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Question: Paypal, VAT, B2B, B2C transactions

by perneali45
3 replies
Hi, folks!

We have a question about Paypal, VAT, and B2B vs B2C transactions.

We have a registered online business, selling instantly-downloadable digital products.

We also use a Paypal Business account.

The company is registered within the EU (European Union).

Each product we sell has a specific price. Let's say $20.

So, the Paypal order button would ask a prospective buyer to pay $20.

BUT...

VAT ought to be different, depending on whether our buyer is a business (B2B transaction) or a consumer (B2C transaction).

Also, different VATs need to be applied, depending on whether the buyer lives within the EU, outside of EU, or America, etc...

Is there a way for Paypal to automatically apply any needed VAT to the transaction?

A huge amount of online businesses sell digital products worldwide, using Paypal. So, how do they do it?

Thanks in advance!
#b2b #b2c #paypal #question #transactions #vat
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  • Profile picture of the author DWolfe
    Have you tried reaching out to your Accountant about this information ? You would get better advice from a professional, than some one from here. You could also look into paypal for that info, however you still may be better off talking to a Pro.
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  • Profile picture of the author Frank Donovan
    It's not up to PayPal to collect VAT on your behalf. It's just a payment processor. You'll usually need to incorporate any applicable VAT in your selling prices, depending on the location of your buyers.

    VAT's a complicated issue, but that's why accountants were invented.
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  • Profile picture of the author savidge4
    I have a account or 2 that I had to set up VAT. On a digital level its a pain in the rear end to say the least. The amount of information needed at the time of purchase I think in the end reduces sales. You don't need just a paypal acct, you need a billing address, and then you need to pair that address with the 2 digit country code, that you get from the paypal transaction.

    So, some reading for you:

    a product I use ( intuit ) that actually brings those 2 pieces of needed data together for me: https://quickbooks.intuit.com/uk/blo...ommerce-sales/

    General VAT info - maybe not so much for the OP but for the group at large: https://quickbooks.intuit.com/uk/blo...ommerce-sales/

    Specific VAT rules as they apply to digital goods and services: https://www.gov.uk/guidance/the-vat-...ers#euvatrules

    VAT rates based on category: https://www.gov.uk/guidance/rates-of...s-and-services

    The "Specific VAT Rules" link is probably the MOST informative in terms of detail how to determine if it is B2B vs B2C ( general rule of thumb - if no VAT # is given at checkout then B2C it is )

    Its a bit tricky, but ensuring its done right is one less stress.

    Hope that Helps!
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