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Sunday, December 28, 2014

VAT Havoc

Well, no doubt many of you have heard of the European Union's new Value Added Tax (VAT) mess that is wreaking havoc lately on sellers of digital items like quilting patterns.  In case you aren't familiar with the new laws, here's the gist.  Basically, anybody selling digital items must charge a value added tax at the rate of the country of the buyer.  

Although the law (taking effect on January 1st) was really supposed to prevent huge companies like Amazon from getting around tax laws in high rate countries, this really poses a problem for many quilt pattern sellers.  Unfortunately, platforms such as Craftsy and Etsy (the two sites that I use to sell my patterns) don't have any built-in measures for complying with the new law, and designers are having to bear the responsibility for collecting and filing these taxes internationally- ridiculous, right?

Currently, both Craftsy and Etsy are (supposedly) working on a solution for their sellers, but in the meantime, beginning January 1st, I will no longer be selling my patterns to the EU.  Although Craftsy and Etsy do not allow sellers to block certain countries from purchases, PayPal does.  Since PayPal is the only form of payment I accept, buyers from the EU will not be able to complete purchases.

Even though I have only sold a handful of patterns to these countries, please know this is a decision I did not make lightly.  I truly hope that Craftsy and Etsy will come up with a more viable solution very soon.

If you live in the EU, I hope you understand the plight of tiny sellers like me.  And of course, my patterns will be still be available to you until January 1st.  Please also know that I am looking into other platforms that are more seller friendly so that I can continue to sell to customers in the EU.  When I find a solution, I'll be sure to let you know!



5 comments:

  1. I had a yarn dyeing business on Etsy, and did a fair amount of international business. Then, the post office went berserk in charging postage and I lost all that business. Sounds like the EU is on the same path. Sometimes governments are really stupid.

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  2. Things are going CRAZY! In my state I have to pay a licensing fees to have a RADIO playing in my office- and it isn't small change!

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  3. Thank you for sharing this post! I have not made much on my digital patterns but have a few planned to launch in the first few months of 2015 and didn't know what to do about the VAT issue. I wondered if I was small enough that I could sneak by but I think what you are doing denying Paypal transactions from EU while it might not be the best customer experience might be the right decision. Please keep posting on the topic as we all value the opinions form others in the industry.

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  4. this UK seller has written a post about the tax situation, she is going to sell her patterns within the EU as emailed documents not downloads which gets around the problem. hope this link helps

    http://littlecottonrabbits.typepad.co.uk/my_weblog/2014/12/new-eu-vat-laws.html

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  5. I believe there is an additional problem with your plan. Apparently, Craftsy does not gather information about the location of it's buyers. So even if you block EU buyers with Paypal, I believe that will not help you with Craftsy sales. It should work for Etsy as I understand it, as long as you don't allow direct checkout (which bypasses Paypal). I sell my knitting patterns on Ravelry, Etsy, and Craftsy so am dealing with this mess.

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