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Can I charge VAT by location?

Is it possible to charge VAT - or not - based on where a customer is from? At the moment, all my customers are being charged VAT regardless of where they’re coming from. This is a real problem, and could get me into big trouble with the tax man.

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Like most payment processing providers, ONTRAPORT doesn't currently support everything that's required to handle the ridiculous VAT-MOSS tax according to the byzantine rules they have created. Fortunately, ONTRAPORT does allow you to set up custom taxes based on the buyer's country, so you're in a much better position than most for collecting this tax. See this article on Adding Tax Types to ONTRAPORT.

However, among the unsupported requirements are:

  1. The requirement to capture two non-contradictory proofs of country before completing the sale.
  2. The requirement to include the VAT in the product price, instead of as an add-on line item (as we do with taxes in the US).
  3. The requirement that B2B sales are excluded from the tax after checking with an EU database of VAT IDs.

If you are a seller that's required to collect this tax (and you want to actually do it) then you'll need to use a service other than ONTRAPORT to do that.

A note from ONTRAPORT's CEO:

Be advised that Landon Ray is not an accountant, a lawyer, a politician, or a tax-collector and thus has no idea what he's talking about. This is not legal advice and is probably wrong, so read on at your own risk. It is your responsibility to keep your business in compliance with all applicable laws.

There has been much hoopla and fretting about the absurd VAT-MOSS tax and the 'changes' that are now in effect.

This change in law was designed to stop major online retailers (mainly Amazon and Apple) from avoiding taxes in the EU by locating their business in the lowest-tax country (Luxembourg). The specific change is that, as of January 1, 2015 if you're a seller of digital goods in the EU you'll have to start collecting taxes based on the buyer's country instead of wherever your company is located.

All the rest of the law has been in place since 2003. That means if you're not in the EU, then you've been successfully evading this law for 11 years. That's no surprise, since the EU has no authority to collect money from you or to make you their unpaid tax-collection agent. I'm quite sure that our taxing authorities aren't going to lift a finger to help Europe collect their taxes. Personally, I'm thinking you should sleep well at night doing business as usual. (Again, this is not legal advice. Consult your attorney or tax professional.)

To make this clearer, here's a table of the old law and the new law, with the ONLY change highlighted in red: http://screencast.com/t/rgC3CfnnH

If you're a seller of digital products who's based in the EU (or you're somewhere else and simply can't sleep at night knowing that you're not abiding by some other country's laws, over which you have no voting power or recourse, and which are incredibly onerous to abide ... (more)

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Asked: 2016-06-07 07:17:06 -0700

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Last updated: Jun 07 '16