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US sales tax or VAT for EU customers?

 
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US sales tax or VAT for EU customers? - 1/21/2010 1:20:27 AM   
GoodGuy

 

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quote:

ORIGINAL: Lützow


quote:

ORIGINAL: Erik Rutins
I think that 2010 should bring some nice store improvements.


Lifelong free downloads of the games you own, an actual working customer service, no VAT anymore for European customers?



@ Erik: I moved my reply from the other thread to this new thread, to make sure it won't be overlooked.
Here we go:

Actually, if you don't have to have a physical copy, you don't violate any European/national laws if you obtain your digital copy from a US seller, means the transaction then would be tax-free. DR doesn't cater for such cases, so, in fact, Digital River should adjust their policy:

Let's say I had a real store here in my town, and I'd have a customer from the US calling me to send him a certain product. I'd then send him the item, with the invoice stating that it's TAX-FREE, since there is NO export sales tax. If the item exceeds a certain value, he'd then have to pay import taxes in the US.

The same should apply for obtaining a product in the US. Digital River should create an excemption for European customers obtaining digital downloads from US sellers.
I also don't see why I have to pay EU VAT for any digital download with DR, just because DR decided to found and register European departments (meant for executing the physical shipping within the EU)???.
If I obtain a US product then it's my duty to declare / pay import taxes, but it's not DR's business.

Also, I am not sure whether US laws really force sellers to apply US sales taxes for foreign customers or not.
Minnesota (where DR's corp. HQ is located) has tax excemptions for ppl who pick up products in MN but who do not intend to use the particular item in MN.
Louisiana and Texas offer foreign visitors sales tax refunds.

Germany offers tax refunds (refunding 19% VAT) for customers who visit Germany and return to their country as well, this applies to visitors from EU countries (actually the whole EU community territory) and quite some non-EU countries (a long list, including USA, Canada and other countries).
But all these regulations only cover situations where a customer actually resides in the US or a given US state temporarily, to pick up an item.

So, in my books, foreign customers who obtain items via internet (from their respective countries) shouldn't even need these tax excemptions, such sales should be tax-free, generally, no?

1) Erik, I'd like to get a statement that clarifies whether taking US sales taxes from foreign customers is a legit proceeding or not.

Note: I am not talking about DR's option to pick "EU" (thus VAT) on checkout.

Also, IF you pick EU as location, and in case the contracting party for a given Matrix item would be DR (as reseller), then only a purchase from Digital River GmbH (Cologne) would justify a VAT for German customers, it doesn't matter if it's a DD or a physical copy.
If I am not mistaken, DR invoices usually indicate that "Digital River International S.a.r.l." (Luxembourg) is the contracting party.
If so, all items should be invoiced without VAT for all EU customers outside Luxembourg. They still put national VAT on the invoice, although customers are not making business with a national company. That's really strange.

If they'd have a real store in LUX, I'd either make them drop their VAT, or I'd file a request for refund with Lux. authorities.
Whoever's getting the VAT, makes unjustified collections there, even if it'd be my country's tax office that's getting the money.

Another example: If I purchase a digital download item in the UK, it still looks like the seller has to pay national sales taxes, as the price would still be the same.
In fact, the seller could configure his online store in a way that his portal software would list all foreign sales and declare them as "tax-free" export sales (he would have the right to do so), so that the national VAT margin goes in his pockets, since the final price wouldn't change.
That's pretty shady, but I can imagine quite some companies do it.

So, my 2nd and 3rd question:

2) Why is there a VAT, in cases where a German customer makes business with a DR branch (as Matrix reseller) in Luxembourg, in fact?

3) Where does the VAT amount go, if I, as a German customer, make business with a DR branch (as Matrix reseller) in Luxembourg?

Btw, I haven't purchased any Matrix title within the last few months, but last time I checked (2009!!!) DR invoiced a VAT amount of 16% or 17%, even though it's been 19% since 2007, in Germany (it used to be 16% until December 2006). In case they are really obliged to pay 19% VAT to the German tax office, then "someone" may get REALLY pissy, if 2% or 3% per sales are missing, right?

4) So, is DR just making up the VAT-thingy (and not actually paying it to the German tax collectors), or do they have some kind of weird EU-agreement, or are they just confused?

< Message edited by GoodGuy -- 1/21/2010 1:42:53 AM >


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Post #: 1
RE: US sales tax or VAT for EU customers? - 1/21/2010 2:00:39 AM   
Erik Rutins

 

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As far as I know, the EU does indeed charge VAT on digital downloads - in general, they have the tax experts and tax lawyers and we rely on them to figure out all the laws the various governments pass and how we have to comply with them. Believe me, we would prefer to charge you all no tax at all, but we do what the law tells us we have to do.

If you want to get more specific answers, send me an e-mail at erikr@matrixgames.com and I can try to get them to provide you some additional info. I am not a tax expert, but I'm 100% confident that we are complying with the letter of the law.

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RE: US sales tax or VAT for EU customers? - 1/21/2010 2:07:52 AM   
GoodGuy

 

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quote:

ORIGINAL: Erik Rutins

If you want to get more specific answers, send me an e-mail at erikr@matrixgames.com and I can try to get them to provide you some additional info. I am not a tax expert, but I'm 100% confident that we are complying with the letter of the law.


Yes that would be nice. I don't (and did not) insinuate Matrix is doing anything wrong, but i am convinced that you would not have to charge ANY tax sales if your EU customers would a) either not "have" to deal with DR or b) could make business with a properly configured US-based payment system, if US tax authorities don't force you to apply national/local tax sales, of course.


< Message edited by GoodGuy -- 1/21/2010 2:10:44 AM >


_____________________________

"Aw Nuts"
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December 22nd, 1944
Bastogne

---
"I've always felt that the AA (Alied Assault engine) had the potential to be [....] big."
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(in reply to Erik Rutins)
Post #: 3
RE: US sales tax or VAT for EU customers? - 1/21/2010 2:10:32 AM   
Erik Rutins

 

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Keep in mind that we (through DR) have a warehouse in the EU as well to speed up shipping times and avoid other duties and import issues. I doubt there's any way we could avoid VAT, but I'm happy to inquire with DR to get the exact details.

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For official support, please use our Help Desk: http://www.matrixgames.com/helpdesk/

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RE: US sales tax or VAT for EU customers? - 1/21/2010 2:12:34 AM   
GoodGuy

 

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quote:

ORIGINAL: Erik Rutins

I doubt there's any way we could avoid VAT, but I'm happy to inquire with DR to get the exact details.


Yes please, and what if DR declares their US branches to be the contracting party for DIGITAL downloads? Does DR need a European warehouse for those?


< Message edited by GoodGuy -- 1/21/2010 2:14:54 AM >


_____________________________

"Aw Nuts"
General Anthony McAuliffe
December 22nd, 1944
Bastogne

---
"I've always felt that the AA (Alied Assault engine) had the potential to be [....] big."
Tim Stone
8th of August, 2006

(in reply to Erik Rutins)
Post #: 5
RE: US sales tax or VAT for EU customers? - 1/21/2010 2:18:24 AM   
Erik Rutins

 

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quote:

ORIGINAL: GoodGuy
Yes please, and what if DR declares their US branches to be the contracting party for DIGITAL downloads? Does DR need a European warehouse for those?


I'm certain that the EU applies VAT to Digital Downloads regardless now, but I'll double check.


_____________________________

Erik Rutins
Director of Product Development


For official support, please use our Help Desk: http://www.matrixgames.com/helpdesk/

Freedom is not Free.

(in reply to GoodGuy)
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RE: US sales tax or VAT for EU customers? - 1/21/2010 2:33:11 AM   
GoodGuy

 

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Ok, thank you.

< Message edited by GoodGuy -- 1/21/2010 2:40:56 AM >


_____________________________

"Aw Nuts"
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December 22nd, 1944
Bastogne

---
"I've always felt that the AA (Alied Assault engine) had the potential to be [....] big."
Tim Stone
8th of August, 2006

(in reply to GoodGuy)
Post #: 7
RE: US sales tax or VAT for EU customers? - 1/21/2010 3:05:21 AM   
GoodGuy

 

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Interesting collection of statements from e-sellers:

https://author.tucows.com/article.php?sid=&account_id=&id=495

quote:


Question:
"5. How do you deal with physical shipments (e.g. do you add VAT to orders that are shipped on CD ROM?) If so, are customers ensured that they will not have to pay VAT before they can get the physical product?"

Answers:

Digital River:
"To the best of our knowledge, CD-ROMs are manufactured and shipped out of the United States into the EU. Our properties do not tax these shipments with respect to the Simplified Rules (which is the option our properties follow). The carrier will invoice the consumer for the VAT with any taxes assessed at the point of entry, who in turn will repay the carrier for the VAT amount plus a small administration fee.

eSellerate:
"VAT is currently being charged on electronically provided goods only. No physical orders are processed with VAT per the EU directives."

ShareIt:
"The new regulation does not affect physical shipments of most standard software. For physical shipments, the regulation remains the same that VAT and possibly other duties are charged upon importation of the physical good into a country within the European Union, and is usually paid by the customer. Typically, there are export stickers or forms that need to be attached to the shipment, that has not changed since the new regulation. For authors using our physical shipping and warehousing facilities, this is something we do and have done for them automatically. If they ship themselves, we can either collect VAT for them and they handle the formalities, or the users pay import taxes upon delivery in their country, which is a common way of doing it.

Emetrix:
"Emetrix - As a small business without a physical presence in the EU, we felt it would be prudent to carefully to evaluate the EU directive and its practical implications as we define our business policy. We have been studying this since the original release of information in early 2002 but by no means claim to be VAT experts. Having a customer base from all over the world, we must carefully evaluate how the choice to collect or not collect VAT impacts our customers' businesses, and make a responsible decision based on our customers' needs, applicable laws, and general industry practices.

At the present time, we are not collecting VAT, but continue to talk to our accounting and legal advisors about the issue. We have also solicited feedback from many of our customers to determine their opinions. As we continue our research, we will be better able to make a decision that is not only wise for our business, but also in the best interests of our customers. Since we are not presently collecting VAT, it is not possible to comment about specific VAT implementations. However, should we decide in the future to begin collecting VAT, we will make details of our implementation readily available on our website."


The author collected these statements in 2005, but I guess some of them are still valid.

< Message edited by GoodGuy -- 1/21/2010 3:08:43 AM >


_____________________________

"Aw Nuts"
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December 22nd, 1944
Bastogne

---
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RE: US sales tax or VAT for EU customers? - 1/21/2010 3:06:11 AM   
GoodGuy

 

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From that same page, Gary Elfring's (elfring.com) comment on the EU's "tax pressure":

quote:

"My firm makes software products that are sold worldwide, mainly on the internet. As you are probably aware, the European Union (EU) introduced new rules on July 1, 2003, that attempt to force US businesses to collect EU VAT on all sales to the EU. The US Supreme Court ruled on this type of commerce interference long ago in the Quill vs North Dakota case. Their ruling explains why US businesses do not have to collect sales taxes on sales made to other states unless their company has a physical business presence in that state. So if my business does not have to collect other states sales taxes, why do I have to collect the EU's VAT?The EU's new VAT regulations are grossly unfair to US small businesses, while favoring EU businesses."


I still find it rather curious that DR adds VAT to digital downloads, but in case EU laws really demand that (i'm not totally convinced yet, since there are excemptions where inner-EU-trade is tax-free), the fact that Digital River HAS branches in the EU (= physical presence within the EU, which are not needed for digital download purchases) makes Matrix Digital Downloads unnecessarily more expensive, compared to a DD-solution where the contracting [reseller] party would be based in the US.

I am convinced Matrix could sell (way) more copies to EU customers if DDs would be offered tax-free.

< Message edited by GoodGuy -- 1/21/2010 3:33:10 AM >

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RE: US sales tax or VAT for EU customers? - 1/21/2010 3:51:29 AM   
GoodGuy

 

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http://www.smallbusinesscomputing.com/news/article.php/2230491

quote:


....
"We manage VAT-related issues for clients operating on our merchant account," said Richard Mitchell, general manager of the London office of Minneapolis-based e-commerce outsourcing company Digital River in April.

Additionally, a lot of smaller companies aren't aware of this law. Many don't see how they can comply.

"Technically, the EU has no control over us as a corporation," said Matthew Feldman, CEO of Versaly Games, a mobile content platform and content wholesaler. "How could they possibly police us if we sell into the EU?"

Versaly wholesales digital content to mobile phone companies in the Netherlands and Spain. In those cases, Feldman said, it's no sweat.

"They collect the revenue and when they send us our royalty, they withhold the VAT tax."

However, Versaly's ForFones.com is a website that sells ringtones, images and games directly to consumers. The company also hosts San Francisco-based CNET's Cell Phone Zone, which offers paid downloads.

Feldman said that it's not always possible to know where a site user is coming from.

"Not only is it difficult for us to gather that info," he said, "it's going to be impossible for the EU to police U.S. companies," he said. CNET did not return calls for comment.

The European Union's initiative may also have an inverse impact on American companies and put them at a competitive disadvantage in the expanding EU marketplace.

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RE: US sales tax or VAT for EU customers? - 1/21/2010 3:59:38 AM   
GoodGuy

 

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quote:

ORIGINAL: Erik Rutins

I'm certain that the EU applies VAT to Digital Downloads regardless now, but I'll double check.


I would also like to know why Matrix Digital Downloads are (or were) being invoiced with 16% instead of 19% VAT to German customers.
In general, IF European VAT laws really apply, then the VAT has to be charged according to the country of destination (where the product is being sent to or - if you will - being downloaded), eg. 17.5% for UK, 19% for Germany, 15% for Luxembourg, no?


< Message edited by GoodGuy -- 1/21/2010 4:08:18 AM >


_____________________________

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Bastogne

---
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(in reply to Erik Rutins)
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RE: US sales tax or VAT for EU customers? - 1/21/2010 9:28:44 AM   
Lützow


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The tax law got introduced in the early 2000s already. When I subscribed to EverQuest in 1999, I had to pay 10,- USD per month like American customers. Some years later greedy German authorities realized there was something new to raise taxes on and afterwards subscription rates got jacked up.

Anyway, GoodGuy has a point. Would be interested in the 16%-19% VAT thing as well.

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RE: US sales tax or VAT for EU customers? - 1/21/2010 1:51:11 PM   
Twotribes


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I just paid sales tax on my WitP AE purchase here in the States so States are paying too.

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RE: US sales tax or VAT for EU customers? - 1/21/2010 3:07:30 PM   
GoodGuy

 

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quote:

ORIGINAL: Twotribes

I just paid sales tax on my WitP AE purchase here in the States so States are paying too.


Sorry, but you seem to be missing the point. If you order an item from EU territory, you don't have to pay VAT. This discriminates US companies and their EU sales, it puts US businesses at a major disadvantage, in fact.
Even worse, quite some of those US companies that don't have a presence in the EU still accomodate the pushy EU legislation, by including EU VAT.
Bigger companies or even corps like DR either can't ignore EU laws (due to their presences in the EU) or they don't dare to ignore them, in order not to endanger possible future business opportunities.

I don't see why Matrix should let the silly EU impose the (discriminating) VAT rules on their DD business.
Publishers like battlefront don't charge EU VAT for DDs. And they have the right to do so.

< Message edited by GoodGuy -- 1/21/2010 3:35:47 PM >


_____________________________

"Aw Nuts"
General Anthony McAuliffe
December 22nd, 1944
Bastogne

---
"I've always felt that the AA (Alied Assault engine) had the potential to be [....] big."
Tim Stone
8th of August, 2006

(in reply to Twotribes)
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RE: US sales tax or VAT for EU customers? - 1/21/2010 3:48:09 PM   
Lützow


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Either DR is forwarding VAT and in this case it should be 19% according to German tax rate, or they don't and then it would be a rip-off.

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RE: US sales tax or VAT for EU customers? - 1/21/2010 5:10:06 PM   
Jevhaddah


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I found this article regarding the issue but its a bit dated.

http://www.out-law.com/page-2235

This one from 2003

http://www.ecommerce-guide.com/news/news/article.php/10375_2194111

A couple of years ago a friend of mine won an AMD CPU in a competition hosted in the US. He got a big shock when the customs and excise paid him a visit asking for a VAT at 17.5% and import duty. I know this is not a Downloaded item but he did not pay a penny for the item, but was charged VAT etc on its percieved value.

I recognise the need for sales taxes but Value Added Tax is just another cashcow for the Government in RipOff Britain PLC and other European countries, unfortunatley we are stuck with it.

Every business that charges VAT is supposed to be registered with the dreaded VAT MAN, who comes to collect his skim once a year. Woe betide any company or individual who cannot pay their VAT bill as prison sentences are often the price they pay. The VAT for Digital Downloads and services is charged at the rate of VAT in the purchasers location.

As for companies outside the EU charging VAT, If they have no premises in the EU I can't see how the VAT MAN could collect his skim, or any legal means to force them to pay so that the percentage of VAT from EU sales can be seen as extra profit.


It's all just a big con really.

But hey, I ain't an economist just a scary hairy old man that likes tom play wargames, so take anything I type on the subject with a pinch of salt.

Cheers

Jev



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RE: US sales tax or VAT for EU customers? - 1/21/2010 5:23:24 PM   
GoodGuy

 

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quote:

ORIGINAL: Lützow

Either DR is forwarding VAT and in this case it should be 19% according to German tax rate, or they don't and then it would be a rip-off.


I didn't word it that harsh, but that's pretty much what I was wondering about.

@Erik:
1) Could you explain why German customers were (and possibly still are [not gonna order anything just to see the actual VAT amount on a DR invoice and to prove my point]) charged 16% only, even though DR is supposed to charge 19% to German customers since 2007?
If'd do business with DR as a publisher, I wouldn't be happy about that, and German tax authorities will not be happy about it either, for sure! So?

2) Where do DR's VAT collections end up? I can't imagine that German tax authorities are comfortable with 16%, since they could collect 19%, in fact.

< Message edited by GoodGuy -- 1/21/2010 11:09:06 PM >


_____________________________

"Aw Nuts"
General Anthony McAuliffe
December 22nd, 1944
Bastogne

---
"I've always felt that the AA (Alied Assault engine) had the potential to be [....] big."
Tim Stone
8th of August, 2006

(in reply to Lützow)
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RE: US sales tax or VAT for EU customers? - 1/21/2010 11:36:21 PM   
Widell


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I'm not great at legaleese, but someone who is and/or have the time to read all the stuff here, may be able to sort things out here: http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/e-services/index_en.htm

My first impression after spending about 30 seconds on the referenced site would have me betting EU VAT is what "they" ask for.


< Message edited by Widell -- 1/21/2010 11:40:22 PM >

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RE: US sales tax or VAT for EU customers? - 1/21/2010 11:38:10 PM   
Widell


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Sorry. Double post. Browser messed up somehow...

< Message edited by Widell -- 1/21/2010 11:40:01 PM >

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RE: US sales tax or VAT for EU customers? - 1/22/2010 12:02:14 AM   
GoodGuy

 

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quote:

ORIGINAL: Widell

I'm not great at legaleese, but someone who is and/or have the time to read all the stuff here, may be able to sort things out
....
My first impression after spending about 30 seconds on the referenced site would have me betting EU VAT is what "they" ask for.


In my first post above, I had this in mind (quote from your link):
quote:


"Under these new rules, EU suppliers are no longer obliged to levy VAT when selling on markets outside the EU, thereby removing a significant competitive handicap."

EU businesses are allowed to drop the VAT, but US businesses are being pushed to collect and forward EU VAT for EU customers, that IS RIDICULOUS. Plus, there is NO U.S. law that would sanction that pushy and impertinent (EU-)behaviour.
In short, companies from non-EU territories (without a physical presence in the EU) collect EU VAT in anticipatory obedience.

< Message edited by GoodGuy -- 1/22/2010 12:08:10 AM >


_____________________________

"Aw Nuts"
General Anthony McAuliffe
December 22nd, 1944
Bastogne

---
"I've always felt that the AA (Alied Assault engine) had the potential to be [....] big."
Tim Stone
8th of August, 2006

(in reply to Widell)
Post #: 20
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