CROCHET PATTERN DESIGNERS----IMPORTANT LEGAL INFO ABOUT TAX COLLECTION!! (Yes, its long, but please read.) New legislation goes into effect on January 1, 2015 in the European Union. This legislation places the point of sale for any digital services (which includes downloadable PDF patterns) at the location of the CONSUMER, not the seller. The legislation also removes the minimum sales thresholds that used to exempt small and micro businesses from having to comply. This means that as of January 1, every seller who sells even one pattern at any price to even one consumer in the EU must register to collect and remit VAT (value-added tax) for all 28 EU countries on quarterly basis. The requirements to comply are technically impossible for many small businesses to implement. Many designers across many different industries in the UK have said they will have to close their business as of December 31 because they cant comply and they dont want to break the law. Many designers still dont even know the law exists. As word gets around, unless the European Commission can be convinced to add some minimum thresholds or other exemptions for small and micro businesses, you can expect to see many small businesses that sell digital files of any kind to go out of business in 2015 or to cease selling to customers in the EU. MY COMMENTARY: Under US tax law, the point of sale is determined to be in the sellers location. For most designers who sell on their own site, that would be the designers state of residence. For Crochetville, it is the state in which our business is registered. For any US business with no physical presence in the EU, it is unclear to me if the EU has legal jurisdiction to change the determination of the point of sale. I am corresponding with someone in the US Dept of Commerce who will be providing me with any information about current federal statutes, tax/trade agreements, or treaties that cede such power from the US to the EU. I will likely not receive an answer until sometime in January, but I will post it here when I receive it. WHAT IS CROCHETVILLE DOING: We are taking steps to comply with the legislation in the event we are told we are legally required to do so. We are now using a service to collect the consumer address info required by the legislation. We will be prepared to collect and remit VAT for any sales made through our digital pattern store. WHAT SHOULD DESIGNERS DO: If you are based in the EU, you have no choice but to comply with this law. If you are based outside the EU, please talk with your attorney, accountant, or other government official to determine your responsibility for complying with this law. If you are told you have the legal obligation to comply, you have several options: 1. List your patterns with a platform that will take care of the VAT responsibility for you, like Crochetville will. You can read more about selling your patterns on Crochetville here: crochetville/community/page/articles.html/_/pattern-uploads/ Even if Crochetville finds out we legally do not have to comply with the law, when you sell your patterns on Crochetville, you are still covered. Since the sale of your pattern would be a business-to-business arrangement between you and Crochetville, you would still not be responsible for collecting VAT on the sales. 2. If you sell through your own website using Paypal buttons and you dont want to deal with VAT, you can set your site up to disallow purchases from customers within the EU. Alternatively, the UK tax authority (HMRC) has determined that if you disable automatic pattern downloads and instead manually send an email to each customer to which you attach the PDF file, that falls outside the scope of this law, and you would not need to bother with collecting VAT. However, please be aware that other countries within the EU might still consider emailing the file to be providing a digital service. 3. You can register through a one-stop shop in the country of your choice (UK or Ireland for English-speakers) to collect and remit VAT as required by the law. You will then file quarterly returns, with info for each country, and one payment. The MOSS system will then submit payments to each country to which you owe VAT for that quarter. 4. There are specific requirements for collecting two pieces of matching address information to determine the correct location of your country, ways in which you must display VAT-inclusive pricing, and specific ways to format your invoice for each EU Member State. You may want to join this Facebook group so you can read up on what you need to do to comply with this legislation if you sell on your own: https://facebook/groups/DigitalVAT2015/ QUESTIONS AND COMMENTS: While we generally do not allow political discussion here, this is a topic that may affect all crochet designers everywhere who sell patterns. You are welcome to post any questions or comments you have. I may not be able to give you definitive answers, but we can support each other through this.
Posted on: Mon, 29 Dec 2014 22:34:56 +0000
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