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URGENT: Everyone Please Read---EU VAT Legislation for Digital Files Effective January 1, 2015

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What the Legislation Says

 

The EU has enacted new legislation that will go into effect on January 1, 2015. This legislation states the following things:

1. All sales of automated digital services (which includes downloadable PDF patterns and some website advertising) are now deemed to take place in the location of the consumer, if the consumer is within an EU Member State.

2. Sellers are required to collect and remit VAT on these sales at the rate charged by the customer's country.

3. Sellers must have two pieces of matching address information before processing the sale to confirm the location so VAT can be charged at the appropriate rate.

4. There is no longer any minimum threshold below which a seller does not need to register for, collect, and remit VAT.

 

 

Impact on EU Designers Who Sell Patterns Here

 

You are consigning your pattern sales through Crochetville, which is a business-to-business arrangement with a US-based business. Therefore, you will not need to collect or remit VAT for these sales.

Pattern sales take place between Crochetville and the customer.

Please check with your taxing authorities to ensure you are reporting the transaction with Crochetville properly to your country.
 

 

Impact on Crochetville

Currently, the US tax authorities determine that the point of sale takes place in the state where Crochetville is registered as a business. Crochetville has no physical presence in any EU Member State nor do we advertise there. We are talking with the US Commerce Department and our Congressional Representative to determine if the EU has legal authority to change the point of sale location as determined by the US government from the US to an EU Member State. We do not believe there is any current tax/trade agreement between the US and any EU Member State that establishes them to have any legal jurisdiction over our business. However, we are waiting for actual written confirmation of this.

We have implemented changes in our order processing procedure to ensure we are able to comply with the legislation if we are required to do so.

 

What This Means for Crochetville Members

1. Effective immediately, you will need to supply a billing address when purchasing a pattern, so we can determine the correct VAT rate for your location (if within the EU).

 

2. We are using a new service called MaxMind that will enable us to collect and verify two matching pieces of address information for each customer, as required by the EU legislation. If MaxMind is unable to find a match, the transaction will be placed on hold. At that time, Crochetville will contact you to resolve the discrepancy. After the discrepancy is resolved, we'll manually process your transaction.

3. The price initially displayed to EU customers, which is based on your IP address geophysical location, will be inclusive of VAT. For at least the first couple weeks of 2015, while we determine exactly how many sales are taking place to EU customers, we are not currently adding VAT to any prices. Crochetville will pay any VAT that is due from our profits at the appropriate VAT rates. This is only a short-term solution.

 

4. If there is a high volume of sales to the EU *OR* we learn that we must comply with this legislation and become a tax collector for EU Member States, then we will adjust our system so that the appropriate VAT rate is added to our current prices for EU customers, based on the billing address information you provide to us. The initial price you see will continue to be IP-based. Once you supply billing address information, the price will reflect the VAT rate for the country you have supplied to us.

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