Digital VAT and the demise of our beloved designers

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On Sunday I finally started on A Summer Ball by Sandy Littlejohns and Deborah Lester. Sadly, their website has now been taken down. I am so lucky that I was able to purchase this pattern when I did. So many designers from the UK and other parts of Europe are closing their businesses or at least not allowing charts for purchase online any more. Due to new VAT (value added tax) rules, businesses can no longer sell products digitally without collecting VAT. It sounds innocent enough, but each country collects a different amount of tax and in some countries, it varies based on location within that country. Each business has to register for VAT in every one of the countries in the EU (European Union). When they make a sale, they need to charge the appropriate amount of VAT based on where the customer is located, anywhere from 17% in Luxembourg to 27% in Hungary. The problem is, a customer can lie about where they are from, and it comes back to the business owner to PROVE that the sale was accurate. This can be done by collecting the customer’s IP address, but it is not that simple. A customer can be traveling and therefore their IP address won’t be the same from day to day. Businesses also now have to keep records of their sales for 10 years including the IP addresses, and some customers don’t like that because they feel it is an invasion of privacy. If businesses do want to continue to sell their goods digitally, they can register with MOSS (Mini One Stop Shop) in the UK or they can register with each individual country that is in the EU but not the UK. A third option would be to find a third party who would be responsible for the VAT. But many cross stitch designers are choosing to stop selling their charts digitally completely.

I have been researching this for several months because, even though businesses were told 6 years ago that this day was coming, no one really did anything then. The internet has changed so drastically in that amount of time, and I don’t think the people in charge had any idea that digital sales would be as big as they are now. Or rather, what they were until December 31, 2014. One of the reasons I was interested in this was because I was worried that it would impact me as a cross stitch store owner selling physical charts to Europe. It turns out that this does not apply to me… yet. On January 1, 2016 the law will be changed yet again to include physical items, not just digital ones. What does that mean for me? Well, I will be doing what many of the designers are doing. In 2016 I will stop selling to any country in the EU completely. My sales will drop, just like many other businesses’. I won’t close down, because my international sales are not a huge part of my revenue. But I know many other businesses out there won’t be so lucky.

For more information, check out the great Facebook page that has been set up for this topic: Digital VAT 2015.


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