As many of you may be aware, EU VAT rules are changing effective Jan. 1st, 2015, such that "electronically supplied e-services" (such as digitally-delivered non-physical goods) will become subject to the VAT rate at the buyer's location, rather than the seller's location. In order to accommodate these changes for our sellers' convenience, our VAT calculation behavior and related Transaction Log details will be changing as follows:



Effective midnight UTC on Jan. 1, 2015, whenever we process an order for sellers who have enabled VAT in Seller Admin > Sales Tax & VAT Settings, we will calculate VAT due for their items which have Sales Tax/VAT enabled by treating the product's Price setting as a gross price that includes VAT. Since conclusive buyer location data only becomes available to us after checkout, we cannot add VAT on top of item prices in the cart before checkout, so accurate VAT calculation can only occur when we process the order after checkout; therefore, our VAT calculation must determine after checkout what portion of your items' gross Price settings constitute VAT. This has the side benefit of allowing you to display and advertise a single flat item price to all buyers regardless of their location and applicable VAT rate.



Products using using Single File Download, Redirection, Send Stored/Generated Codes, or "Package files from other products" (aka "Bundle other products" in our new Admin) which do not also have Shipping/Buyer's Address enabled will be treated as digital goods subject to the buyer's VAT rate, rather than the seller's, and reduced VAT rates applicable to digital goods or specific file types (e.g. ebooks) also will be determined automatically. Products which DO have Shipping/Buyer's Address enabled will be treated as physical goods that remain subject to the seller's VAT rate, so please DO NOT manually enable Shipping/Buyer's Address for non-physical items that use VAT calculation.



For orders subject to VAT, we will perform a GeoIP lookup on the buyer's connection IP and require them to specify their country/postcode in the cart. When we process the order after checkout, we will log the buyer's GeoIP country, their Billing address (or PayPal account's Residence country), and either their Shipping address (if provided for other items in the same order) or the country they declared in the cart, and we will attempt to find a 2-way country match between those items in order to determine the buyer's place of supply for VAT purposes. In the rare case where no two of those items match, we would still process the order without calculating VAT and also email a Suspected Tax/Shipping Fraud notification to the seller, to bring that to your attention and let you decide how to resolve the situation.



Affiliate commissions will be calculated on the item's net price (gross price minus calculated VAT); however, in cases where VAT could not be determined due to a location-match failure (as described above), we will calculate commission on the affected item price(s) minus a generic 25% reduction to account for probable VAT.



You will be able to use your E-junkie Transaction Log to document each buyer's place of supply and determine how much VAT you'd need to remit to relevant EU jurisdictions or to a single VAT MOSS such as the UK's, which would then redistribute any VAT due to other EU jurisdictions. Downloadable Transaction Log export files for sellers using VAT will add new VAT-related fields at the end of each line, which should preserve compatibility with any existing software tools you may be using to process these files.



To take advantage of this new VAT calculation, all you should need to do is make sure VAT is enabled in your E-junkie Seller Admin > Sales Tax/VAT Settings and also select your origin country therein, and enable Sales Tax/VAT in the settings of each product that should be subject to VAT. Since this will treat item prices as gross including VAT, you may also wish to raise your prices to incorporate a "VAT overhead" factor sufficient to cover your total expected VAT liability. If you'd like to stall for time to edit your item prices, you can temporarily disable your sales by setting Seller Admin > Account Preferences > "Make items unavailable for purchase until" some date in the future, then simply delete that setting to resume selling once you've updated your prices. If you wish, you can also email us to request that we should just boost your VAT-enabled items' prices across the board by some percentage:

1https://www.e-junkie.com/ej/contact.htm1

BTW, these are the filename extensions we will be treating as "ebooks" wherever the buyer's location has a special VAT rate for ebooks; these include common e-reader file types as well as primarily-text formats not typically intended to be user-editable:



.pdf,

.epub,

.mobi, .prc, // Mobipocket

.txt,

.azw, .azw3, .kf8, // Amazon Kindle

.rtf,

.pdb, // eReader / Palm Media OR Plucker

.lit, // MS Reader

.lrf, .lrx, // Broadband eBooks (BBeB) / Sony media

.cbr, .cbz, .cb7, .cbt, .cba, // Comic Book Archive / compressed images

.chm, // Microsoft Compiled HTML (usually help)

.djvu, // Deja Vu / compressed images

.fb2, // FictionBook

.xeb, .ceb, // Founder Electronics / Apabi Reader (Chinese)

.ibooks, // Apple iBook

.opf, // Open Electronic Package / Open eBook

.ps,

.pdg, // SSReader (Chinese)

.xml,

.tr2, .tr3, // TomeRaider

.xps, .oxps, // Open XML Paper

Your initial understanding is correct; you should now set your prices with enough built-in overhead to include VAT, then after checkout we will calculate how much of the gross price(s) paid actually constitute VAT for each sale.



You could simply set this "VAT overhead" factor equal to the maximum VAT rate you expect to be subject to (and pocket any excess overhead as additional profit when a buyer's VAT rate happens to be lower), or you could take a savvier approach by looking at your sales history for each EU nation and their respective VAT rates to calculate an average overhead factor that would cover your total expected VAT liability (e.g., one seller recently estimated a 13% markup would do the trick for him).



The reason we're doing it this way is a bit of a compromise necessary to accommodate certain requirements of the new EU VAT rules:



1) Prices displayed or advertised to buyers at any point must be their final price including VAT. Since the VAT rate on digital items will now vary depending on the buyer's location, sellers can't simply display a fixed, common price to everyone and just tack VAT on top of that, and most independent sellers will find it infeasible and impractical, if not downright impossible, to implement custom scripting in their sales pages that would dynamically generate a variable final price (fixed base price + variable VAT amount) to display to each buyer, which would also create an incentive for buyers to falsify their IP address and/or self-declared location in order to avoid/minimize their tacked-on VAT. Moreover...



2) The buyer's IP address and/or self-declared location alone are not considered sufficient to establish the buyer's "place of supply"; the rules require collecting at least 3 unrelated pieces of location data and obtaining a match between at least 2 of those in order to conclusively determine place of supply. Even using one of those initially to guess at the proper VAT rate before checkout would violate point 1) above, if the final location/rate turns out to be different than the initial guess. Most sellers use PayPal for checkout, where we aren't even informed of the buyer's Residence or (if provided) Shipping address until after checkout, so we have to calculate VAT after checkout at least for PayPal, which effectively means doing so for all checkout methods.



You may be interested in the previous, rather extensive discussion about these VAT changes in our main support forum, which influenced the approach we developed and have implemented today:

1http://www.e-junkie.com/bb/topic/68191

EDIT: We've now devised a couple approaches to set different prices on the same products for EU/B2C vs. non-EU/B2B buyers -- see this help page for instructions:

1http://www.e-junkie.com/ej/tips.tax.vat-pricing.htm1



=====



Yes, that's an unfortunate side effect for which we haven't sorted out a workaround yet.



You may wish to create a Discount Code such as "NOVAT" that non-EU buyers can use in their cart to apply a discount equal to the VAT markup you've applied to your prices. You can also use cart customization code to mention that in your cart, if you're using our standard overlay-style cart that appears "inside" your own page -- e.g., you could add the following lines just after the "function EJEJC_lc(th) { return false; }" line in your standard View Cart code:



function EJEJC_config() {

EJEJC_POSTCALL=true;

}

function EJEJC_shown() {

jQuery("#tdPmnt").attr("innerHTML",

"<b>Buyers outside the EU:</b> Enter discount code <b>NOVAT</b> to remove EU taxes included in our item prices.");

}

Unfortunately at present we have no way to make discounts conditional on buyer country, but we'll keep that idea in mind as we continue deliberating how best to handle non-EU buyers when VAT calculation is enabled. Meanwhile, we'd advise watching for orders where your no-VAT discount is applied; if you see any of those which calculate any VAT, that would indicate the discount was applied dishonestly.



Maybe we could devise a way to auto-apply a certain discount whenever the buyer's connection IP is outside the EU and they don't self-declare an EU country in their cart? Of course, that approach could run afoul of EU citizens traveling abroad, or even people who know how to deliberately falsify their IP, but that may be easier to monitor than making sure everyone manually entering a discount code is doing so honestly.

We frankly agree that this situation is onerous and absurd, but please direct your grievance to the parties responsible for deciding and imposing these new requirements, and who also have the power to change them, namely your national and EU government representatives.



This site is one of the most clearly informative resources for laymen that we've found explaining the new VAT rules, and seems to be the foremost in organizing the effort at redress:

http://euvataction.org/



We have no operational presence based in the EU and thus have no representation nor influence with EU decision makers, so we can only do our best to accommodate these new regulations as they have already been enacted, as a convenience for our clientele.



Unfortunately, the EU VAT rules require that sellers must display the buyer's final price including VAT before checkout, and since VAT on digital goods has now become a variable amount depending on the buyer's verified "place of supply", only two approaches can satisfy that requirement:



A) Simple method: set a flat gross price for all buyers that includes VAT overhead;



B) Complex method: conclusively determine each buyer's place of supply before dynamically calculating their final price incl. VAT to display on your sales pages.



The new VAT rules specify that "place of supply" on digital items must be verified by collecting at least 3 unrelated pieces of location data, only one of which can be arbitrarily self-declared by the buyer, and identifying a country match between at least 2 of those data points. For web-based sales, this effectively means obtaining a 2-way match between a GeoIP country lookup of the buyer's connection IP, the Billing/Residence address registered to the buyer's payment account, and any buyer self-declared location such as a Shipping address or cart-selected country.



Therefore, the complex method B described above would effectively require full-featured traditional ecommerce software that not only provides shopping cart functionality but also generates your site's storefront pages and manages checkout as a self-contained process; in this scenario, buyers would need to register for a customer profile account on your site and provide address details to verify their place of supply, so they can be logged into that account before shopping where your storefront could calculate final prices incl. VAT to display to each buyer.



That method simply cannot work with E-junkie, as we provide neither storefront-generation nor customer profile functionality. We merely provide purchase buttons to paste into your own site, and we only obtain sufficient buyer information to verify their place of supply after checkout has already been completed, so the simple method A described above, which was proposed and strongly demanded by sellers in the earlier VAT thread here, was the only feasible approach left for us to implement.

Now, regarding the suggestion to set different prices for non-EU vs. EU buyers, you can already accomplish this right now, without needing to create duplicate products nor maintain separate seller accounts.



One approach would use the &amount= parameter on your button URLs to boost the price on your EU buyers' purchase button URLs. With this approach, your products' Price settings would be the non-EU price, so you'd just use your regular button code for non-EU buyers. For EU buyers, you'd provide separate buttons for the exact same products, but these button codes would include an &amount= parameter to add VAT overhead to the item's base Price setting.



For Add to Cart buttons, the specified &amount= value gets ADDED TO the item's base Price; however, for Buy Now buttons, the &amount= value OVERRIDES the item's base Price setting as long as the &amount= exceeds that base Price. E.g., an Add to Cart button that adds an extra 12.34 to the base Price would look like this (where XXXXXX is your E-junkie Client ID and YYYYYY is your product's Item Number):



<a href="https://www.e-junkie.com/ecom/gb.php?c=cart&ejc=2&cl=XXXXXX&i=YYYYYY&amount=12.34" target="ejejc" class="ec_ejc_thkbx" onclick="return EJEJC_lc(this);"><img src="//www.e-junkie.com/ej/ej_add_to_cart.gif" border="0" alt="Add to Cart"></a>



A different approach would use our "Variants having individual price/weight/stock/SKU" feature, where you'd set up each product with Variants to determine EU vs. non-EU prices. This has the advantage of allowing you to update prices in Seller Admin later without having to edit any button codes already in your page, as long as you don't change the corresponding option values for your Variants. To follow the examples I'll provide here, you'd want to familiarize yourself with our Variants configuration as described here:

http://www.e-junkie.com/ej/help.variants.htm#variants



E.g., a product with an EU price of 30.00 and rest-of-world (ROW) price of 25.00 could Define Variants with Option 1 Name = "VAT" and a configuration like this:



EU,30.00,,,Y,,

ROW,25.00,,,N,,



A neat trick here is that you don't need to depend on buyers to select the proper product option from a dropdown menu; rather, you can provide separate Add to Cart buttons for EU and ROW buyers that hard-code the proper option into their respective button URLs -- this tutorial explains this general technique in more detail:

http://www.e-junkie.com/ej/tips.variants.button-tutorial.htm



E.g., following the example Variants configuration above, your Add to Cart button for EU buyers would look like this (again, where XXXXXX is your E-junkie Client ID and YYYYYY is your product's Item Number):



<a href="https://www.e-junkie.com/ecom/gb.php?c=cart&ejc=2&cl=XXXXXX&i=YYYYYY&o1=Y" target="ejejc" class="ec_ejc_thkbx" onclick="return EJEJC_lc(this);"><img src="//www.e-junkie.com/ej/ej_add_to_cart.gif" border="0" alt="Add to Cart"></a>

To address a few remaining points:



While HMRC in the UK has been able to enact some concessions to ease the burden on UK merchants, those don't apply to sellers based elsewhere in the EU, and our VAT solution has to work for all EU sellers.



VAT on physical products remains subject to the VAT rate in the seller's country, rather than the buyer's place of supply. Products which have Shipping/Buyer's Address enabled will calculate VAT as physical goods at the seller's VAT rate. Since we now have to wait until after checkout to calculate VAT for digital products, as a practical matter we now have to calculate VAT for all products by the same method at the same time. Your Transaction Log will show separate VAT totals for each VAT rate applied to each order.



Our understanding is that EU sellers who have a VAT MOSS in their own country can just file EU-wide VAT returns with their domestic VAT MOSS, which would then redistribute any VAT due to other EU jurisdictions. Offhand, I'm not sure if EU sellers without a domestic VAT MOSS can file with another country's VAT MOSS; perhaps an EU merchant in this position can respond here to clarify.



It appears that non-EU sellers are now expected to collect and remit VAT on digital product sales to EU buyers, though we're frankly hard-pressed to fathom any actual consequences whatsoever that low-volume digital-goods sellers outside EU jurisdiction could possibly suffer for failure to comply. Non-EU sellers can comply by filing all their EU VAT returns with a VAT MOSS in just one EU country (e.g., the UK's VAT MOSS).

The product-level Sales Tax/VAT setting just determines whether that item is subject to whatever Sales Tax and/or VAT calculation may be configured for your account in Seller Admin > Sales Tax / VAT Settings. I see you do have Sales Tax but not VAT configured for your account, so your log should not be calculating VAT on any sales. Thanks for reporting this bug; I will bring that to Development's attention.

PrintChapIs it possible to have two additional fields in the transactions log? I would like a numeric data only tax field and a country of residence field (as in the old logs). This will make sorting and reporting for VAT MOSS an lot easier. Thank you.

Note that your Web-based Transaction Log view is intended as a human-readable format, which differs from the downloadable log export file we provide in a machine-readable format suitable for spreadsheet programs or other software tools. When you have EU VAT enabled, the downloadable log includes new columns at the end reporting discrete values for VAT-related data.



I'm asking Development to clarify what some of these fields are reporting, so we might yet revise the field labels and/or the order in which they appear, but that should be settled within a few days. Once we've got that finalized, our Transaction Log help page will document the new fields:

http://www.e-junkie.com/ej/help.transaction-log.htm

lorilinThe only thing I'm still confused about is shipping charges. I have to charge EU VAT on shipping as well. Now I'm set up to have variable shipping charges based on weight, and whether the customer wants "signed for" delivery or not.



I'm guessing I can edit/redo all my shipping rules so that the EU shipping prices include VAT, and the non-EU shipping prices don't. Am I right about this being the simplest way?

Actually, the simplest thing you could do would be to set Handling as a % of Shipping in your Cart Shipping Settings. That'd just boost all your shipping calculations by whatever % you specify for every order. :^)

The bug that allowed VAT calculation to happen for sellers who don't have VAT enabled has been fixed as of yesterday morning, but Development still needs to retroactively correct the logs for sellers who were affected by the bug, which they said they'd be doing today. This log correction should merely delete any VAT calculated by mistake and then recalculate affected affiliate commissions accordingly.

Our VAT calculation does not add VAT to any transaction; it only calculates after the fact how much of the total price paid would constitute VAT. You can simply disregard any VAT amount(s) we calculate if you determine you are not subject to pay it.