New EU VAT regulation for 2015 and eJunkie

[E-junkie_Guru]

It's possible that some buyers could be deterred by the requirement to specify a shipping address at checkout. At present we have no other way to block buyers by location, but Development is considering approaches to make that possible without requiring a Shipping address in the future.



Regarding the post about "Digital portals, platforms, gateways and marketplaces" above, I addressed how that doesn't apply to E-junkie previously in this thread here:

http://www.e-junkie.com/bb/topic/6819/pg/4#post25552



We provide our VAT calculation feature as a convenience for our merchant clientele to determine how much VAT they may be subject to pay, but it's still up to each merchant to determine whether they're subject to VAT, which items are subject to VAT, and whether they need to actually pay any VAT we calculate.

[saintanneshelper]

Thank you for this note.

[sgt_bilko]

Is there a way to unsubscribe from threads? I can't find an option to do that.



EDIT: No worries I've just seen that if I don't press on the link in the email there will be no further updates.

[E-junkie_Guru]

I just posted an update regarding the new Transaction Log fields and Thank-you Email/Page template tags we now support for VAT purposes:

http://www.e-junkie.com/bb/topic/6940/pg/2#post25699

[gravelld]

I may have missed this or misunderstood something, but is it possible to receive the buyer's billing address in the IPN received from E-Junkie? I'm talking about the one sent to "Payment Variable Information URL".



Because I'm not receiving it right now, so I don't understand how I'm supposed to collect this data (automatically).



I'm using a Buy Now button, not Add To Cart.

[E-junkie_Guru]

PayPal does not report the buyer's full billing address back to us; they only specify the buyer's Residence country (country where their PayPal account is registered -- effectively their billing country), which we transmit to custom/third-party Integration URLs as the 'residence_country' variable (same field name as in actual PayPal IPNs).

[gravelld]

Yep, thanks, I'm picking residence_country up.



So it seems that I have to add a billing address capture form before payment?

[E-junkie_Guru]

You could try that, perhaps using our Variations feature to provide text fields for the buyer to fill in before they click Add to Cart:

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



Non-PayPal checkout methods such as 2Checkout would capture a billing address which is then stored in your E-junkie Transaction Log, although at present we have no way to transmit that to an Integration URL.



That said, presumably you're seeking a billing address for VAT documentation purposes, and it appears you're in the UK, so it may interest you to know that HMRC has conceded that the buyer's registered Residence country reported by the payment processor (e.g. PayPal) is an acceptable piece of location information to obtain the required match between at least 2 such pieces of information:

http://euvataction.org/2014/12/29/hot-off-the-press-concession-from-uk-hmrc-will-enable-more-firms-to-keep-trading/



I.e., if you have that item, you don't necessarily need to also obtain a full billing address in particular, but you do still need to obtain a 2-way match among that and at least 2 other acceptable pieces of information about the buyer's location.



To determine the buyer's place of supply for digital items, our VAT calculation feature will look for any 2-way country match between a GeoIP lookup of the buyer's connection IP, their Billing address (or Residence country for PayPal checkouts), and the buyer's self-declared country in the cart (or Shipping address for other tangible items in the same order).



If you're using our VAT calculation feature, your E-junkie Transaction Log will capture all the data necessary to document the buyer's place of supply for digital goods, so you shouldn't need to reinvent that particular wheel at your end -- see full details here:

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

[gravelld]

Right now, because I'm not convinced the regulations will not be relaxed, I'm keeping things as simple as possible and just swallowing the VAT hit. I'm crossing my fingers for a nil rate.



I already receive the residence country and buyer IP. So are you saying that is good enough, so long as they match? According to your third para yes, according to your fourth, no ("at least two other acceptable pieces of information").

[E-junkie_Guru]

The new VAT rules for establishing the buyer's location as the place of supply for digital goods require collecting at least 3 different pieces of information about the buyer's location, from which any 2 non-conflicting pieces of information would be sufficient to identify the buyer's location for VAT purposes.



If you do not enable VAT, we do still record the buyer's IP with a GeoIP country lookup for that IP, as well their PayPal Residence country, so you're probably safe as long as those GeoIP and Residence countries happen to match. However, if those don't match for any particular sales, and if you ultimately wind up subject to pay VAT, those sales would pose a problem for you in calculating and filing VAT.



Really, there's no downside to enabling our VAT calculation, and we'd recommend you do so if there's any chance your sales may wind up subject to VAT. This will ensure that all the required location information is collected and recorded (we even log the 2-way match result for you), and although we'd calculate what portion of the total prices paid would constitute VAT, you can simply disregard those amounts if you ultimately determine you are not obliged to pay VAT.



The VAT amounts we calculate are not normally shown to buyers at any point (unless you deliberately use our thank-you email/page template tags to do so), and nothing is withheld for VAT from the payments you receive. You don't even necessarily have to raise your prices to cover VAT overhead if you'd rather have us just calculate VAT out of your existing prices and take the gamble that you might wind up getting to keep those amounts.

[gravelld]

I use the Buy Now buttons though... I didn't think your VAT calculations apply to them.



I don't want to add an extra layer of "shopping cart" in the way of a purchase.



If I were to enable this, is it as simple as selecting my location (UK), and clicking "Charge VAT"?

[E-junkie_Monster]

Sorry, the shopping cart step is still necessary for VAT charges. We don't have any way to handle VAT calculations through the Buy Now buttons.

[mike1952]

I'm sorry to raise the New EU VAT rules spectre again but..............



Re: "so it may interest you to know that HMRC has conceded that the buyer's registered Residence country reported by the payment processor (e.g. PayPal) is an acceptable piece of location information to obtain the required match between at least 2 such pieces of information:" This concession will only apply until 30th JUne 2015 - see http://euvataction.org/2014/12/29/hot-off-the-press-concession-from-uk-hmrc-will-enable-more-firms-to-keep-trading/ for details.



Also, Etsy (and several other platforms like Folksy) are now taking on board the new rules in that they are collecting and remitting the VAT - see https://blog.etsy.com/en/2015/update-european-union-rules-on-digital-item-sales-2/ - the extract below is from them:



"In a recent blog post, we announced that we will be collecting and remitting VAT on behalf of Etsy sellers based in EU countries who are providing digital goods to buyers in the EU by automatic download. We are now announcing that we will collect and remit VAT on behalf of all Etsy sellers providing digital goods to buyers in the EU by automatic download, whether or not the seller is based in the EU. That means you won’t have to process VAT returns on automatically downloaded digital items sold on Etsy to buyers in the EU, no matter where your shop is based.



To be clear, your EU buyers – not Etsy or Etsy sellers – will be paying VAT as part of their total purchase price. We’re working on the site update needed to begin collecting VAT during checkout and will provide more details on how the collection process will work soon. If you’re wondering if you should list your digital items, please know that Etsy will take responsibility for collecting VAT and remitting it to the appropriate tax authority.



If you have more questions about VAT on digital items, check out our responses to these Frequently Asked Questions. Please keep in mind that we can’t give legal or tax advice to individual businesses, so we encourage you to contact your local governments or professional advisors for specific advice related to your shop."



Pleas also see - http://www.businesszone.co.uk/topic/finances/vat-moss-how-paypal-etsy-and-others-are-preparing/58804 - for further discourse on this subject.



In view of the above, can e-junkie please explain how the services they offer and supply differ from those provided Etsy?



With thanks,



Mike















https://www.gov.uk/government/publications/vat-supplying-digital-services-to-private-consumers/vat-businesses-supplying-digital-services-to-private-consumers

[E-junkie_Monster]

Hi Mike,



The big difference is that Etsy processes their own payments, which is why they can collect and remit VAT even when they work with PayPal. E-junkie is not a payment processor so it is not possible for us to collect or send out any funds at all.

[mike1952]

Hello E-Junkie Monster!



I really hate to be contradictory or confrontational, and I take on board what you state about Etsy but the whole thing lies on on what HMRC states on this matter which is:



"Digital portals, platforms, gateways and marketplaces



If you supply e-services to consumers through an internet portal, gateway or marketplace, you need to determine whether you are making the supply to the consumer or to the platform operator. If the platform operator identifies you as the seller but sets the general terms and conditions, or authorises payment, or handles delivery/download of the digital service, the platform is considered to be supplying the consumer. They are therefore responsible for accounting for the VAT payment that is charged to the consumer." Extract taken from the link below (at the bottom):





https://www.gov.uk/government/publications/vat-supplying-digital- services-to-private-consumers/vat-businesses-supplying-digital- services-to-private-consumers



Interpreting this:



If you supply e-services to consumers (which is me) through an internet portal, gateway or marketplace (which is you), you (I) need to determine whether you are making the supply to the consumer or to the platform operator. (I'm making the supply to the platform operator in the form of e-books who then supplies the consumer) If the platform operator identifies you as the seller but sets the general terms and conditions (which you do), or authorises payment (which is you), or handles delivery/download of the digital service, (which is you) the platform is considered to be supplying the consumer. They are therefore responsible for accounting for the VAT payment that is charged to the consumer.



The crux of the matter is the use of the word 'or' in the guidance. It is not saying that ALL the conditions must be met before responsibility is accepted but that if ANY condition is met, then follows the responsibility.



In my undedrstanding, Etsy is not a payment processor as they rely on PayPal for this.



Over to you in the nicest possible way :-),



Mike

[E-junkie_Guru]

Caution is advised against reading too closely such informal "guidelines" as you cited vs. the actual regulations that they're attempting to explain; the latter are legally binding, whereas the former are not. That said, the same guidelines you cited also state further down:

If you operate a digital platform through which third parties sell e-services you are liable to account for the VAT on those sales unless every one of the following conditions are met:



- the digital platform and everyone else involved in the supply must identify who the supplier is in their contractual arrangements

- the invoice, bill or sales receipt must identify that supplier and the service supplied

- the digital platform must not authorise the charge to the consumer

- the digital platform must not authorise the delivery

- the digital platform must not set the general terms and conditions of the sale

E-junkie satisfies all of those conditions. Regarding the last point, we do not set any general terms and conditions of any sale between you and your buyers; our Terms of Service only govern your own use of our service. Regarding the first point, our Terms of Service state that we are "not involved in any transaction between You and Your buyer", that "You are deemed to have a direct commercial relationship with each third party that purchases goods or services from or undertakes any other transaction with You", that we are "not acting as Your or any third party's agent in connection with the operation of E-junkie.com", and that "You are solely responsible for [...] determining, collecting and remitting to the appropriate authority all taxes (if any) arising from or related to such orders or transactions" -- all of which identify you as the party selling and supplying goods to your buyers, where you are only using E-junkie as a tool to facilitate that supply.



Regarding the other points, your chosen payment processor (e.g. PayPal) is responsible for authorizing any charges to the buyer; we are not involved in payment authorization at all. The payment processor also authorizes delivery of any digital goods purchased when they notify our system they have completed the buyer's payment to you. Any invoice, bill or sales receipt issued by your payment processor would identify you as the party receiving that payment for the goods/services ordered. Indeed, we never handle any actual payment funds from buyers at any point whatsoever; therefore, we have no way of withholding any such funds as VAT, nor do we have any way of billing/charging sellers to obtain funds with which we could conceivably remit VAT.



This ultimately comes down to the essential nature of the business relationships between the buyer, the seller, and the platform -- i.e., is the buyer purchasing from (paying) the platform or the seller, and is the seller supplying goods to the platform that in turn resells those goods to buyers (akin to a wholesaler-to-retailer relationship) or selling goods themselves for which the platform is merely an order-taking and/or delivery tool (akin to a cash-register manufacturer and/or parcel courier)? In the former cases, the platform is the supplier subject to accounting for VAT; in the latter cases, the seller is the supplier subject to accounting for VAT, and that latter is the scenario which characterizes E-junkie.

[mike1952]

Hello again!



I've delayed a reply to the above as I was awaiting a repoly from HMRC, which is now shown below.



"Our Reference: 17274258



Dear xxxxxxxx



Ref: VAT



Thank you for your enquiry of 3 March 2015, regarding the sale of digital services via E-junkie.



Guidance on this issue can be found on our website, in a publication entitled 'VAT: businesses supplying digital services to private consumers'. In short, VAT on digital services are now due in the consumer?s country, not the supplier?s country.



In particular, the guidance states:



"If you supply e-services to consumers through an internet portal, gateway or marketplace, you need to determine whether you are making the supply to the consumer or to the platform operator. If the platform operator identifies you as the seller but sets the general terms and conditions, or authorises payment, or handles delivery/download of the digital service, the platform is considered to be supplying the consumer. They are therefore responsible for accounting for the VAT payment that is charged to the consumer."



Whether E-junkie operates as per the above is a matter of contractual detail.



In the event they do operate in this way, they would be responsible for accounting for VAT on the supply to the consumer. Where the supply takes place outside the UK, they would be responsible for registration under MOSS, if appropriate. Your supply would then be to the platform, rather than the consumer, and you would be making a B2B supply (see paragraph 23.2 of VAT Notice 741A: Place of supply of services)."



In the light of the above, can you please explain why you are not taking responsibility for VAT as required for compliance, for your customers?



With thanks,



Mike

[E-junkie_Monster]

Mike,



I'm very sorry about the misunderstanding, but the answer to this remains exactly as it was given in Guru's post above:

If you operate a digital platform through which third parties sell e-services you are liable to account for the VAT on those sales unless every one of the following conditions are met:



- the digital platform and everyone else involved in the supply must identify who the supplier is in their contractual arrangements

- the invoice, bill or sales receipt must identify that supplier and the service supplied

- the digital platform must not authorise the charge to the consumer

- the digital platform must not authorise the delivery

- the digital platform must not set the general terms and conditions of the sale

E-junkie meets all of these qualifications. Your buyers are purchasing from you, not E-junkie.



EDIT: To further clarify using Etsy as an example, the relationship between merchant and buyer is different with their service. Buyers who shop via Etsy pay Etsy, and Etsy then pays the merchants. Since Etsy is handling the funds for the sales Etsy is responsible for collecting and remitting VAT among other responsibilities they take on by playing such an active role in the sales process.



E-junkie is different because your buyers are paying you directly your PayPal account or your account with a similar third party payment processor. E-junkie is not selling your products and never touches the sales funds for any given order, so we cannot collect or remit VAT from those transactions.



You are the supplier, payment receipts refer to you, we do not authorize the charges, we do not authorize the delivery (we automate it based on your account settings and we do not have the authority to hand out download links on your behalf if one of your buyers asks us directly), and we do not set the general terms and conditions of the sale.

[m0ds]

Hi there, so VAT MOSS requires you to input the totals EXCLUDING VAT.



Ejunkie gives you (apparently) info on how much to deduct, as it works with VAT inclusive prices.



Trying to keep things simple, I opted to keep my prices as they are and make them VAT inclusive etc.



So I don't specifically know the VAT exclusive price of each item, but it looks like I will have to now?



Or can someone explain how to take the info ejunkie provide and use it with VAT MOSS please? I guess now I have to reprice everything based on VAT exclusive, and work out the inclusive rates. Ugh.



If only



1 > VAT MOSS had allowed for the VAT inclusive totals and then it worked out the deductions or



2 > Ejunkie had something to help you work out VAT exclusive price (maybe it does, using the extra report columns) ?



Thanks



PS. Full info on the VAT MOSS returns can now be found here:

https://www.gov.uk/government/publications/vat-mini-one-stop-shop-union-return



Also, I heard our PM (Cameron) is aware of this and how its affecting small businesses, and apparently wants to get an EU wide threshold or something for it.

[elmer77]

Unfortunately, it appears you haven't actually enabled VAT calculation in your Seller Admin > Sales Tax / VAT Settings, so we haven't been corroborating the buyer's place of supply for digital items nor calculating VAT amounts for you. You'll have to do the best you can with the information we otherwise routinely collect in your Transaction Log:

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



If you were using our VAT calculation feature, you could simply view your E-junkie Transaction Log for the past quarter, then download that log view and open it in a spreadsheet program to calculate VAT amounts we'd calculated for each country and deduct those from your gross (incl. VAT) prices/revenues to determine your net (excl. VAT) prices/revenues to report on your return.