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The Magic Cafe Forum Index » » Latest and Greatest? » » Bad News for Anyone Selling Magic ebooks or Downloads (14 Likes) Printer Friendly Version

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Dominic Reyes
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That won't make any difference Jackmagic. The U.S. are not in the EU either. We would still have the same tax agreement with them, just with much more paperwork and expense.
The Greek
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This is quite funny as it is a good indicator his confusing all this is.

https://www.youtube.com/watch?v=k1VMa1PUIQc#t=112
Tom Jorgenson
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I say we just ignore it all and go about our business. Do our 'Ooops, sorry' if they come banging on the door. Then the first one to get nailed can let us all know what the drill is.

I doubt they'll be coming for their six bucks with any effort. They'll be looking for the bigger players.


Theoretically, anyway.
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mastermindreader
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That's pretty much the way I see it, Tom.
celebrity
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I've spoken to my accountant yesterday and he has phoned me today with some exciting news on this (this is more applicable to the smaller companies).

In short if you disable the automated feature of the downloadable product then this no longer becomes an e-service as there is manual work involved.

ie. If you have to manually/physically create an email to a customer and then manually attach the file this "manual" work means that the service is no longer an "e-service" and the relevant taxation laws will not apply (so long as you are under the VAT threshold).

He is forwarding me some paperwork today and I will attach it for your interest.

Note: This is coming from a UK source and so I'm only presuming that the same will apply to those overseas Smile

Another way he suggested getting round it is to offer a free e-book with a physical copy. He did state however that the physical copy MUST be posted as in the eyes of the Inland Revenue it MUST be clear that the PHYSICAL book is where the value of the sale is. That said the price of a little printing and a postage stamp could be factored into the price of the e-book Smile
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writeall
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Quote:
On Nov 22, 2014, JoeJoe wrote:
So do we get representation for these VAT taxes?? Just curious. Smile

-JoeJoe


Yes and No. The seller doesn't get representation because they aren't paying the tax - they just collect if from the buyer. The buyer gets as much representation as they normally would when paying a tax, and I suppose that varies by country.
Claudio
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Thanks for the heads up. Here's the link to get the most recent news:
http://ec.europa.eu/taxation_customs/tax......ew_rules
Dominic Reyes
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There's some good news for suppliers of downloads located within the EU that are currently under the VAT threshold.

On Friday, an amendment was agreed to allow none vat registered companies to still register for MOSS without having to register for vat on their physical sales.

All this applies to sellers supplying to retail customers. Sellers supplying to other business's don't have to do this.

So if you are a seller that has a turn over under your countries tax threshold, you need to do the following

Based in the UK/EU
Register for MOSS.
Charge VAT to all download sales to customers from other EU countries and file a return using the moss system
You don't need to charge VAT to customers within your own country or those based outside of the EU (for example USA)

Based outside of the EU
Register for VAT in one EU country of your choice.
Charge VAT to all customers based in the EU. (The level of VAT to charge is based on the country the customer is based in) and submit a quarterly return to the IRS

Retail customers should be provided with a full VAT receipt on request.

It's good news for small business in Europe as they don't now have to go fully vat registered for all goods in order to use MOSS
It's also good for EU businesses that None EU companies have to charge VAT, creating a more level playing field and closing avoidance loopholes. For None EU sellers, well.. It sucks :/

Should this be ignored?
You could do nothing and assume that it's just small fry. Nothing may happen, just in the same was that nothing may happen if you don't declair income etc. however, you need to keep records for 10 years. If someone reports you to the tax man, or you are just unlucky, it could trigger an inspection. You pay the costs of an inspection and it's horrible, plus if they find something, there's no defence in claiming you didn't know. You face a big costs bill plus the owed tax, plus interest plus a large fine.
Also, inspections work like a Google crawling bot. If one company gets inspected, it could lead on to their suppliers etc being inspected and so on. So it's important to get everything in place for the new year. It only takes a malicious competitor, or an unhappy customer to report you and an inspection could be triggered as soon as the IRS or Tax office take a look at your website.

An EU customer may attempt to include their purchase in their accounts or tax return. If they do, that could trigger an inspection because even if you didn't overtly charge the customer VAT separately, part of the price they paid was still tax, and it can red flag you.

What to do:
1 call your accountant or a tax advisor.
2 call your local tax advice service about the process of registering for MOSS
3 login to your payment provider (paypal etc) and examine the section for handling VAT, specifically by geographical location. All payment gateways and download delivery services know about this and will have info on implementing this process.
4 relax and carry on providing awesome customer experience and service.

Don't worry about the process, it's easier to set up than you think. If you're small, the paperwork on a few EU sales won't be much. If you are big, just outsource it.

I should point out, I'm not an accountant and this is not legal or financial advice. You should talk to your accountant or a qualified professional.

Hope this helps
Dominic
JackMagic
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As there is No VAT on Printed Books what happens if you sell a book and give away a PDF Copy for Free?
Dominic Reyes
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Quote:
On Dec 4, 2014, JackMagic wrote:
As there is No VAT on Printed Books what happens if you sell a book and give away a PDF Copy for Free?


Technically, revenue could argue that the digital copy is of substantial value, and as a result the whole sale would lose its tax exemption as it's not a book anymore.


You would need to be careful that the value of the PDF did not make up a substantial part of the value of the product, otherwise it may not be classed as a 'book' anymore. For example, you can't sell a care and servicing instruction book for a gold watch and then include the watch for free. The book needs to be the primary source of value.

Or

I would have thought (ie guessing) that the transaction would not class as a digital services transaction as you are posting goods as part of the delivery process.
However, probably wise to run that past the VAT helpline
Michael Daniels
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Article 7 of EU Regulation No 282/2011 defines electronically supplied services as those which are “delivered over the internet or an electronic network and the nature of which renders their supply essentially automated and involving minimal human intervention, and impossible to ensure in the absence of information technology.”

This could be interpreted as excluding non-automated delivery (e.g., by email, or by posting out a DVD), and also excluding automated electronic delivery of a file that duplicates a physical product (e.g. a PDF file that is also available as a printed book).

But I am not a lawyer, and I wouldn't be willing to risk testing the law in this matter. The penalties for failures to account correctly for VAT are punitive.

There is a good newspaper article explaining the new regulations at http://www.theguardian.com/small-busines......sinesses

In the UK, there is also an online petition for a change to the new regulations at https://www.change.org/p/vince-cable-mp-......products

Mike
JoelDickinson
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Michael that's great news and very good of you to share that with us.
Your a gent.

Best wishes.

Joel
REALWORKERS.CO.UK
TADAA.CO.UK - ASTONISHING MAGIC
aalexander
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Two things I haven't been able to figure out yet:

1) Does anyone know what implications this has for an e-book seller in Canada? I've seen people say that this applies in the US due to a tax agreement with the IRS, but I can't seem to find anything about Canada.
2) Has anyone found out whether sending each item individually in an email is indeed a way around this?

-Aaron.
Dominic Reyes
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Hi
Yes it applies to Canada too

It only applies to digital products delivered automatically. If you manually email the product you don't need to charge Tax. However, If the IRS check, you have to prove you did that for every case.
george1953
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Ash, the good old folks in Brussels that know what's best for us strike again.
By failing to prepare, we are preparing to fail.
Saturn UK
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Quote:
On Jan 9, 2015, Dominic Reyes wrote:
Hi
Yes it applies to Canada too

It only applies to digital products delivered automatically. If you manually email the product you don't need to charge Tax. However, If the IRS check, you have to prove you did that for every case.


I checked into this and disabling automatic delivery was not enough to be excluded as the process is mainly automated.
Mark Traversoni

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yachanin
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Quote:
On Jan 9, 2015, Saturn UK wrote:

I checked into this and disabling automatic delivery was not enough to be excluded as the process is mainly automated.


Hi Saturn UK,

Is your conclusion based on speaking with a tax person or lawyer? It seems that with the automatic delivery disabled, no transaction could ever be completed, whereas if sending/receiving payment through an electronic service (e.g., PayPal) were disabled, transactions could still be completed. Does that not imply the most important thing is human action, not automation? Thanks.

Regards, Steve
Dominic Reyes
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Quote:
On Jan 9, 2015, Saturn UK wrote:
Quote:
On Jan 9, 2015, Dominic Reyes wrote:
Hi
Yes it applies to Canada too

It only applies to digital products delivered automatically. If you manually email the product you don't need to charge Tax. However, If the IRS check, you have to prove you did that for every case.


I checked into this and disabling automatic delivery was not enough to be excluded as the process is mainly automated.


We received confirmation from Customs and Revenue that manual delivery is sufficient. It's worth you contacting them directly to clarify for your business and individual delivery system.

Hope this helps
Dominic
The Greek
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I think Dominics information is more accurate. No idea were some people get their information from 😃
Saturn UK
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This is from the HMRC

Defining ‘electronically supplied’
This covers e-services which are automatically delivered over the internet, or an electronic network, where there is minimal or no human intervention. In practice, this can be either:

where the sale of the digital content is entirely automatic eg, a consumer clicks the ‘Buy Now’ button on a website and either:
the content downloads onto the consumer’s device
the consumer receives an automated e-mail containing the content
where the sale of the digital content is essentially automatic, and the small amount of manual process involved doesn’t change the nature of the supply from an e-service
All ‘e-services’ that are ‘electronically supplied’ in the ways outlined above are ‘digital services’ and are covered by the rule changes.

The bit where it says small amount of manual process is here you get caught.
If the sale is automated and you just send the order to murphys system for example and then its all completed electronically it still applies.

To not be covered by the rules the sale would have to be taken manually and emailed manually so there is no automation.

This is all very confusing though as what is defined as a small amount of manual process, if in doubt I suggest you cover yourself and get it in writing that it does not apply.
Mark Traversoni

www.saturnmagic.co.uk

#theshopwithstock Pleased to be different!

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