International Taxes - Selling from US

7 replies
Hey guys... The company I work for (incorporated in Delaware where there is no sales tax) sells downloadable software all over the world, and I don't know if we are supposed to charge/collect/pay any international taxes, VAT, etc. We are probably going to talk to a CPA, but I just wanted to see if anyone on here knew the answer...

Thanks!
#international #selling #software sales #taxes
  • Profile picture of the author Caleb Spilchen
    Hey,

    As far as I am aware, you DO NOT need to charge local taxes to any country unless you were to have a physical place of business there... For example, I do very little business within Canada so I don't charge sales tax, but if I did, I would charge Ontario sales tax to residents of Ontario, and to canadian residents I would charge the PST.... However, to anyone else, it would still have no tax added on.

    ****PLEASE NOTE...

    I am NOT an ACCOUNTANT, and I am just speaking from my personal THOUGHTS and IDEAS. I'm not responsible for your usage of this information, damages, etc... I am not liable for any actions against you... etc blah blah blah ****
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    Caleb Spilchen

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    • Profile picture of the author agmccall
      If the company you work for sells software all over the world then they should probably have a lawyer on retainer so don't you think this question should be posed to that person

      al
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  • Profile picture of the author spearce000
    If you sell via a 3rd party processor like ClickBank or 2checkout they take care of all this for you.
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  • Profile picture of the author katiekatiekatie
    Thanks, guys! We're going to get advice from a CPA...I'll write anything on here that seems applicable to most situations.
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    • Profile picture of the author Kate Davies
      Hi

      I don't know if you have consulted a CPA yet, but you definitely should and ask if they know about the new rules coming in to force on 1st January 2015.

      I used to be an accountant but I do other stuff now. I'm certainly no expert in VAT which is why I'm suggesting that you definitely need to consult a professional and make sure that they know about the new changes specifically affecting digital services.

      There are three elements to whether to charge VAT. First the type of supply (and there is some confusion about which digital products and services attract VAT - but software is going to be vatable), second is whether the supplier has to be registered for VAT (depends on their turnover) and finally the Place of Supply.

      Right now the Place of Supply is where it is supplied from - where the seller is based. So I'm based in the UK and my business is VAT registered, so I have to charge VAT to my EU customers. If I make a sale in the UK or any other EU country I charge VAT at the UK rate, but if I make a sale to a customer in the USA or Australia for example, I do not charge VAT. It's annoying but simple.

      BUT!!!! From 1st January 2015 it all changes for anyone supplying digital services in the EU; and the Place of Supply will be where the Buyer is based.

      For those of us in Europe it will be an absolute nightmare. It means that I must charge my UK customers 20%, any customers from Denmark would be charged at 25% and those from Luxembourg 15% etc. There is a new registration scheme coming in called VAT MOSS, because each country has different VAT rates and different registration thresholds.

      Having said all that ... I still don't think it will affect supplies from countries outside the EU, so I'm fairly confident that you won't need to charge VAT to your UK and other EU customers. BUT, I think it is worth checking with your CPA and making sure that they specifically know about the new rules.

      Hope that helps.

      Kate
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  • Profile picture of the author Sid Hale
    Hi Katie,

    Originally Posted by katiekatiekatie View Post

    Hey guys... The company I work for (incorporated in Delaware where there is no sales tax) sells downloadable software all over the world, and I don't know if we are supposed to charge/collect/pay any international taxes, VAT, etc. We are probably going to talk to a CPA, but I just wanted to see if anyone on here knew the answer...
    VAT is a sales tax, not unlike our own state sales tax. It is a tax imposed on the consumer (buyer) at the point of sale.

    Neither tax is imposed on the seller.

    Instead, the various taxing authorities (U.S state or EU country) require the seller to collect the tax on their behalf, and then remit those funds to the taxing authority. It's easier for them to control/audit the sellers than it is for them to have each consumer account for each purchase and remit the appropriate taxes.

    The seller is put into the position of acting as a collection agent of the (state or EU contry) taxing authority.

    There is no facility for you as a U.S company to register as a VAT seller, just as there is no way for a UK company to register as an agent for the collection of Maryland sales tax. Therefore, no EU country (taxing authority) is expecting you to collect/remit VAT, anymore than Virginia expects a Maryland or Delaware business to act as a collection agent for them.

    U.S based companies are under NO obligation to act as a collection agent for foreign taxing authorities. Those taxing authorities DO NOT have any jurisdiction over any U.S. based company, unless that company also has a physical presence in the foreign country.


    I guess this is where I should tell you that I am not a licensed accountant in any state in the U.S (nor in any EU country for that matter), but then neither am I an attorney, an electrician, a plumber, or U.S Senator.

    Hope this helps
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