Changes to VAT calculation behavior

[panos]

To the team of developers @ e-junkie:



I've been a happy customer since 2006. But my jaw dropped this morning when I read what you recommend us to do. These things are merely unacceptable.



There is a fundamental rule for businesses like mine, that are selling all over the world:

The product prices listed on our sites should be the net prices, with no taxes added.

You recommended us to calculate an average overhead factor that would cover our total expected VAT liability. I am sorry but this is not how business should be done. You are asking me to display a price of X euros which in the end will be different from the price the buyer will pay?



Second: the customers in the US and in all non-EU countries should not be charged more money.



You are the developers and you need to come up with a solution that works.



I'll be waiting for a few more days to see if you come up with a different solution before stopping using this service.

[E-junkie_Guru]

We frankly agree that this situation is onerous and absurd, but please direct your grievance to the parties responsible for deciding and imposing these new requirements, and who also have the power to change them, namely your national and EU government representatives.



This site is one of the most clearly informative resources for laymen that we've found explaining the new VAT rules, and seems to be the foremost in organizing the effort at redress:

http://euvataction.org/



We have no operational presence based in the EU and thus have no representation nor influence with EU decision makers, so we can only do our best to accommodate these new regulations as they have already been enacted, as a convenience for our clientele.



Unfortunately, the EU VAT rules require that sellers must display the buyer's final price including VAT before checkout, and since VAT on digital goods has now become a variable amount depending on the buyer's verified "place of supply", only two approaches can satisfy that requirement:



A) Simple method: set a flat gross price for all buyers that includes VAT overhead;



B) Complex method: conclusively determine each buyer's place of supply before dynamically calculating their final price incl. VAT to display on your sales pages.



The new VAT rules specify that "place of supply" on digital items must be verified by collecting at least 3 unrelated pieces of location data, only one of which can be arbitrarily self-declared by the buyer, and identifying a country match between at least 2 of those data points. For web-based sales, this effectively means obtaining a 2-way match between a GeoIP country lookup of the buyer's connection IP, the Billing/Residence address registered to the buyer's payment account, and any buyer self-declared location such as a Shipping address or cart-selected country.



Therefore, the complex method B described above would effectively require full-featured traditional ecommerce software that not only provides shopping cart functionality but also generates your site's storefront pages and manages checkout as a self-contained process; in this scenario, buyers would need to register for a customer profile account on your site and provide address details to verify their place of supply, so they can be logged into that account before shopping where your storefront could calculate final prices incl. VAT to display to each buyer.



That method simply cannot work with E-junkie, as we provide neither storefront-generation nor customer profile functionality. We merely provide purchase buttons to paste into your own site, and we only obtain sufficient buyer information to verify their place of supply after checkout has already been completed, so the simple method A described above, which was proposed and strongly demanded by sellers in the earlier VAT thread here, was the only feasible approach left for us to implement.

[E-junkie_Guru]

Now, regarding the suggestion to set different prices for non-EU vs. EU buyers, you can already accomplish this right now, without needing to create duplicate products nor maintain separate seller accounts.



One approach would use the &amount= parameter on your button URLs to boost the price on your EU buyers' purchase button URLs. With this approach, your products' Price settings would be the non-EU price, so you'd just use your regular button code for non-EU buyers. For EU buyers, you'd provide separate buttons for the exact same products, but these button codes would include an &amount= parameter to add VAT overhead to the item's base Price setting.



For Add to Cart buttons, the specified &amount= value gets ADDED TO the item's base Price; however, for Buy Now buttons, the &amount= value OVERRIDES the item's base Price setting as long as the &amount= exceeds that base Price. E.g., an Add to Cart button that adds an extra 12.34 to the base Price would look like this (where XXXXXX is your E-junkie Client ID and YYYYYY is your product's Item Number):



<a href="https://www.e-junkie.com/ecom/gb.php?c=cart&ejc=2&cl=XXXXXX&i=YYYYYY&amount=12.34" target="ejejc" class="ec_ejc_thkbx" onclick="return EJEJC_lc(this);"><img src="//www.e-junkie.com/ej/ej_add_to_cart.gif" border="0" alt="Add to Cart"></a>



A different approach would use our "Variants having individual price/weight/stock/SKU" feature, where you'd set up each product with Variants to determine EU vs. non-EU prices. This has the advantage of allowing you to update prices in Seller Admin later without having to edit any button codes already in your page, as long as you don't change the corresponding option values for your Variants. To follow the examples I'll provide here, you'd want to familiarize yourself with our Variants configuration as described here:

http://www.e-junkie.com/ej/help.variants.htm#variants



E.g., a product with an EU price of 30.00 and rest-of-world (ROW) price of 25.00 could Define Variants with Option 1 Name = "VAT" and a configuration like this:



EU,30.00,,,Y,,

ROW,25.00,,,N,,



A neat trick here is that you don't need to depend on buyers to select the proper product option from a dropdown menu; rather, you can provide separate Add to Cart buttons for EU and ROW buyers that hard-code the proper option into their respective button URLs -- this tutorial explains this general technique in more detail:

http://www.e-junkie.com/ej/tips.variants.button-tutorial.htm



E.g., following the example Variants configuration above, your Add to Cart button for EU buyers would look like this (again, where XXXXXX is your E-junkie Client ID and YYYYYY is your product's Item Number):



<a href="https://www.e-junkie.com/ecom/gb.php?c=cart&ejc=2&cl=XXXXXX&i=YYYYYY&o1=Y" target="ejejc" class="ec_ejc_thkbx" onclick="return EJEJC_lc(this);"><img src="//www.e-junkie.com/ej/ej_add_to_cart.gif" border="0" alt="Add to Cart"></a>

[E-junkie_Guru]

To address a few remaining points:



While HMRC in the UK has been able to enact some concessions to ease the burden on UK merchants, those don't apply to sellers based elsewhere in the EU, and our VAT solution has to work for all EU sellers.



VAT on physical products remains subject to the VAT rate in the seller's country, rather than the buyer's place of supply. Products which have Shipping/Buyer's Address enabled will calculate VAT as physical goods at the seller's VAT rate. Since we now have to wait until after checkout to calculate VAT for digital products, as a practical matter we now have to calculate VAT for all products by the same method at the same time. Your Transaction Log will show separate VAT totals for each VAT rate applied to each order.



Our understanding is that EU sellers who have a VAT MOSS in their own country can just file EU-wide VAT returns with their domestic VAT MOSS, which would then redistribute any VAT due to other EU jurisdictions. Offhand, I'm not sure if EU sellers without a domestic VAT MOSS can file with another country's VAT MOSS; perhaps an EU merchant in this position can respond here to clarify.



It appears that non-EU sellers are now expected to collect and remit VAT on digital product sales to EU buyers, though we're frankly hard-pressed to fathom any actual consequences whatsoever that low-volume digital-goods sellers outside EU jurisdiction could possibly suffer for failure to comply. Non-EU sellers can comply by filing all their EU VAT returns with a VAT MOSS in just one EU country (e.g., the UK's VAT MOSS).

[printchap]

Is it possible to have two additional fields in the transactions log? I would like a numeric data only tax field and a country of residence field (as in the old logs). This will make sorting and reporting for VAT MOSS an lot easier. Thank you.

[phoenixhelix]

I haven't enable VAT settings - the box is unchecked, but you are still calculating VAT anyway and reducing my affiliate commissions. Is there a way to override this? Or are you intentionally making this a default setting that can't be overridden?



In doing some further digging around in settings, I notice that you connect sales tax and VAT together in one checkbox on the product settings. So, if I want to charge sales tax, VAT automatically gets configured as well. Can you separate these settings, so we have a choice?

[E-junkie_Guru]

The product-level Sales Tax/VAT setting just determines whether that item is subject to whatever Sales Tax and/or VAT calculation may be configured for your account in Seller Admin > Sales Tax / VAT Settings. I see you do have Sales Tax but not VAT configured for your account, so your log should not be calculating VAT on any sales. Thanks for reporting this bug; I will bring that to Development's attention.

[E-junkie_Guru]

PrintChapIs it possible to have two additional fields in the transactions log? I would like a numeric data only tax field and a country of residence field (as in the old logs). This will make sorting and reporting for VAT MOSS an lot easier. Thank you.

Note that your Web-based Transaction Log view is intended as a human-readable format, which differs from the downloadable log export file we provide in a machine-readable format suitable for spreadsheet programs or other software tools. When you have EU VAT enabled, the downloadable log includes new columns at the end reporting discrete values for VAT-related data.



I'm asking Development to clarify what some of these fields are reporting, so we might yet revise the field labels and/or the order in which they appear, but that should be settled within a few days. Once we've got that finalized, our Transaction Log help page will document the new fields:

http://www.e-junkie.com/ej/help.transaction-log.htm

[printchap]

I hadn't realised there was a difference between the web and download transaction log. The donload version works fine for me witht eh extra fields. Thank you.

[lorilin]

E-junkieGuruNow, regarding the suggestion to set different prices for non-EU vs. EU buyers, you can already accomplish this right now, without needing to create duplicate products nor maintain separate seller accounts.



****snip****

Thanks E-junkieGuru! I'm glad I won't have to make duplicate products (that would mean upgrading my account, or creating a second one as I'm already near my 60-product limit).



It sounds like one of the solutions you suggest will be a good workaround in my case.



The only thing I'm still confused about is shipping charges. I have to charge EU VAT on shipping as well. Now I'm set up to have variable shipping charges based on weight, and whether the customer wants "signed for" delivery or not.



I'm guessing I can edit/redo all my shipping rules so that the EU shipping prices include VAT, and the non-EU shipping prices don't. Am I right about this being the simplest way?



Cheers,

Lori

[bamberg]

I had thought that shipping as well as physical goods should not include EU VAT.

[lorilin]

bambergI had thought that shipping as well as physical goods should not include EU VAT.

I can't comment on your situation, but unless I'm mistaken, here in the Netherlands I have to charge 21% Dutch VAT on all goods I sell to private parties whose shipping address is in the EU. I don't sell to other companies, only private parties, and I only sell physical products, nothing digital.



Sometimes I wish I could just have a regular 9-5 and just focus on doing actual work, not trying to figure out rules and regulation (I'm really not good at that).

[bamberg]

Sorry for the confusion - I am in Switzerland, so I am selling into the EU, so shipping/goods do not need VAT as far as I know, you being in the EU is completely different.

lorilin

Sometimes I wish I could just have a regular 9-5 and just focus on doing actual work, not trying to figure out rules and regulation (I'm really not good at that).

oh yes, i agree!

[E-junkie_Guru]

lorilinThe only thing I'm still confused about is shipping charges. I have to charge EU VAT on shipping as well. Now I'm set up to have variable shipping charges based on weight, and whether the customer wants "signed for" delivery or not.



I'm guessing I can edit/redo all my shipping rules so that the EU shipping prices include VAT, and the non-EU shipping prices don't. Am I right about this being the simplest way?

Actually, the simplest thing you could do would be to set Handling as a % of Shipping in your Cart Shipping Settings. That'd just boost all your shipping calculations by whatever % you specify for every order. :^)

[phoenixhelix]

E-junkieGuruThe product-level Sales Tax/VAT setting just determines whether that item is subject to whatever Sales Tax and/or VAT calculation may be configured for your account in Seller Admin > Sales Tax / VAT Settings. I see you do have Sales Tax but not VAT configured for your account, so your log should not be calculating VAT on any sales. Thanks for reporting this bug; I will bring that to Development's attention.

Thanks so much for reporting the bug. Any timeline on a fix? I realize I have no idea if it's a simple or complex programming issue.

[E-junkie_Guru]

The bug that allowed VAT calculation to happen for sellers who don't have VAT enabled has been fixed as of yesterday morning, but Development still needs to retroactively correct the logs for sellers who were affected by the bug, which they said they'd be doing today. This log correction should merely delete any VAT calculated by mistake and then recalculate affected affiliate commissions accordingly.

[phoenixhelix]

E-junkieGuruThe bug that allowed VAT calculation to happen for sellers who don't have VAT enabled has been fixed as of yesterday morning, but Development still needs to retroactively correct the logs for sellers who were affected by the bug, which they said they'd be doing today. This log correction should merely delete any VAT calculated by mistake and then recalculate affected affiliate commissions accordingly.

Thank you so much. Awesome customer service, and I really appreciate it!

[flixelpix]

One issue, you don't have to charge domestic VAT on digital products if you fall under the VAT threshold. I had a local sale and VAT is being added to the transaction. Is there anyway of it ignoring domestic sales? it does ask in which country we reside in the VAT option list?

[E-junkie_Guru]

Our VAT calculation does not add VAT to any transaction; it only calculates after the fact how much of the total price paid would constitute VAT. You can simply disregard any VAT amount(s) we calculate if you determine you are not subject to pay it.

[flixelpix]

E-junkieGuruOur VAT calculation does not add VAT to any transaction; it only calculates after the fact how much of the total price paid would constitute VAT. You can simply disregard any VAT amount(s) we calculate if you determine you are not subject to pay it.

Thanks, it dawned it me after I posted it was just a matter of zeroing the GB transactions at the end of each quarter. Thanks for the reply.