EU Vat Tax Scare

If you’re like 90% of the American population, you probably haven’t heard about micro and small internet businesses (like mine) getting hit with the mother of all freak-outs on New Year’s this year.

The EU (European Union – 28 countries) has supposedly decided to that they can make sellers like me (here in the US) go through crazy amounts of work and expense to help them make a buck in taxes.   They are expecting sellers of internet “services” (like downloading a PDF) to collect and pay a VAT tax from my customers from the EU.   The way they’re going about it is crazy.   Really crazy… Get a load of what they are expecting:

  • Someone buys a PDF from me on the internet.  If they’re from an EU country, supposedly a tax is now assessed.
  • I must determine where that customer lives over there
  • Assess a tax before checkout – and it’s as high as 27% !!!
  • To determine where they live, I need to get two, non-conflicting pieces of personal info about my customer FROM TWO DIFFERENT SOURCES  (so no.. you can’t take the word of your customer to tell you!)
  • Remember.. this is all supposed to happen before checkout!
  • Are you getting this?  It’s up to *me* to be a detective and accurately determine where they live to assess the proper tax
  • This is priceless:  I must get a third identifying piece of info – from an entirely different source! –  if the first two conflict
  • Again, before the sale happens!
  • I am supposed to keep all of this info for 10 years (seems this flies in the face of their own privacy laws there)
  • And obviously, I’m supposed to do the admin work of all of the above plus the bookkeeping to submit the tax to them.

Ok.. I have to admit, I got freaked out for the first day or two over this.  Then I calmed down.   🙂

I didn’t hear about this until December 30th.  It was taking effect in two days – on January 1.

I watched about 16,000 patterns come down off of Craftsy because the sellers were frightened over all of this.

It doesn’t make sense to me that I should shut my business down over something happening in another country!

But really… besides the obvious problem of how is a tax collector from the EU going to come after me over here… what on earth makes them think they *can* make a law that affects me over here in the US?

Just think… what if that little twit dictator in North Korea wanted to make a law that says we Americans are supposed to do something for him?   I’d like to think our government wouldn’t stand for that.

So what prompted this post is that I responded to a gal in the EU that said the VAT tax was “inconvenient” to sellers.   OMG… so I decided to copy what I wrote over there.  Here it is:

“Inconvenient” ? That’s like having someone smash your big toe with a sledge hammer and you say it “hurts a little”. You people seem to be a little too nice and too polite over there. It’s *obscene* for lawmakers to think that a seller should have to do the detective work of figuring out where each customer lives and then go through more hoops to assess a tax properly and do the admin work to submit it. Oh… and to keep records for 10 years? On what? My laptop that travels with me? Or.. am supposed to buy (and employ) another computer system that is secure?
Expecting a tax to be assessed from *one* place is understandable – sort of. After all, the real work (service) is happening in ONE PLACE … from the computers on our ends… it’s outrageously crazy to think that we are supposed to know every taxing detail of other locations worldwide if someone buys our product from the internet.
And I want to say this: It really angers me when I hear any of the lawmakers or citizens in the EU say that we (sellers in America) are selling *to* them and deserve to be punished by this sort of tax – or it being “fair”. NO… it’s the other way around… folks in the EU have decided to purchase *from* me over here. I didn’t ask for business from the EU… nor should I have to go through extraordinary measures to block people in other countries.
If those of you in the EU want to tolerate this, it’s your business. But the EU should have to figure out how to bang this tax out of their own people instead of thinking that someone in another country owes them our time and money to administer this.
Also… some of this wreaks of “restraint of trade” or as a “trade barrier”… which is another whole interesting topic.
So let’s take this obscenity to another level… Here in Colorado, each city can opt to be a “home rule city” and collect their own sales taxes instead of a seller paying the state and the tax money then be distributed to the appropriate cities where the sales really happened.  There are 96 of these cities.. (see Wikipedia article here if you’re curious ) and if a seller travels into one of those cities and makes sales, they are expected to buy a tax permit to do so. Those permits range in price from free to $120 – YEARLY.
Now just think if we Americans got as whacked out as the EU is being and the American government expected sellers worldwide to collect the proper taxes based on *our* citizens’ home locales? Oh.. and there isn’t one clearinghouse for this – that was the point, it seems.. these cities *didn’t* want to collect through the state. So if the tables were turned and we did this sort of thing in the US based on where the customer lives, and if you have a crazy-great selling product that someone in each home rule city in Colorado bought, you could feasibly have to submit 97 tax reports (one to the state and the rest to the home rule cities) and pay up to 97 tax permit fees. Interesting?
That’s the Pandora’s box that is being opened here by assuming it’s OK to think that someone in another jurisdiction can require people like me to have to figure out where my customer came from!
Now … let’s multiply that world wide. Just think of all of the taxing jurisdictions world wide and crazy politicians and dictators that are running the show in all of these places! It becomes *impossible* for a seller of a 99c PDF to cope with this. I think it’s impossible for someone with a $200 one! It kills business.
This sort of taxation here (expecting to reach across boundaries to tax where the customer lives) is unconstitutional. Several states have tried to put an internet tax in… and it resulted in a “revolt” of sorts. (Amazon deserves a lot of praise for their stand on this!) Some of those laws have been repealed (California for one) as well as struck down by courts for the time being (Colorado)
Its sad, IMO, to see American sellers jumping on the bandwagon to this and either closing their stores out of fright or spending outrageous amounts of time and money to figure out how to comply.
I honestly don’t see how we can be required to play this game.