What asshole thinks that this has ANY value just because it is added on to a transaction?

Errr....what?

Value Added Tax is a tax on the value you've added to a product. If you buy a widget at 10UKP and sell it at 15UKP then you pay tax on 15-10 = 5 UKP. (Well, in principle; the mechanics are a bit more complicated. You charge VAT on the full price of everything you sell, pay VAT on the full price of everything you buy, take the latter from the former and pay the result to the authorities).

It's a tax on the consumer!

[della]

The Value Added Taxation is a tax on the consumer: if the VAT is 20%, the consumer has to pay 20% more for the product - this way, who sells the good gets back the money he already paid.
What happened until is that, because USA companies didn't pay the VAT to EU tax offices, they could not charge the tax to the consumer. So, at the end, the european consumer didn't pay tax. Looks like unfair competition! If you want to enter the european market, you have to abide by the european rules!

Re:Eh? Do you really TRUST them with your money:?

[mark2003]

Railway lines?

Don't be ridulous - I can buy a HumVee and drive anywhere I want, when I'm not in my private jet.

Organised public transportation is communism - it takes your freedom!

Unfortunately, customs *do* go after individuals

[Anonymous Brave Guy]

Back in reality, Customs can and do stop parcels and insist you tell them what's in it. However, they ignore most of the stuff for private citizens and only go after the stuff for companies.

Unfortunately, that's not always the case. One of my friends found this out the hard way, when she ordered a whole load of cosmetics from a supplier in Australia, where they were selling considerably cheaper than the UK. She was told that what she was paying the supplier covered everything including charges for getting the stuff to the UK, but then got hit with an extra tax bill running to several figures when the stuff arrived.

Re:taxes

[CrazyDuke]

"Reasonable stuff?
Like the porn movies shown on public TV. Or the free housing and dole for illegal immigrants.

Yep, lots of "reasonable" stuff. I'm glad you love the welfare state of Sweden."

Cool! Beats a facist police state anyday. *marks Sweden as a place to go when he leaves the US.*
Well, when I can afford it...

Oops, did I imply that the US was anything other than a Freedom Loving Democrasy (TM) ? *Does 30 hail Bushes and prays to the almighty dollar as penance to appease the armchair patriots and the corporate gods.*

Why is tax bad?

[CompVisGuy]

OK, nobody likes to pay more for the same goods. Nobody likes the idea that their hard-earned cash is going to the government.

But where is the money really going? If we assume for a moment that you have a government who spends their collected taxes wisely (not always true, I'll admit), then that money gets put to good use.

Such taxes will be used to pay for health care (here in the UK we have a nationalised health service, paid for by taxes), transport infrastructure (roads, rail, air etc.), education (again, here in the UK, schooling is paid for by taxes, and university education is mostly paid for by taxes), police, ambulance, fire services etc. etc.

If EU citizens were shopping in the US via the web, because it is cheaper, those taxes wouldn't be being paid, and the services that rely on them would be underfunded.

I can only speak from a UK perspective on this, but while our education, health etc. services are free from many US-citizen's perspectives, they are terribly underfunded. General elections are usually fought on the basis of taxation, and the population votes for the party offering the lowest taxation (a simplification, but it's almost this simple) -- so there is little growth in the amount of money that can be spent on public services.

To put this in perspective, a few months ago I saw a news item announcing good news: NHS patients with a specific serious heart problem had their operation waiting times cut by 6 months: the waiting time for the surgery was now just 18 months. I ask those Americans reading this: would you buy health insurance that had an 18 month waiting list for major heart surgery?

If I was faced with the choice of being able to buy a DVD for £15 rather than £20, or having a health service that actually worked, guess which I'd opt for.

Re:Web subscription

[vidarh]

How does EU citizens pay for online goods from US companies? By credit card. Who issues them the credit cards? Their local, EU based bank licensed by the local government. Who will likely get pressured into ensuring card associations (Visa, Mastercard) require their US merchants to comply with EU VAT regulation to do business? The EU banks...

Get the point? If EU doesn't get compliance otherwise, they have plenty of weapons to force the card associations to do the enforcement for them. Don't file EU VAT returns? Then no sales to European issued credit cards for you.

I'm not saying they will do this instantly, but it's a "simple" way of enforcing the VAT, and one I'm sure a lot of people is willing to make a lot of effort to ensure the EU doesn't feel compelled to take (I doubt the banks or card associations would be too happy about taking on that responsibility)

Re:Eh? Do you really TRUST them with your money:?

[@madeus]

As a UK citizen (also a social democracy, at least by US perceptions) I really quite like Switzerland's model (far more democratic than the UK, which is still tied up with hundreds of years worth of elderly legislation and precident).

On the down side, don't they still have conscription in Switzerland?

I am very anti conscription (except in times of war where it comes essential for the survival of citizens of the state (and/or their civil rights), as in the two previous world wars).

Not least because it's horribly inefficient and the resultant conscripts are worse than useless in performing actual modern military duties (which is not just my opinion, but one backed by the military intelligence community, and a topic previously covered by Janes) but also because I don't think the state should arbitrarily order people around (as I believe the state should serve the people, not the other way round).

Unlike JFK I think people should always question "what the state can do for them" rather than ask "What can I do for the state?" (the state should always have justify it's existence and every tax is levies and spends on bureaucracy and every individual it employs or gives money to for any service or goods, or whenever it asks it's citizens to give up their time or put themselves at risk.

Assuming it's still active are there any plans to abolish conscription in Switzerland (as it has been - or is being - in the rest of Europe)?

Thank Heaven for Europe!

[evodas]

Unlike my dense-brained nation of nine-year-olds, Europe understands that they don't get clean, safe streets and a decent society for free.

Re:Eh? Do you really TRUST them with your money:?

[Doom Ihl' Varia]

In Switzerland, it is a little different. You arn't just drafted at random. Every able bodied male under gos military training and has to take a "refresher course" every year. All of them are sent home after training with their weapons and gear. This creates for a make shift militia. There is very little ill feelings towards the process and with that in mind, it makes a very effective way to maintain neutrality. No sane person would come up against a willing militia a quarter the size of Switzerland's population.

Import duties etc.

[Stone Pony]

A lot depends on what you're buying. Nearly everything that I've ever bought from the USA has been books / magazines, which are zero-rated for VAT (in the UK, at least) and import duty. The shipper sticks the green form on the package, the postman delivers the goods to my door, end of story.

If you buy goods which aren't zero-rated, though, it's more complicated. In general terms, Customs duty is added on the basis of the value of the goods including the cost of shipping and insurance. VAT is then added (17.5% in the UK) on the value of the goods including the duty (yes, you do pay VAT on the customs duty!). The fee from the handling company is between you, the shipper and the vendor, but I think it's part of the terms of service (using the word "service" loosely). You don't get it with goods shipped by post.

There are thresholds below which value duty and VAT aren't charged: on postal imports the limits are £18; or £36 (actually 45 Euro) for gifts (there are rules defining the meaning of "gift"). Just to complicate things, these limits apply to the intrinsic value of the goods, which is the price paid for the goods exclusive of shipping etc.

The effect of that is that the costs associated with buying from abroad cut in quite suddenly and dramatically. I can buy something for, say $25 (about £15.50) plus $11 (£6.80) shipping and handling and pay no import charges at all, but goods costing $30 (£18.75-ish) +s/h will cost me £25.55 (goods + shipping) plus, say £2.55 in duty (depending on the exact nature of the goods, obviously) plus £4.91 VAT (17.5% on £28.10). That's a total of £7.46 in charges, as opposed to nil for goods only slightly cheaper.

Of course, all this applies to physical goods. The article refers to digital goods and services. No-one is going to be paying one penny, or Euro extra in VAT for goods bought from outside the EU because of this.

Disclaimer: I work for HM Customs and Excise, who collect these charges. Until quite recently I specialised in the valuation of imported goods.

Re:I agree

[YrWrstNtmr]

For instance, I know I don't pay anything towards machines for killing.

Really? Sweden does not have an Air Force? A Navy? An Army? Does not Sweden produce a very capable set of fighter jets, SAABs?
Does not Sweden still cling to the archaic concept of a draft ?
Are Swedish military personnel not currently deployed to such places as Afghanistan and Kosovo?

Thus in Sweden, I can live almost as well by not working as working.

IOW, an apparently otherwise intelligent young male, can live as a leech on the ass of everyone else, contributing nada. And brag about it.
The only reason you don't pay anything towards a military is because you don't have a job, and thus pay no taxes.
Yeah...that sounds like my kind of paradise.

I get free medical care.

"Free", only because you are a leech with no job, and pay no taxes.

And my country is free of racial tension because we have strictly limited immigration from trouble makers.

IOW...instead of allowing immigration, and possibly helping some poor slob who wants a better life, you selfishly keep your 'paradise' for yourselves. Must maintain that Nordic racial purity. Keep out anyone you don't like the looks of.

To clear things up a little...

[Jouni]

The original posting is a bit misleading, the tax is only on "sales of digital goods and other electronic transactions", as stated by the article (which nobody reads :)).

To verify this, quoted from Europemedia: "From the first of next month, a new EU directive will be enacted, forcing all internet companies to impose VAT (value-added tax) on all digital sales. This amounts to a tariff of between 15 and 25 per cent on items such as software or music downloads, any transactions as part of online auctions and subscriptions to internet service providers, sold over the internet anywhere within the European Union."

In other words, the tax is on services and digital products sold to EU citizens on the Internet. It's still annoying (and hellish for small shareware shops to deal with!) but at least it doesn't affect the cost of physical goods... yet.

And in the case of online auctions, this means that the EU will tax the service eBay provides, not the actual product supplied from seller to buyer.

Jouni

No tax on services

[sita]

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.

Nope. You don't have to pay EU VAT on a service that is rendered in the US (such as a website subscription). You DO have to pay VAT on goods imported into the EU, even if those goods lack material manifestation.

Of course, the line between goods and service can be difficult to draw at times.

Help with specifics!

[MrIcee]

As an Indie game producer (tranquility) we obviously need to examine this. Our games are purchased, currently, by download only - and we have a fairly decent following in europe.

Does anyone out there (current level 5 posters havn't had this info) have a SITE we can go to, to learn the specifics of this?

Since we're a very very small company we won't be putting up any "headquarters" in europe.

Who do we pay? How frequently do we pay? What laws do we need to follow in terms of documentation? How long do we need to hold onto records? Where to we go to find out if tax rates have been changed, or even what they are?

It's one thing to demand a VAT... it's another thing entirely to make sure we get the proper information in order to implement it correctly.

We're going to do it

[brooks_talley]

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.

I work with a porn site; starting July 1, US residents will pay $19.95, EU residents will pay $29.95. We have to charge more than the EU tax to cover the administration costs of sorting out 15 different tax zones.

And we'll certainly make it clear to EU residents *why* they're paying 50% more than people who live in the US. On the bright side, they won't really have a choice of going somewhere else, as any remotely major competitor of ours will also be charging more.

My petty side hopes that the US passes a law that EU internet companies have to collect state and local sales tax for the location where US buyers are. I reckon there are about 45,000 different local sales taxes in the US. The administrative costs alone would basically force EU companies to just not sell to US residents.

Cheers
-b

Early one morning

[Tablizer]

(knock knock knock! Opens door)

You: Why, who are you guys?

Guests: Well, Sir, we are the Royal Police from Great Britton. We are here to collect sales tax that you failed to collect on your website.

You: But this is California, not England.

Guests: Does not matter, we are here to collect.

You: I refuse to pay.

Guests: I am sorry, but we have to arrest you and take you to England....

Re:this is how i will deal with this

[ViVeLaMe]

they can easily enforce this
through the EU banks.
see, the EU could really simply say "mmh, this EU guy paid 15.99$ to amoebasoft.com, and we diidn't see any VAT coming back. Stop all payments toward aomebasoft.com's bank account.".
And poof, there you are, no more EU business.

Mr. EU Taxman can bite me

[Angst Badger]

There is no way in hell I have the time or resources to keep track of VAT rates for fifteen different countries. It's possible that if I did a lot of business with EU states that I would have no choice, but for the smattering of EU customers that I have, I'm not going to bother with it. As far as I'm concerned, any transaction conducted with me here in the United States is taking place within in the United States and is subject to US laws. If I were buying something from Europe, I would operate under the reverse assumption and pay the local taxes -- which I presume would be collected by the seller and included in the price.

Provided there's no actual enforcement, I plan to ignore this. If I get a notice from an EU tax agency that I need to pay up or face extradition on tax evasion charges, I will cut a final check to the Europeans and not deal with them in the future.

This is not, BTW, some flag-waving anti-European rant on my part -- I like the EU a good deal better than my own country -- but from a business standpoint, it isn't worth the hassle to me. I'm not sure this is such a hot idea anyway. I'm not viscerally opposed to sales taxes on net sales -- it would help curb the obliteration of thousands of local businesses by giants like Amazon -- but it ought to be collected by the seller and the seller's government. For the seller to have to keep track of the buyers' governments and their innumerable laws is an unreasonable burden on trade. Giant corporations have the resources to deal with that sort of thing; small businesses do not.

Re:Does anyone have a link to actual info about th

[Cidtek]

"If I, a European Citizen, buy a product from your US based company, then that's a trade. Your company is trading in the EU."

I see it as you came to the USA to buy something.

USA base website
USA based vendor

Sounds like a god deal to me!

[jmorris42]

Basically this is a tax on large multimational corporations. So that makes small companies more competitive. What's not to like?

AOL, eBay, etc have to comply because they have operations in the EU. Small companies, located entirely in the US can safely ignore anything the EU says because their laws don't leave their borders any more than a US law can apply to a company in the EU.

This is just a larger version of the fun we get inside the US with sales tax. Buy from a small outfit and you don't pay sales tax unless you are unlucky enough to be in the same state. Which, btw, is why so many mailorder/online retailers avoid establishing operations in high population states.

The EU should be allowed

[aepervius]

TO TAX every entity making buisness within their border. Why is this SOOO diffcult to uednrstand ? Repeat after me. Internet sales are not different than normal one. The electronic medium doesn't make it something special. An e-tailer selling electronic goods is *doing* buiness in the country where the item is sold, not where the sale is. The same way a catalogue entity selling in the EU from sweden isn't submited to Sweden law but the law and VAT of the final country. Heck it even hold for US entity selling with EU (VAT should be payed at country entry) that you dislike it doesn't make it more your point of view correct.