Robsta Posted December 14, 2005 Share Posted December 14, 2005 I've just got off the phone to the UK's HM Revenue & Customs regarding the sale of digital media and tax implications. What a minefield!!! From my research on their website, and speaking to the adviser it seems CubeCart may have to make some additions to the account system, or payment system. This applies to VAT registered businesses, selling digital products. I'll summarise what I've learnt... 1. Digital goods supplied online are categorised as services. As such are taxable according to the tax laws of the country in which the customer resides. This creates a problem to start with as CC assigns tax within each product. I've not checked this, so could be wrong, but CC does not use the shipping information when selling digital products therefore cannot restrict the countries in which to sell? So the best solution is to price it with inclusive tax and take a chance your accountant or bookkeeper knows his stuff? not sure on that one... which leads me to the second point. 2. Selling outside of the EU. Tax is only applicable to businesses outside of the EU (don't quote me, I need to do more research on that one!). Tax is not applicable for digital products when sold to consumers. From my brief discussion with the Revenue and Customs, I need to know whether the purchase is for business or home use at the point of sale, to know whether to charge tax. Is anyone else UK based, selling digital products and is VAT registered? I would really appreciate some feedback on this. The HM Revenue & Customs are sending me some more information, including a flow chart . Is it worth considering an 'All countries' catch all tax area? Quote Link to comment Share on other sites More sharing options...
Robsta Posted December 16, 2005 Author Share Posted December 16, 2005 I assume then that no one else has come across this? Or it's not the problem I think it is? I've not received the info in the post yet, so I am not sure either way. :huh: Quote Link to comment Share on other sites More sharing options...
Guest bennyuk Posted December 16, 2005 Share Posted December 16, 2005 My self and my clients all have this problem. It's a common one with no specific correct answers, just many different ways of doing it. I have some clients that build in VAT into the price, but don't tell the end customers, and then the vat man gets his cut of every sale. I have other clients that ignore it and so skip the VAT (not advised) I'd love to know the "best" solution, but then again I realise that Mr VatMan could well change the laws to make things trickier. Personally I think there's 1 person we all may of heard of, that has sold lots and lots of digital goods, to people from ALL OVER the world.... Brooky!... any tips on this subject from you? (Devellion is bound to be offshore taxhaven soon) Quote Link to comment Share on other sites More sharing options...
Robsta Posted December 16, 2005 Author Share Posted December 16, 2005 Thanks for your feedback Benny... I'm glad it's not just me missing something obvious. Quote Link to comment Share on other sites More sharing options...
Guest Posted December 16, 2005 Share Posted December 16, 2005 I sell digital goods but am not VAT registered however I still add a 17.5% tax thingy on my products just in case i do have to pay at the end of year. when accountant says yes or no :huh: Quote Link to comment Share on other sites More sharing options...
Robsta Posted December 16, 2005 Author Share Posted December 16, 2005 I sell digital goods but am not VAT registered however I still add a 17.5% tax thingy on my products just in case i do have to pay at the end of year. when accountant says yes or no Isn't that risky EH? what if a customer asks for your VAT number to claim it back? Quote Link to comment Share on other sites More sharing options...
Guest bennyuk Posted December 16, 2005 Share Posted December 16, 2005 It's ok (and prolly a prudent move) to add 17.5% "extra" onto your costs, although you couldn't call it VAT. In the UK, you can become VAT registered at any time, but you are onkly FORCED to do so when turnover reaches £50k (approx) then you HAVE to be VAT registered. Don't get me started on money laundering with paypal as the topic has worn me out already... needless to say many people can hide their turnover very well using paypal and the like.... BTW I am not a mewmber of the FSA and everything I say regarding finances should be taken with 2 kilo's of salt.... Quote Link to comment Share on other sites More sharing options...
Robsta Posted December 16, 2005 Author Share Posted December 16, 2005 It's ok (and prolly a prudent move) to add 17.5% "extra" onto your costs, although you couldn't call it VAT. I interpretted EH's reply to say he added it as a tax addition. Yes, probably a good move then. But I think CC needs a catch all tax group. I noticed that Brooky has one in the pipeline, as mentioned on one of his posts. Quote Link to comment Share on other sites More sharing options...
Robsta Posted December 20, 2005 Author Share Posted December 20, 2005 More information on VAT and online services for UK businesses can be found on the here on the HM Revenue and Customs website. Quote Link to comment Share on other sites More sharing options...
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