Do I [Really] Have to Deal with EU VAT Tax as a US Seller?

Do I [Really] Have to Deal with EU VAT Tax as a US Seller
Most online sellers are required to collect and file EU VAT tax from customers in EU countries, even if the seller isn’t located in the EU. Are you one of them?

*Disclaimer: This post may contain affiliate or referral links, which means if you make a purchase I may receive a small commission or “store credit” for referring you :)

As a digital product seller in the US, it was strange to think I might have to collect taxes for other countries.  I was recently shocked — and briefly paralyzed — to realize that as infrequently as this seems to be discussed among online sellers (and how few shopping cart solutions actually offer it as an option), most online sellers are required to collect and file EU VAT tax from customers in EU countries, even if the business isn’t located in the EU! 

Once I realized this, I started digging as deep as I could into the what and how of expectations for non-EU sellers like me, and looking into the various online popular shopping carts used to sell online, to figure out which ones actually offered this capability, and I was baffled by how many didn’t offer it as an option at all, or at least didn’t do anything to make it easier for a seller to manage.

So, to quickly answer the question:

>> Do US Sellers Have to Collect and File EU VAT Taxes?  The short answer is generally yes, if you’re selling to customers in the EU.  Almost all US businesses selling to customers in the EU are expected to collect EU VAT taxes from EU customers, and file them quarterly.  This is true even for most digital products, such as e-books, memberships and courses.

It’s complicated to figure out whether your products qualify as needing to charge VAT, but the biggest exception allowing one to avoid VAT seems to be if a product includes some element of human intervention, as in the sale of the product cannot be completely automated, or “passive.” For instance, if you include a group coaching element to your course, or you have to manually send a digital file once someone has made a purchase, you may not have to collect VAT.

Quick Disclaimer:  Before I go on, let me just give a little disclaimer that I’m not a lawyer, financial advisor, or expert in any way on the topic of EU VAT, or taxes in general.  I’m just an online marketer myself, trying to be as informed and equipped as possible on the topic.  I’ll do my best to point to some expert resources so you can do some further research yourself.

How I First Learned About EU VAT and Why it Applies to Me as a US Seller

I first heard about EU VAT only recently (late 2018), via a Thrive Themes webinar talking about why they had decided on SendOwl (an online shopping cart) to integrate with their popular Thrive Apprentice plugin for WordPress (an online course creation plugin that allows you to build online courses on your WordPress site, but that doesn’t inherently allow you to offer paid courses).

In all the research, nerding out and drooling I’ve done over various fancy WordPress shopping carts and membership plugins, course creation platforms, and all-in-one store options, I had heard very little about SendOwl.  To be honest, it didn’t strike me as a particularly impressive product compared to other options, and so I was super intrigued by Thrive Themes’ reasoning around choosing to heavily integrate with and recommend using SendOwl over other, more fancy solutions.

You can hear the webinar yourself for free inside of Thrive University, but to summarize, Thrive’s explanation for recommending SendOwl was fairly simple:

One reason was that SendOwl is fairly simple to set up, and inexpensive to start using, compared to other tools.

But the most talked about reason was the fact that SendOwl apparently allows you to (somewhat easily) collect and manage EU VAT taxes, while MANY other popular solutions do not have this capability included!  Much of the webinar was actually spent educating us on why we need to be collecting EU VAT in the first place, even if we aren’t located in the EU.

Ultimately, Thrive Themes is most confident in recommending this solution as the most simple way to sell courses through Thrive Apprentice, as SendOwl is rather simple to use, and it would be the only plugin needed to provide a membership space, payment processing, and a good way to manage VAT.  Of course, there are other great options that would be more complicated (and more expensive), and likely require at least 2 additional tools instead of the one.

Quite honestly, by the end of the webinar, my mind was blown that this was the first time I was even hearing about VAT, and that I should have it set up as a US seller.  And as I’d already invested in various tools for my own use and testing, I was disappointed to realize how many did not make collecting EU VAT easy on poor little sellers like me, if they even offered it at all.

Here’s a much shorter video (about 8 minutes) from Shane of Thrive Themes going over the gist of the full webinar:

Don’t Panic, But…

After some research, I’m not as panicked as I initially was, but still very aware of how much more careful myself and other sellers need to be when planning for and utilizing their favorite selling tools and systems.  We don’t have to throw our hands in the air and give up, but we need to be aware of what’s legally expected of us, and whether our setup will allow us to be compliant or not.

So, before I go into some tips and possible selling setups and solutions, let’s look at some popular selling tools that are and are not set up to help you collect and file EU VAT tax.

Some Popular Selling Tools That Don’t Include VAT Collection

Each of these tools does NOT include a proper way to handle collecting VAT.  This doesn’t mean you shouldn’t use them, it just means that in order to collect the information you need to properly file VAT taxes, you’ll need to utilize one or more additional services.

  • WooCommerce WordPress Shopping Cart (may be fine with an additional plugin)
  • Lifter LMS Learning Management Plugin for WordPress
  • LearnDash Learning Management Plugin for WordPress
  • MemberPress Membership Plugin for WordPress
  • Thinkific Course Creation Platform
  • Many more, including most shopping carts.

Some Selling Tools That Do Include VAT Collection

  • SendOwl Shopping cart made for selling digital products
  • ThriveCart Powerful shopping cart made for selling anything.
  • Teachable Course Creation Platform.Teachable will actually collect AND file VAT for you, when you enroll in their BackOffice service.  This generally will cost you 2% on all sales, but might be worth it if you don’t want to handle VAT yourself at all.
  • Podia Course and Digital Product Storefront.  I found limited documentation on how Podia handles VAT, but it does seem that it at least allows you to collect it.  I was a little disappointed and wary about this initially, because I was planning to switch from Teachable, until I realized Teachable had much better documentation and even a done-for-you service.  However, since I realized that it appears any Podia shop can be connected to external shopping carts like ThriveCart via Zapier (Teachable only allows you to do this with their $99/month Pro plan), I’ve been doing some tinkering with that, and it could be a great option, especially if connected to something like ThriveCart.

Some Possible Selling System Solutions for Handling EU VAT

If you’re already using or planning to use a tool that doesn’t already allow you to collect VAT tax (ideally automatically, at the correct rates for each country), don’t  panic yet!  You may not need to switch, you may just need to add something additional into your process.

I’ve been brainstorming some possible solutions for various tools, some of which I plan to test myself in the near future.  So, some of these might not work, or there might be a better solution for your needs, but hopefully this will help ease your mind and help you brainstorm your own solutions.

Some Possible Selling Tool Combinations

If you’re using:

  • WooCommerce: Check out the YITH Woocommerce EU VAT plugin.  I haven’t tried it yet myself, but I’ve read that it will collect and automatically calculate VAT rates for you, and even give you a summarized printout of what to expect when you go to pay your quarterly VAT taxes.
  • Teachable: If you already have the BackOffice service by Teachable, they should already be handling VAT taxes for you in the background!  If not, it might be worth looking into it, as this is the only platform I’ve seen so far that will handle everything for you.
  • LifterLMS, LearnDash, MemberPress, etc: If you’re using one of these plugins or something similar, you’ll probably just need to connect it to an additional shopping cart that will allow you to properly handle VAT.  For instance, you could try SendOwl, ThriveCart, or WooCommerce (with an added VAT plugin).  I realize, it’s kind of a pain to have to potentially add multiple plugins, so if you’re worried about your setup getting to complicated, it might be worth looking at something else instead.
  • Thinkific: Unfortunately for Thinkific users, there doesn’t seem to be a good cost-effective solution:/  Other than connecting to another shopping cart such as ThriveCart via Zapier (which requires the Pro Thinkific plan), the only other option that Thinkific recommends is to integrate with Quaderno, which itself will run you $40/month.  Of course, if you’re selling enough that these expenses are a drop in the bucket, than this is likely a great and professional solution for you.

More Info About Collecting and Filing EU VAT

Again, I’m definitely not the tax expert here, so I don’t want to give spell out too much information on the ins and outs of VAT and the expectations for Americans and other sellers outside the EU.  So I’ll just point you in the direction of some resources I found helpful, and encourage you to do some research of your own!

Helpful Resources

Great overview of VAT with helpful FAQs: http://euvataction.org/key-facts/

Thrive Themes Webinar (now part of Thrive University, called “How to Build an Information Product Empire Your Actually Own“) that goes over VAT and why they decided to heavily integrate Thrive Apprentice with SendOwl.  I have the Thrive Themes product membership, but believe you can register for Thrive University and view this course for free.  https://thrivethemes.com/university/

Conclusion

I hope you’ve found this post informative and helpful, and that it hasn’t ruffled your feathers too much as to be discouraging!  But if your mind is a little blown  like mine was, I hope your feathers have been ruffled enough to encourage you to do your own research, and not just take my word about EU VAT tax and the likelihood that you’ll be expected to deal with it as an online seller.

I encourage you to look utilize the resources mentioned above to get you headed in the right direction with requirements and procedures for collecting and filing VAT, and to look into any tools you’re currently using or are thinking of using to sell your products to see what options they include (or don’t include) to make the process possible for you!

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