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07 January 2015

Let's talk about tax, baby


I'm afraid to say that his lovely picture isn't what this post is about today.  It's more a soothing balm to use as an antidote to the contents of today's post, for I'm here to talk to you about tax - whoopie do!

Please don't run straight for the hills though, because this is a message to customers who would like to buy one of my patterns.  But also, if you buy or sell online you could well need to know about this.

So who does need to know?
Sellers: Anyone, anywhere in the world who sell digital downloads online.
Buyers:  Anyone based in an EU country.
And: All my EU customers!

What's going on?
Due to some changes in the EU VAT laws everybody who sells digital downloads online now needs collect and remit VAT on behalf of their EU customers.  Julie from Little Cotton Rabbits kindly gave me permission to use her explanation here...
"On January 1st 2015 a new EU-devised law will come into force regarding VAT on all automatically electronically supplied services (telecoms, video streaming, e-books, apps, music, pdfs etc) full details are here. Previously VAT has been payable on the seller's location and there were some sensible thresholds in place to nurture the smallest of small businesses and encourage entrepreneurship and trade.
From January 1st the VAT will be payable on the buyer's location and there is no de-minimis threshold - in other words if you sell a single pdf file/music download etc. to anyone in a European country that you are not resident in (whether you as the seller are in Europe or anywhere in the rest of the world) you will be expected to charge VAT at the buyer's country rate and send that VAT to that country's authorities. You will need to become familiar with the 75 different tax rates across the 28 European member states."

(You may want to take a moment to read all of Julie's post about the EU Tax changes here, as she explains it very simply and clearly.)

What does this mean to me?
My EU customers: You can still buy my patterns without problems, but in order to comply with the changes, your orders will be diverted to Love Knitting for checkout and you will need to register with Love Knitting to complete the process.
(Not ideal but options are limited at the moment.)
Please also note that VAT will be added to the pattern price at checkout, once your country is determined.  

My customers in UK and the rest of world: Nothing changes for you!

Buyers online generally: Outside of the EU, you probably won't notice a change. Although many people are closing their businesses because of this new ruling, so it's possible a few of your favourite independent online sellers will disappear. 

EU buyers (inc UK): Well, prices are going to go up for you. Partly because you will now be paying VAT and partly because sellers will end up paying more in fees to comply.
The buying process might become more time-consuming as buyers will need to collect more data from you about where in the world you are.
Some sellers will also stop selling to you. (Some already have!)

Selling online: Anyone who sells the relevant products online will be affected by this unless you have a way of blocking sales to the EU.  (Third party platforms are supposedly responsible for dealing with the changes but as plenty of big names like Etsy, Craftsy, Folksy and Paypal were unprepared for this, you'll need to check what plans (if any) they now have in place.) 

This doesn't sound great, what can we do?
The sad fact is the people who conjured up this law had no idea at all how people buy and sell on the Internet and so the law just doesn't take into account how thousands, if not millions sell online. We need to tell them to make changes.  If you are outside of the UK and even if you are outside Europe, please lend weight to our argument by signing the petition below.  Tell the EU that you are not happy because this affects the whole world, businesses and their customers. 

One more thing...
You also need to know that the EU is planning to bring in this law for all products sold online next year, not just digital downloads.  So if you sell anything online, soon you will be affected.  Also be aware that the rest of the world is planning on bringing in similar laws soon.

That's why it's so important to sign these petitions and get some changes now!

Petition Link

Suspend the current EU VAT laws for micro business

You can read more about the changes and what action you can take on the EU VAT Action website.

: :

Ok folks, that's it
If you made it this far, thank you and well done.
If you signed the petition, thank you very, very much.

Now go and scroll up to the look and look at that nice soothing basket of yarn again to make yourself feel better!



S x




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36 comments:

  1. I have to say that this law really s****! :(

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  2. This seems completely crazy, but EU tax law is not known for being sane... Several questions occur to me though. Why is the situation unchanged for people in the UK - surely they will have to be charged VAT too? Does it make any difference if you are VAT registered? How will the tax authorities monitor and police this? I don't expect you to know the answers by the way - just adding some thoughts to the pot :) Kathryn (Crafternoon Treats)

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  3. Thanks for the link Sandra, I've signed the petition. It's ridiculous. A minimum threshold could easily be set to assist small (micro?) businesses

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  4. Well quite! My understanding is that the UK have said that they will keep their threshold in place for local sales, so as I’m in the UK, I can sell to the UK and not worry about the VAT. But other countries selling to the UK I presume to have to charge the VAT. As for policing it, my thoughts exactly, who knows! I don’t see that they can very effectively, even people who know about it don’t know how to apply it so there’s going to be countless thousands tiny sellers not complying as far as I can see, how can they track them all down?? I think the UK have already basically said that they won’t! — Not official tax advice - make your own enquires. ;)
    Thanks for your comment!

    Sandra x

    Cherry Heart
    ・Blog: sandra-cherryheart.blogspot.co.uk
    ・Boutique: cherryheart.co.uk
    ・Crochet Corner: cherryheartcrochet.co.uk

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    ReplyDelete
  5. Thanks so much for taking the time to sign Jill, that’s great!


    Sandra x

    Cherry Heart
    ・Blog: sandra-cherryheart.blogspot.co.uk
    ・Boutique: cherryheart.co.uk
    ・Crochet Corner: cherryheartcrochet.co.uk

    ・Facebook・Instagram・Ravelry・Pinterest・

    ReplyDelete
  6. Yep, that’s my understanding too.. (of the theory at least!)

    Sandra x

    Cherry Heart
    ・Blog: sandra-cherryheart.blogspot.co.uk
    ・Boutique: cherryheart.co.uk
    ・Crochet Corner: cherryheartcrochet.co.uk

    ・Facebook・Instagram・Ravelry・Pinterest・

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  7. I think that it is outrageous!! I have signed the petition. The economy has been greatly damaged by the big banks, corporations and many corrupt goverments and then they want the small businesses and consumers to pick up the pieces for everything? It is not on.....i I hope the petition is successful, I really do..... Thanks Sandra for bringing this to our attention, Pati x

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  8. It really does suck doesn’t it? I know exactly what you mean about putting things on hold. I was planning to open a Etsy shop, but not sure if that’s a good plan now. Plus I wanted to starting selling some sewing patterns, but that’ll have to be on hold too. :(
    Let’s hope some sense is seen soon!


    Sandra x

    Cherry Heart
    ・Blog: sandra-cherryheart.blogspot.co.uk
    ・Boutique: cherryheart.co.uk
    ・Crochet Corner: cherryheartcrochet.co.uk

    ・Facebook・Instagram・Ravelry・Pinterest・

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  9. Utterly ridiculous..... who are these people sitting around thinking up ways to make life more difficult and complicated for those trying to earn a little by sharing their talents!?!?!?

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  10. Thank you Pati and thanks too for signing, I’m hoping that every little will help. I know that the EU VAT action group is now at least being listened to and this will support them so here’s hoping….

    Sandra x

    Cherry Heart
    ・Blog: sandra-cherryheart.blogspot.co.uk
    ・Boutique: cherryheart.co.uk
    ・Crochet Corner: cherryheartcrochet.co.uk

    ・Facebook・Instagram・Ravelry・Pinterest・

    ReplyDelete
  11. Good post, thanx. I sell patterns on Etsy and I really don't like it how they're not doing anything about this on Etsy! A big percentage of their sellers is from the UK and Europe and have no idea how to handle this. This seriously harms small business owners.

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  12. I know, it makes your blood boil doesn’t it? As someone else pointed out in a forum I was reading, these people making the laws are people who have secretaries to work computers for them, because they don’t know how!

    Sandra x

    Cherry Heart
    ・Blog: sandra-cherryheart.blogspot.co.uk
    ・Boutique: cherryheart.co.uk
    ・Crochet Corner: cherryheartcrochet.co.uk

    ・Facebook・Instagram・Ravelry・Pinterest・

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  13. Well, etsy have known about it for ages and say it is up to the sellers to deal with it. I have already encountered a pattern seller pleading that no one from the EU buys their patterns. The sellers there are looking for etsy to provide a EU block button so no one from those countries can buy their patterns. That works for them as the US is still a huge market. Obviously just selling in the UK restricts things somewhat.
    This means a lack of choice and a hike in the prices that can't be supported. I am already rather lack-lustre at the £5.50 - £6.50 price tag on a simple (a small zipper bag) sewing pattern which is now the norm. I do in fact know the amount of work that it involves, as it was meant to be part of my own business plan for this year. However, that is just greedy and I have plenty of books or free patterns to utilize instead. The idea of a pattern is that you work on it once and then you profit from that work over and over, it is not the same as selling a finished product you need to make each time. The same patterns a short while ago were nearly half that price. Compare the price of a book full of patterns and you can see why one pattern for nearly the price of some cut price books, or perhaps two for a normal priced one is not such a good option. I didn't think about popping a pattern worth £3.50 in my cart and built up a collection. £5 is money though that I need to think about before spending and I do. It is shortsighted because not only will sales be lost, it will be hard to build up a reputation with fewer buyers.
    So these new laws are not good on top of that. Folksy though are not affected as they do not sell automatic downloads. Only this type of digital selling is currently affected in the UK at least. From 2016 (date not agreed on yet), all physical goods will as you say also be affected. Currently, in the UK you can sell patterns without the new laws affecting you if you send the email with the pattern attached manually - just how it used to be done not very long ago. There are also sites which you can sell from that help you comply with the new VAT laws with minimal fuss - Paddle and PayHip. I think Folksy only sell to the UK as well, so there will probably be no issue there. Until it affects all purchases, so selling platforms will just need to shape up. There is no way the majority of small sellers can cope with the administration, knowledge needed and the collection of data (not to mention the ethics of data protection laws).
    It is already destroying micro businesses, I've seen many sellers removing their patterns. I can see that it will lead to people copying designs instead of purchasing them too. The irony is that these laws were set up because of the big businesses not complying with paying their taxes, yet one way around them is for the independent seller to sell on those sites who will manage the VAT for you. A sad time really. US businesses are supposed to be complying but many of them on etsy have no interest in doing so as they can't see how governments in the EU will be able to enforce the regulations. Hmrc says that third parties such as etsy are responsible but they themselves are in no hurry to comply. This will surely affect their business, especially once all purchases are liable for the tax.
    Anyway, I'm hoping for change at some point, but not counting on it!

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  14. Thank you so much for your comment Kate. I agree with so much of what you’ve said, especially the part about the big businesses, it is indeed ironic to think they will end up with more business because of it. I too hope that there will be some changes to help the little guys. I too have heard of many people that are either blocking sales to EU or just packing up because they don’t want the hassle. It is very sad.
    Sandra x

    Cherry Heart
    ・Blog: sandra-cherryheart.blogspot.co.uk
    ・Boutique: cherryheart.co.uk
    ・Crochet Corner: cherryheartcrochet.co.uk

    ・Facebook・Instagram・Ravelry・Pinterest・

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  15. Thanks for the info. I have signed the petition. I have ordered online for some time but only in the last year been buying patterns digitally and would really miss it now. My daughter hopes to start her own business and sell her textile work online when she finishes college in the summet so this may affect her too. I only published my first blog yesterday and don't have any followers yet !! But if I do I will add a link to this post to try to get more signatures for you. (If I can work out how to do it!!!) :)

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  16. It's such a stupid and short sighted law - it's going to really affect small businesses and prevent people from selling things...eugh!!!

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  17. There isn't really a word that adequately describes just how shortsighted and unmanageable this whole thing is. It is going to cost governments far more to administer than they can ever hope to earn. The world-wide aspect is so insane it is almost hilarious - I really want to see the EU enforce the collection of VAT in non-VAT countries. Australia for instance - how can they force a small to mid-size seller in Australia to collect and remit VAT on sales to an EU member country? I don't need a crystal ball to see that this farce will end the same way as Australia's ill-fated Carbon Tax - the cost of collecting the tax was double the amount of tax collected so in the end the government rescinded it. It's just a shame that so many wonderful small entrepreneurs and indi designers will close up shop in the meantime.:(

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  18. Exactly Beth, and the ‘almost' bit is right! If it wasn’t for the fact that many people are going to give up selling online because of this, it would be so bad it would be worth laugh. I expect they do very well out of the big guys, but the cost to administer the collection of a few pounds here and there from a couple of pdfs being sold is just daft! The trouble is, they just don’t seem to realise that’s what they are asking for. Crazy!!


    Sandra x

    Cherry Heart
    ・Blog: sandra-cherryheart.blogspot.co.uk
    ・Boutique: cherryheart.co.uk
    ・Crochet Corner: cherryheartcrochet.co.uk

    ・Facebook・Instagram・Ravelry・Pinterest・

    ReplyDelete
  19. Thanks so much for signing and it would be great if you can share the link too, the more the better! Let’s hope it won’t affect your daughter, or that something is sorted by then.
    Sandra x

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  20. It's so disappointing when something like this happens isn't it. It really hasn't been properly thought through, and it's penalising small sellers so badly. I do hope you don't suffer too many difficulties, it really is so very unfair. Best wishes, CJ xx

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  21. I was reading about this VAT last weekend. Many ppl are not happy. I'm glad Ravelry had the smarts to hook up with Love Knitting. Etsy and Craftsy are still puzzled at how to handle this.

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  22. I'm sorry - but UK is an EU country too!

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  23. It is indeed. As I understand it though, for UK to UK sales there is a threshold in place though.


    S x

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  24. It is very much so. Thank you so much, luckily at this time, most of my sales are through Ravelry and thankfully they managed to get something in place in time. It does limit plans I had for this year though, but hopefully things will plan out. Fingers crossed!

    Sandra x

    Cherry Heart
    ・Blog: sandra-cherryheart.blogspot.co.uk
    ・Boutique: cherryheart.co.uk
    ・Crochet Corner: cherryheartcrochet.co.uk

    ・Facebook・Instagram・Ravelry・Pinterest・

    ReplyDelete
  25. Signed!! I'm in the US, but value my cottage industry businesses way too highly to grasp how anyone thought this was a good idea. I cringe to think how many businesses will fail before this stupidity gets repealed or readjusted.

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  26. Thanks for this post, I was completely unaware about the changes. I was considering selling some of my own patterns online but that will need a bit more thought now! Petition signed!

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  27. Don’t worry, you’re not alone! Sorry to be the bearer of bad news though, as it’s rubbish isn’t it? :( Thanks so much for signing and let’s hope there will be changes coming…

    Sandra x

    Cherry Heart
    ・Blog: sandra-cherryheart.blogspot.co.uk
    ・Boutique: cherryheart.co.uk
    ・Crochet Corner: cherryheartcrochet.co.uk

    ・Facebook・Instagram・Ravelry・Pinterest・

    ReplyDelete
  28. Thank you so much for signing April, everyone from outside UK will help them understand it’s not just the UK whinging! That’s my biggest concern too, the amount of tiny businesses that will go and the amount of people who will now be put off even starting.
    Sandra x

    Cherry Heart
    ・Blog: sandra-cherryheart.blogspot.co.uk
    ・Boutique: cherryheart.co.uk
    ・Crochet Corner: cherryheartcrochet.co.uk

    ・Facebook・Instagram・Ravelry・Pinterest・

    ReplyDelete
  29. I think I'm just going to offer all my patterns for free and put a donate button on my page for anyone that feels inclined to. It makes me sad that a lot of creativity and sharing will get stifled due to this. I'll perhaps use Ravelry for anthing really fiddly or that took a lot of my time to get right.

    Anyway, thanks again for sharing about this.

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  30. Thanks for explaining so clearly ! - I've signed the petition and will keep buying patterns online despite this law to support small business.


    Good luck to all !
    xEva

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  31. Hi Sandra,

    I don't think that this will apply to those of us who are too small to get involved in VAT will it? I know that the threshold for this in the UK is about £81K turnover per annum - which I could only dream about - LOL!

    However, there is some good news about it now, apparently, check out: http://blog.folksy.com/2015/01/08/vat-moss-update-part-two :)

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  32. Hi Debbie,

    I’m afraid that threshold only applies to UK to UK sales, anything sold to the EU, however small the sale should have the VAT charged. You just can’t be too small to avoid this! :( I suppose it’s good that Folksy customers at least have the choice of emailing their files manually to avoid tax (for now), but it’s now much help for those with automated systems!
    PS The link you added didn’t work, so I’ll add it here in anyone is interested: http://blog.folksy.com/2015/01/08/vat-moss-update-part-two
    Sandra x

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  33. Thanks for clearifying, Sandra - have just signed the petition! Marianne xx

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  34. Thank you for the link Sandra - it's the first time I read about a petition and I am very happy to sign (which I have already done) and I will be sending the link to everyone I know. I am here in Germany and it is so annoying for me to see many shops close down or to know that it is such a lot of unnecessary work for the sellers of small items. I have always loved buying patterns that usually sold for a small sum - it's the same feeling like buying a bag of sweets as a child - a small treat in everyday life. So let's hope for the best!

    ReplyDelete

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