Tuesday, 6 January 2015

Temporary Suspension of Instant Downloads on Cross Stitch Patterns

This week I have been trying to get my head around International taxation laws.

On the 1st of January, I received an email from Etsy informing me that of the 1st of January 2015 (that's right - that day!) there would be significant changes to European Commission rules related to Value Added Tax on sales of digital goods.  Nothing like a little bit of warning or a heads up!

The email from Etsy informed me that:

"The new rules state that all businesses selling digital goods and delivering them electronically to consumers in European Union member countries will be required to pay VAT based on the VAT rates of the country where the customer is located, not on the rates of the country where the business is located.  If your shop is based outside of the EU, it is unclear how the VAT rules will be enforced."

"We're working on a tool that will make the process easier for you and give you the ability to verify the country of your buyers.  We'll be releasing further details in January 2015".

You know, after the new rules have come into place.

As far as I have been able to find out:
1) this rule covers the sales of digital patterns
2) each country in the EU has a different rate of VAT
3) currently there is no way to add VAT to sales, to identify where customers are from prior to purchase, or to limit sales to specific countries, which means that
4) currently if I have to pay VAT it comes out of my pocket, rather than being charged to the customer which is what is meant to happen

But most importantly:
5) The United Kingdom has taken the position that PDFs manually emailed by sellers are not covered by the new rules.

As a result, I have taken the position to temporarily remove all instant downloads from my Etsy store, and to instead email the patterns to customers.  It's a lot more work for me, and means that it will take a bit longer for you to receive your orders.  However, as the largest majority of my sales are in Australia, the USA and the UK, this is the easiest, cheapest way for me to abide by the new EU rules as an international seller.

This has all thrown me a bit and made me realise that I need to become more aware of the Australian taxation laws affecting Fangirl Stitches, and of the International taxation laws.  It's also meant that I've been more than a little distracted as far as cross stitching is concerned.  I have a number of new patterns that will be appearing in the Etsy store soon, and a new direction for Fangirl Stitches that I'm quite excited about, and I hope you will be too.  More on that soon, I promise!

Hopefully Etsy will come up with an alternative solution quickly and I will be able to revert back to Instant Downloads, which are everyone's friend.

Happy Stitching!

- Ros at Fangirl Stitches

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