In which the EU unintentionally declares war on knitting designers

December 2, 2014 7:45 PM

Starting on January 1st, 2015, the European Union will require sellers of digital content to collect VAT taxes based on the location of the buyer, not the seller. The new policy, known as VAT MOSS, requires sellers to register for VAT in an EU country, sign up for a "mini one-stop shop" (MOSS) account, collect three pieces of non-contradictory evidence proving the location of buyers, store that evidence for ten years and follow onerous EU privacy rules dictating how the data is stored, and then calculate and pay VAT to every EU member state. These rules apply to anyone selling digital content to the EU, regardless of where the seller is located. EU officials claim that these requirements will not harm small businesses, because they assume most small businesses sell through platforms like Amazon and iTunes which will be responsible for complying with the regulations. Knitting designers, independent e-publishers, and handbag-pattern publishers disagree, claiming that the new regulations will put independent sellers out of business or force them to sell their products through the very huge multinational corporations whose tax-dodging practices the law was apparently meant to target.

Today, after a week of answering questions via Twitter, the British tax office participated in a webinar to try to clarify policies to increasingly confused and concerned UK microbusiness owners. Critics are tweeting under the hashtag #VATMESS

posted by ArbitraryAndCapricious (65 comments total)

Well that seems extraordinarily complicated.
posted by So You're Saying These Are Pants? at 7:47 PM on December 2, 2014 [2 favorites]

This will not end well.
posted by sparklemotion at 7:51 PM on December 2, 2014 [2 favorites]

Basically: if you're a knitting pattern designer in Chicago and someone in the EU buys one of your patterns, you're now responsible for paying taxes to the European country in which that person lives. You must register for a tax number in an EU country (you can pick which one) and then register for a MOSS account. You must collect three non-contradictory pieces of evidence that prove where the person lives. You must store that information for ten years, and you must follow EU privacy laws when you store that information, which includes a requirement that you use a server based in the EU. You must keep track of the VAT rates in each of the 28 EU member states and make sure you pay the correct rate.

I don't think anyone in Chicago is actually going to do that, although the EU tax people swear they're going to enforce it on non-EU businesses, but the same requirements exist if you're in London, and then the government will come after you if you don't do it.
posted by ArbitraryAndCapricious at 7:54 PM on December 2, 2014 [7 favorites]

Ha ha. No.
posted by Sportswriters at 7:57 PM on December 2, 2014 [6 favorites]

God, someone is going to fucking clean up making some sort of simple square/paypal-like app based service that deals with this for some flat rate off the top fee.

Like they get X percentage of the total, and then you get invoiced once a month for the taxes. they rent the EU-based servers(couldn't one already do this with AWS/ec2?) and deal with everything for you. You just make an account and give them a CC or whatever.

The real news, and whether or not said app/service will spring in to existence and get huge(at least, etsy sized huge), depends on whether they start seizing stuff at customs or whatever from US sellers who just go "meh, fuck that".
posted by emptythought at 8:07 PM on December 2, 2014 [2 favorites]

emptythought: "The real news, and whether or not said app/service will spring in to existence and get huge(at least, etsy sized huge), depends on whether they start seizing stuff at customs or whatever from US sellers who just go "meh, fuck that"."

I don't know a lot about VAT, but the OP is discussing digital assets. ITunes, Steam, Google Play, Microsoft Store, etc. Last I checked, network traffic from London doesn't go through customs.
posted by pwnguin at 8:12 PM on December 2, 2014 [3 favorites]

Does anyone at the EU head office know how the Internet works?
posted by aaronetc at 8:27 PM on December 2, 2014 [23 favorites]

A threshold would cure the problems this represents. I don't know why they thought implementing it without one would be a good idea.

The real news, and whether or not said app/service will spring in to existence and get huge(at least, etsy sized huge), depends on whether they start seizing stuff at customs or whatever from US sellers who just go "meh, fuck that".

Read the article. This only applies to digital content. There's no seizing to be done.
posted by Thing at 8:28 PM on December 2, 2014

I'd bet this ends up getting handled by the payment processors. No small business is building their credit card infrastructure on their own, and it would be a great product for a company like Stripe to include in their services, much like emptythought suggests.
posted by Amplify at 8:29 PM on December 2, 2014

Does anyone at the EU head office know how the Internet works?

They sure do. But Amazon figured out how the internet works twenty years ago. Therein lies the problem this is meant to fix. Its basically the same as with Sales Tax in the US.
posted by Thing at 8:30 PM on December 2, 2014

Am I being too cynical here, or was there possibly some element of opening the way for someone to start a service as described above in this thread and thereby to clean up in the design and implementation of this law?

...nah. I am being too cynical, aren't I.
posted by seyirci at 8:32 PM on December 2, 2014 [1 favorite]

Except no US state, to my knowledge, claims that they're going to enforce collection on non-American sellers who sell online digital content to buyers in that state.
posted by aaronetc at 8:34 PM on December 2, 2014 [3 favorites]

God, someone is going to fucking clean up making some sort of simple square/paypal-like app based service that deals with this for some flat rate off the top fee.

Think about transnational merchants with a strong brand that already do business in both countries and have already solved this problem internally. Amazon could step in and sell their tax software as a web service, either directly to vendors or through middlemen.
posted by a lungful of dragon at 8:38 PM on December 2, 2014 [1 favorite]

One of the big problems with the EU is that this is how they "solve" problems - with huge, cumbersome processes that please no one and make everyone's lives far more complicated. Preferably, the smallest players will get hit the hardest. Bonus points are awarded in Brussels if small operators decide to stop doing business rather than figure out how to comply with the rules.

If the EU thinks it can find a way to collect these taxes from anyone outside of the EU, my message is: best of luck.
posted by 1adam12 at 8:54 PM on December 2, 2014 [9 favorites]

Europe is trying to make companies pay their tax. This is being done on the general rule of taxes being paid where the money was earned. The main reason for this is many businesses are not actually located where they are registered.

Naturally, big business doesn't like this and is aggressively lobbying behind the scenes.

Their favourite trick is to find some ickle cute business and pay them to complain loudly. There are others, such as conflating a national rule as though it was an EU one.

Add in a bit of yellow journalism, hyped up headlines in the press and you've got your 'EU goes bonkers' type stuff. Here's some info on the move.
posted by quarsan at 9:02 PM on December 2, 2014 [33 favorites]

Like they get X percentage of the total, and then you get invoiced once a month for the taxes.

VAT is paid by the buyer at the time of purchase, so the payment processor wouldn't even need to invoice the seller. They'd just take the money from the transaction.

Another problem is that consumers in many (most?) EU countries aren't used to seeing prices before tax. If Amazon displays something as EUR 100, then that's what you pay at checkout. This law will mean that websites/services will need to adjust how they display prices, or try not to lose customers at the checkout page when they realize that their EUR 100 purchase is actually going to be EUR 120. That kind of thing is perceived by consumers as bait-and-switch, and takes a lot of getting used to.
posted by rh at 9:07 PM on December 2, 2014 [2 favorites]

The goal here obviously is to increase tax revenue. But I'd bet big money the actual outcome will be decreased revenue due to reduction in taxable commerce.
posted by Chocolate Pickle at 9:58 PM on December 2, 2014 [1 favorite]

Or you know, they could just make Google, Amazon, Apple, Microsoft etc pay their fucking taxes.
posted by fullerine at 10:17 PM on December 2, 2014 [14 favorites]

Or you know, they could just make Google, Amazon, Apple, Microsoft etc pay their fucking taxes.

Isn't that the point? Those companies register their business in the country with the lowest taxes and sell digital services to consumers in higher tax countries. The change is that taxes are now paid in the consumer's country, closing that tax loophole.
posted by TheophileEscargot at 11:40 PM on December 2, 2014 [9 favorites]

I've been considering starting a Patreon, and am so excited to try and figure out how these new rules will impact that.
posted by aedison at 11:44 PM on December 2, 2014 [3 favorites]

Relax. The proper European way to handle complicated EU rules is to shrug and carry on as if nothing's changed. It's only the British who fume and tie themselves in knots over how unworkable they are.
posted by pipeski at 1:49 AM on December 3, 2014 [11 favorites]

silk road: Where you can find your cocaine, LSD, guns, hitmen, and sweater patterns.

wait, what?
posted by el io at 2:18 AM on December 3, 2014 [7 favorites]

It's only the British who fume and tie themselves in knots over how unworkable they are.


It's practically only the British who have a very high threshold over which "small businesses" have to register for VAT. Only if the company's turnover exceeds 81k a year do they need to start charging VAT to their customers. Or, in american terms, its like not having to charge Sales tax until you reach 130k dollars of sales. Everyone else in Europe who opens a company will have registered with their tax authority and dealt with it already as most thresholds around the EU are low or nil. So no one in the rest of the EU is really concerned because their accounting software will be updated accordingly and they are used to calculating VAT anyway. It's really just one more field on your VAT database table, isn't it?

This is actually great news. All this money being payed to Apple and Amazon and such will actually come back home to the Treasury's pocket for a change. British knitting pattern sellers giving up on their businesses because they can't be arsed to do the accounting is a very small price to pay.
posted by Marauding Ennui at 3:25 AM on December 3, 2014 [2 favorites]

Read the article. This only applies to digital content. There's no seizing to be done.

I missed that part, but as someone else also commented on this is still fertile ground for a service like this that remarkets your stuff on compliant sites, or one that just transparently handles payment processing for you.
posted by emptythought at 3:54 AM on December 3, 2014

> "Another problem is that consumers in many (most?) EU countries aren't used to seeing prices before tax ...That kind of thing is perceived by consumers as bait-and-switch, and takes a lot of getting used to."

As a minor note -- in stores, this is true. Online, while VAT is included, service or shipping charges added on after the fact are not rare. I'm pretty sure no one likes them, but a surprise charge won't be something no one has ever seen before.
posted by kyrademon at 4:01 AM on December 3, 2014

The logo for the European Commission, the bureaucratic arm of the EU that implements these regulations, is literally a stack of paperwork.
posted by cardboard at 4:24 AM on December 3, 2014 [3 favorites]

Out of pure, genuine curiosity -- what will happen to Sally Mae's Knitting Patterns of Outer Goshen, Wisconsin, if Sally Mae just says, "Nah, fuck off, EU."? Can the EU block people from being able to (easily) purchase her knitting patterns? Or go after the buyers for not paying tax? Or...?
posted by Etrigan at 4:28 AM on December 3, 2014

> God, someone is going to fucking clean up making some sort of simple square/paypal-like app based service

It's a rather sweet deal for Apple, Amazon, et al: some of the money they lose from the ending of corporate tax fraud is recouped from providing this service. But yeah, reads like a typical UK "the euro-sky is falling!!!1!" story.
posted by scruss at 4:47 AM on December 3, 2014

I'm inclined to suspect that the obliteration of nano-businesses in favour of the corporations is a deliberate result of negotiations between the departments of the EU and those corporations. Who will probably find a whole new set of tax loopholes anyway.
posted by Grangousier at 4:50 AM on December 3, 2014 [2 favorites]

what will happen to Sally Mae's Knitting Patterns of Outer Goshen, Wisconsin

Exactly what's happened to her for the last eleven years. The U.S. isn't relevant in this case.
posted by Grangousier at 4:51 AM on December 3, 2014 [2 favorites]

Can the EU block people from being able to (easily) purchase her knitting patterns? Or go after the buyers for not paying tax? Or...?

the two options i can think of on the technical side, not the legal one, are some sort of firewall/blacklist at either an ISP or national level(which, yea, not happening... at least yet) or strongarming the card processing companies or just card companies themselves to not allow transactions from cards registered in the EU with outside companies that don't.

at which point everyone starts paying for shit like this with paypal, or dwolla, or a kabillion other things... and then what?

the worst i can see from this barring above-board places that will want to use some service that streamlines this is that people use whatever the easiest and laziest method of payment middlemanning that can jump it. because really, how can they enforce stopping something that works like "add funds to payboxpalmathing, which is essentially buying payboxpaylmathing monopoly money>transfer virtual sillybucks within there to someone in whatever country has the thing you want>they withdraw the sillybucks in to real meatspace funds.

That's how paypal already works, essentially. Since unless you have a paypal debit card the money in their system might as well not exist(and yet somehow they're not a bank! lololol).

This already gets used for some silly questionable stuff and tax dodging and whatever. How the fuck would they stop that? Especially if the money is going in to $PAYMENTSERVICE and becoming funbux before it leaves that outside-the-eu country.

i just don't really get it.
posted by emptythought at 4:52 AM on December 3, 2014 [1 favorite]

British knitting pattern sellers giving up on their businesses because they can't be arsed to do the accounting is a very small price to pay.

And I think that's basically the bottom line. Europe is pretty anti-entrepreneurial, regardless of their rhetoric to the contrary, and if they create an atmosphere in which it's impossible for small and start-up digital businesses to exist, then they see that as a small price to pay for achieving more-important goals.

Out of pure, genuine curiosity -- what will happen to Sally Mae's Knitting Patterns of Outer Goshen, Wisconsin, if Sally Mae just says, "Nah, fuck off, EU."? Can the EU block people from being able to (easily) purchase her knitting patterns? Or go after the buyers for not paying tax? Or...?

What the tax people are saying is that they'll figure out the penalty that Sally Mae owes and then get the tax authorities in Wisconsin to collect it. The tax authorities in Wisconsin will do that because the EU is on the forefront of a coming revolution in taxation, and Wisconsin will want to cooperate so that they can collect taxes on EU businesses when they wise up and adopt the EU's tax policies. Whether that will actually happen is very, very questionable. I think in the end this is going to give non-EU small and microbusinesses a very big advantage over EU businesses.

I'm inclined to suspect that the obliteration of nano-businesses in favour of the corporations is a deliberate result of negotiations between the departments of the EU and those corporations. Who will probably find a whole new set of tax loopholes anyway.

That's one of the main theories I've encountered while doing research about this. Basically, the deal for Amazon et. al. is that they'll have to pay higher taxes, but they'll gain a lot of business now that it will be impossible to be a small independent digital business in Europe and sellers will have to sell through them.
posted by ArbitraryAndCapricious at 4:53 AM on December 3, 2014 [1 favorite]

So, the EU commission wants payment processors in private markets to develop totally secure long-term location and identity database servers for EU residents? I'm sure that will work out well.
posted by ennui.bz at 4:54 AM on December 3, 2014

Also, how in the world are they supposed to verify your current location when you make an internet purchase? Have they not heard of VPNs?
posted by ennui.bz at 5:08 AM on December 3, 2014 [2 favorites]

In the webinar/Q&A with the representative of the UK tax authorities it was stated explicitly that refusing to provide a service to anyone outside one's own country would be considered discriminatory and would be illegal. It's not possible to get round this by simply not selling into the rest of Europe. Because free trade.
posted by Grangousier at 5:24 AM on December 3, 2014 [2 favorites]

The guidance is pretty clear that they can use whatever information they like to verify your location ennui.bz, including self-reported data by the buyer. So long as you have two pieces of consistent data (eg, credit card combined with a self-reported location, or geo-located ip) then that's sufficient. Things get more complicated if you have conflicting data, in which case you need to acquire more information from the buyer, but the overwhelming majority of online purchases aren't going to change all that much. What is going to change is the tax paying at the back-end.

It seems to me that a lot of the noise over this change seems to be people getting stressed out by the uncertainty more than anything else. Things will shake themselves out.
posted by pharm at 5:26 AM on December 3, 2014 [2 favorites]

I don't understand the affront here, or the extremely biased summary of this link: its important companies start paying taxes in the areas they are making profits in. We've delivered sophisticated markets and infrastructure that allow companies to make a profit, said markets and infrastructure are not cheap and have been created with considerable investment from government. Why should multinationals get a free ride?

As pharm mentions, the actual guidances involved aren't particularly onerous, seems like a completely reasonable step, and something more countries should be doing.
posted by axon at 5:48 AM on December 3, 2014 [2 favorites]

It's almost like they want UKIP to win
posted by fearfulsymmetry at 6:07 AM on December 3, 2014

Why should multinationals get a free ride?

I don't think anyone is saying that multinationals should get a free ride. (And for what it's worth, the Knit-o-Sphere, which is primarily where I've been following this, tends to lean pretty far to the left. I haven't heard anyone complaining about the idea that Amazon and iTunes should pay their fair share of taxes.) The issue is that the exact same regulations cover someone who is making £1000 a year in a business that she (and it does often seem to be women) is running out of her spare bedroom. In the UK, small and microbusinesses are exempt from VAT on physical goods and services, but anyone making even a penny in digital sales is subject to the same VAT rules as Amazon. If digital sales were handled the same way as physical sales, it wouldn't be as much of a problem, at least in the UK.
posted by ArbitraryAndCapricious at 6:11 AM on December 3, 2014 [1 favorite]

*shrug* I'm not sure what the problem is. I'm just going to start getting my knitting patterns from China.
posted by happyroach at 6:53 AM on December 3, 2014 [1 favorite]

I cannot help but compare the general attitude in this thread to the attitude displayed in this thread.
posted by kariebookish at 6:57 AM on December 3, 2014

I really don't understand any of this, but here's a blog post from knitted hat designer Woolly Wormhead about it. She goes through how various platforms that sell knitting patterns seem to be dealing with the situation. I've followed her blog since my early days knitting and have made a bunch of her hats, so it's hard to think of her career as a "small price to pay."
posted by Squeak Attack at 7:20 AM on December 3, 2014 [8 favorites]

One way out for knitting pattern shops could involve the distribution of physical content.

Make downloadables free but encrypt them. The not-for-free keys for decrypting content could be sent through the mails.

This may be as or more cumbersome than VAT compliance.
posted by mistersquid at 7:27 AM on December 3, 2014

I don't understand the affront here

A thing that's a problem is that there is a size of business below which it's simply not practicable to register for VAT (in the UK) or to keep track of all the different rates and thresholds of VAT throughout Europe (and register in each of those countries), as well keeping to all the data requirements, and it's those people who are particularly upset. It doesn't seem reasonable that the requirements for making tens or hundreds or even a few thousands in sales should be as bureacratic as those on Amazon or Apple. From the individual's point of view it appears to be a situation where if you exchange money for a good or service (of however small an amount) you are in danger of bringing the tax apparatus of two countries down on your head, and the authorities have not managed to assuage people of that fear, in fact they've increased it, firstly by only allowing news of the change to spread by rumour, secondly by what they've actually said about it.
posted by Grangousier at 7:36 AM on December 3, 2014 [1 favorite]

I don't think anyone in Chicago is actually going to do that, although the EU tax people swear they're going to enforce it on non-EU businesses

I'm not sure why the EU thinks it has any jurisdiction over non-EU businesses owned by non-EU citizens not resident in the EU.
posted by one more dead town's last parade at 7:39 AM on December 3, 2014 [2 favorites]

Agreed that the primary problem here is threshold. Had there been a reasonable threshold under which the regulations didn't apply, then this wouldn't be the compliance nightmare that many small shops fear it will become.
posted by dejah420 at 8:20 AM on December 3, 2014

I'm not sure why the EU thinks it has any jurisdiction over non-EU businesses owned by non-EU citizens not resident in the EU.

That does seem like an extraordinary leap they're making simply because it's how things sort of worked back in the day of only physical goods. If the state of Wisconsin thinks its citizens should be beholden to EU taxes because they received money from an EU citizen for sending some data across the Internet* why aren't Wisconsin citizens beholden to England's libel laws when discussing an English person? We might as well buy black helicopters and start a Western World police force just to satisfy Alex Jones listeners. I think most US states would turf out any government that tried to enforce it and I'm 99% confident an attempt to do so here in New Hampshire would be tantamount to assisted suicide.

The Internet has created a whole host of interesting problems to solve and forces us to look at ourselves (hopefully) as citizens of the World and not just our locale or nation; it's unfortunate but unsurprising rich companies with lawyers have made this work for them while individuals keep getting screwed. I'm as tired of slippery slope arguments as the next guy, provided he isn't Sisyphus, but it would be good to step back and ask why this all makes sense. Customs duties and sales tax on physical goods make sense: someone has to pay for the infrastructure to make import/ export possible or you get a Free Rider problem and taxing sales rather than income can be a fairer approach to taxing citizens. But I don't see how this concept follows directly and wisely from what has been true in the past.

As always, I'm haunted by Larry Lessig's Code; at the time I thought the idea of code we wrote enforcing laws and resulting in terrible restrictions was a worst-case scenario but now it all feels like business as usual.

* I appreciate someone has to pay for the infrastructure but that's a different argument and it seems like large corporations sending video and sound reap a much larger advantage without paying anywhere near the same percentage as this proposes.
posted by yerfatma at 8:23 AM on December 3, 2014 [1 favorite]

The issue is that the exact same regulations cover someone who is making £1000 a year in a business

Why should any business get a free ride?

A thing that's a problem is that there is a size of business below which it's simply not practicable to register for VAT

It doesn't actually seem impractical, that seems pretty subjective to me. Besides, I've seen few small business selling digital goods that didn't use Paypal or some such and I imagine they'll take away most of the registration problems themselves.

Is anyone else concerned about the knee-jerk response in the media, nearly 100% of it negative?
posted by axon at 9:13 AM on December 3, 2014 [1 favorite]

"Why should any business get a free ride?"

Because at some point, the cost of administering and collecting the taxes outweighs the profit that the shop would make, and discourages new businesses from starting without a larger capital base.
posted by klangklangston at 9:31 AM on December 3, 2014 [8 favorites]

Why should any business get a free ride?

Because at a certain level, the costs to businesses to follow these laws and the costs to governments to enforce them are just not worth it. You don't want to make it too hard to start up your own small business, which is why there are usually exemptions for small businesses -- freedom from sales taxes for a while, lower income tax rates, limits on what you are obliged to spend if your payroll is low enough, etc.
posted by jeather at 9:32 AM on December 3, 2014 [5 favorites]

If you had been following the passage of the Tobacco Products Directive (overseen by a fellow accused of soliciting bribes from at least one tobacco company then rapidly retiring to the Caribbean with a small fortune but still passed afterwards) this would come as no surprise.
posted by K.P. at 9:42 AM on December 3, 2014

That does seem like an extraordinary leap they're making simply because it's how things sort of worked back in the day of only physical goods.

Except that the foreign seller was never required to collect VAT; it was collected from the purchaser when the product went through customs.

This is equivalent to claiming that they can force a seller in Chicago who sells tangible goods in person in a brick-and-mortar store to identify EU residents, collect VAT from them, and remit it to their country of residence. And that's clearly nonsense.
posted by one more dead town's last parade at 11:05 AM on December 3, 2014 [1 favorite]

axon: "Why should any business get a free ride?"

Why should anyone get a free ride? Have you ever used a sidewalk? Then you must pay a walking tax. You'll need to complete and submit a three page form with supporting documentation and pay the one cent tax each time you take a step before you can take another step. You must pay regardless of where you walk. You'll also need to have an approved bank vault and security system installed in your house to store those forms for ten years. There are serious consequences for noncompliance. This 4000 page document lists your obligations.

Don't get me wrong. I think everyone should pay their fair share. I just don't think heavy-handed bureaucracy that favors big businesses with large accounting departments at the expense (even demise) of small businesses who don't is the way to get there. It's almost like the big businesses wrote the law themselves.
posted by double block and bleed at 3:48 PM on December 3, 2014 [3 favorites]

Presumably the language covering international businesses is purely to stop the big guys like Google/Apple/Amazon trying to re-arrange their shell companies so that sales to EU come from outside the EU. Those companies will still have offices in the EU which will allow the EU to come after them even if all the shell companies are technically somewhere else.

Mae's Knitting Supplies in Wisconsin will be ignored.
posted by markr at 4:35 PM on December 3, 2014

Oh, you'd like to think that, markr, but you'd be wrong. There are over 4 million knitters on Ravelry (think knitter Facebook) and it seems like at least half of them are trying to sell patterns to each other, in my jaded opinion (I've been in knit publishing full time for 10 years now).

Some of the largest/most popular knit designers/companies are UK-based and several are pulling in 6 figures and up on digital sales. Really. This affects small businesses, it isn't any less valid because the vocal ones happen to be women who everyone think earn nominal amounts of pin money from their efforts.
posted by bitter-girl.com at 5:07 PM on December 3, 2014 [3 favorites]

I was specifically talking about US companies selling to the EU. If they have no offices or presence in the EU they can presumably ignore this. Sellers in the EU will have to comply, and multinationals who have offices in the EU will have to comply because the EU can just go after the EU arm.
posted by markr at 5:51 PM on December 3, 2014 [1 favorite]

If you're pulling up six figures in digital sales, then yeah, you should be paying the tax. Threshold should probably be in the mid-to-low five figures.
posted by klangklangston at 7:46 PM on December 3, 2014 [1 favorite]

Why should any business get a free ride?

Because cutting small businesses a break encourages entrepreneurship. Think about it this way. We currently have a model for how businesses get started. Some dude (and it is usually a dude) has an idea for a tech startup. He finds an angel investor who gives him a couple of million dollars (or pounds, or euros) to get off the ground. He hires a bunch of people and makes his product. He sells it through a major corporate retailer like the Apple App store. He sells his company to a multinational and retires. The end. This dude is going to have no trouble complying with the VAT MOSS regulations. He'll be selling through the App Store, which will take care of it, and besides, he has a couple of million dollars. He can hire a bunch of accountants to handle it for him.

So here's how an online knitting pattern business gets started. Ysolda Teague, an English literature student at the University of Edinburgh, takes up knitting because she has always liked to sew, and she doesn't have room to sew in her tiny dorm room. She finds Knitty, an online knitting magazine, and figures that she and five other weirdos are reading this random knitting website. She sees that they have submission guidelines and thinks "what the hell; I could design a pattern." She designs and submits a pattern, Knitty accepts it and puts it on the cover of their next online issue, and the next day she finds that she has 10,000 hits on her personal website. It turns out that a lot more than five people were reading that knitting website! She starts selling patterns on her website, and by the time she graduates from university, she realizes that she's making enough money from selling online patterns that she can support herself and doesn't need to get a real job. Now, ten years after she designed that initial pattern, she's making a lot of money off of her patterns, e-books, paper books, workshops, etc., and she can afford to hire someone to sort through the VAT MOSS mess for her. But what if that requirement had existed when she was a 19-year-old student selling patterns out of her dorm room? The business that she has today wouldn't exist, because no 19-year-old student is going to have the time or resources to sort through that mess. Better just to knit her patterns herself and not worry about selling them.

Now, obviously a lot of people think that would be no big deal. It's just knitting. It's just women's stuff. It's not as important as the next super-important iPhone game, which will probably not be affected by VAT MOSS. I think that's wrong, because Ysolda is a really talented designer, and her patterns make life better. (Seriously. Don't you want to learn to knit just so you can make this stuffed puppy?) But I also think that it's a big deal because there should be space for startup businesses created by people who aren't going to be recognized by angel investors, who tend to be rich, white men who generally see potential in other middle-class-and-up white men. There should be room for businesses that exist outside of the spaces created by multinational corporations. Ysolda has, as far as I can tell, done it completely on her own: she has self-published all of her patterns, e-books and paper books and sold them through her website. And that matters, because she wants to do things that she might not be able to do if she were beholden to corporate publishing, like publish a book where every pattern is modeled both by her teeny-tiny self and by a plus-size model who is really plus size, not fashion-industry plus size. Do you really want rich people and rich companies to be the sole arbiters of which small businesses get to exist? Because that's the world we're looking at if the only way to start a business is to have an accounting staff at your disposal from day one.
posted by ArbitraryAndCapricious at 8:06 PM on December 3, 2014 [7 favorites]

Although the knitting pattern industry is a very clear example of how this legislation fails small companies and sole traders, I'm not sure it's useful to paint the issue as gendered like that. The same problems also apply to people who want to sell ebooks, fonts, music, games or anything digital outside the big aggregators (iTunes store, Amazon, Google Play, etc) whether they are penised or ovarised.
posted by Grangousier at 2:20 AM on December 4, 2014

FWIW, there's at least a perception among activists on this issue that it's pretty gendered. Women are overrepresented among owners of digital microbusinesses, and the sectors in which women are overrepresented seem to have been ignored by the people who crafted and communicated these regulations, who sometimes refer to it as the "App tax." The UK tax authorities have agreed to meet with a group of eight business owners to discuss their concerns, and six of the eight are women. Running a digital microbusiness is an appealing option for mothers looking for flexible work arrangements, which is why there was such fury when the UK tax authorities finally agreed to address microbusiness's concerns in, of all things, a Twitter Q&A and then scheduled it when many of the affected business owners were picking their kids up from school. All-digital businesses are also appealing to people who have limited access to startup capital, and many women are in that situation. I don't think this was at all intentional, but it does seem like the businesses affected by this are disproportionately owned and run by women.

As some of the comments above have shown, there's also some misogyny in the responses, as if any small, woman-owned business can be dismissed as "ickle" and "cute."

Sorry. I'm commenting too much on my own thread! And I should probably say that I'm not directly affected in any way by this, but I find it sort of fascinating.
posted by ArbitraryAndCapricious at 6:38 AM on December 4, 2014 [1 favorite]

That example is a great example of why small businesses (which let us call somewhere under six figures of revenue a year) should be exempted from this.

I don't understand why pattern and book makers don't want to charge VAT on top of the same price they charge for everyone else, though. I suspect there's something cultural that I know nothing about.
posted by jeather at 7:18 AM on December 4, 2014

jeather: "I don't understand why pattern and book makers don't want to charge VAT on top of the same price they charge for everyone else, though. I suspect there's something cultural that I know nothing about."

VAT is fairly complicated, though most of the usual complication is simple because the supply chain is one, maybe two steps long.

What makes this change complicated is that you'll be charging based on the buyer's location, which you cannot know very well online. How do you go about collecting three pieces of location data? And how do you even follow the customary practice of advertising the price after VAT? Geo-IP query visitors, and hope their billing address doesn't change the price they already saw after the fact?

Beyond the implementation details, I suspect that people living in low VAT countries wish to retain their competitive advantage. Furthermore, it only applies to digital products. If you print out and mail the pattern, you would presumably be able to act under the normal rules? Finally, it represents an increase in price which typically comes with a decrease in sales; a deadweight loss.
posted by pwnguin at 9:29 AM on December 4, 2014

Beyond the implementation details, I suspect that people living in low VAT countries wish to retain their competitive advantage.

No, what I was asking was based on one of the links posted earlier.

In real terms, although I'm aiming to work with platforms that are VAT-responsible, they won't be swallowing the cost of the VAT, only the administration. Figures show that approximately 32% of my customers live in the EU, and with an average rate of 20% VAT, 20p of every pattern sale at that new price of £3.50 will be covering the costs of VAT. In an ideal world, I'd put the price up to £3.75, as I can't afford to cover the increased costs of production AND the added VAT implications, but I kinda feel that jumping to £3.75 so soon with such little warning and when I've been promising a different price isn't fair on you guys.

Instead of saying "I will work with VAT-responsible platforms and charge everyone £3.50 plus VAT if necessary", she's saying "I will work with VAT-responsible platforms and charge everyone £3.50 including VAT". And maybe I don't know how the platforms work, but it seems odd that everyone pays the same total amount even if the VAT differs. If I order something online, I pay a higher total than someone in Alberta because they have lower sales taxes.
posted by jeather at 9:38 AM on December 4, 2014

I realize this was buried in a paragraph of questions, but:

How do you even follow the customary practice of advertising the price after VAT

As I understand it, in daily European life, prices are advertised post-VAT. When the sticker says 0.99€, thats how much you will pay. Adhering to this system in a variable VAT Eurozone would be difficult.

I suspect the ability of multiple jurisdictions to levy sales taxes is why sales tax is not regularly included in advertised prices -- the Safeway circuluar in the newspaper advertising beef @ 4.99/lb needs to cover multiple city, county, and state jurisdictions, with different funding needs and taxation mixes.

As for why this lady wants to charge everyone the same rather than customize VAT based on location similar to American methods, I suspect most Euopean microbusinesses are using European ecommerce platforms. But really, lets not dismiss the idea that Amazon & Apple are hunting for darling microbusinesses to persuade on their behalf.
posted by pwnguin at 11:02 PM on December 7, 2014

Vince Cable MP, the Business Secretary, has responded to a Change.org petition about this issue. IMO, he doesn't seem to have a grasp of the actual problems in hand.
posted by aedison at 4:20 AM on December 8, 2014