Wednesday, December 17, 2014

VAT tax and Craftsy and Me, a Horror Show

If you don't own a business anywhere in the world with an online presence, I find myself very jealous of you this week. You did not have to spend several days attempting to make sense of the ultimately completely senseless new VAT tax regulations, and make some hard decisions as to how they affect you. That's how I've spent my week thusfar, and right now I kind of hate Europe. Which really sucks, as I am about to spend almost three weeks there and I don't want to be annoyed with them.

The long and short of it is this: as of 1/1/15, all businesses anywhere in the world who sell a downloadable good (music, e-book, and yes, craft patterns) to an EU customer will have to pay VAT (Value Added Tax, or as I like to call it Violently Acrimonious Tax) to the country in which the customer lives. If you start doing a little research and familiarize yourself with the complete mess this entire thing is, as I have been doing all week, you will soon be hitting the egg nog and your Christmas spirit will be in the toilet. Trust me.

I drafted and sent this letter to several key parties in the EU today. It explains a little more about why I unfortunately will be shutting my Craftsy store paid patterns down, effective 1/1/15.

Dear Sirs,

I am a quilt designer based in Massachusetts, USA, and I find myself this week wishing to go back 250 years to drink a tankard at the Green Lantern with Paul Revere and Sam Adams. Forgive my drama, but it is hard not to feel like this is taxation without representation and I’m all Don’t Tread on Me-ing over here across the pond.

Having just been apprised of this VAT tax this week, as it is getting no press over here at all, and having to do my own mind-boggling, tedious, and contradictory research, and having to scramble to figure out how to adjust my business to either accommodate receipt and payment of VAT or risk massive penalties for my average of two sales a year of a $9 quilt pattern to an EU quilter has quite ruined my Christmas spirit.

The digital download portion of my business, which I accomplish entirely through the Craftsy website, is not the main moneymaker for me, but it is significant enough that I do not wish to lose it. Have you heard the adage “When you buy from a small mom-and-pop business, you are not helping a CEO buy a third vacation home.
You are helping a little girl get dance lessons, a little boy get his team jersey, a mom or dad put food on the table, a family pay a mortgage, or a student pay for college”? That’s my family exactly. We own one home. We have three children, one of whom gets her dance lessons in part through the online downloads sales portion of my business. If I have a really good month on Craftsy, maybe I take everyone out to dinner too. It’s high living at its best.

In three years of having my patterns on Craftsy, I’ve sold six patterns to the EU. Six. Total sales in three years were hundreds of times higher than that, and were 98% USA customers, with my next two big markets being Australia/New Zealand and Canada. Unfortunately, because I cannot control who is buying from me as Craftsy is the middleman, I now must shut down my loyal 98% of my online download customers and 100% of my sales due to .006 of my overall sales history and the possibility of another .006 this year. USA customers are my lifeline in ALL aspects of my business, and shutting this side down will likely have adverse effects elsewhere, including marketing, production, and overall business visibility.

While I do feel all treaded on, payment of the VAT for me would not be a problem if Craftsy were being at all helpful, but they currently are not. There is no way for me to actually collect VAT on a Craftsy sale, so the tax payments would have to come out of my own pocket. I do not have the resources, as a micro-business, to set up or properly keep up with the records you’d like us to keep for ten years as to any EU sales, and “two non-conflicting pieces of data” to show where these sales came from – I can’t even wrap my head around how I would go about that. To say nothing of the cost of registering for VATMOSS, etc. There is no way I can block EU buyers even if I wanted to. Craftsy could do these things as the third party. They do not appear to be willing to do so at this time, although I keep hoping they will see the light. Therefore I see no choice but to close down my shop as of 1/1/15 until such time as the law is changed to set a reasonable threshold for micro-businesses. One sale of any amount is not remotely a reasonable threshold.

I thank you for your time, and I hope that my story is one of only thousands who are begging you to set a reasonable threshold that will allow microbusinesses to function, prosper, and continue to help grow the world economy.

Please help keep my kid in tutus.


Beth Helfter
EvaPaige Quilt Designs
Quilting Hottie Haven blog –

So yeah. That's the plan. No more downloads from me after 12/31, until and if Craftsy gets a clue and collects and files VAT when necessary for micro-businesses like me.

I didn't want to just shut down that side of things without warning, so consider yourselves warned. If you like download patterns and have been thinking of buying one, from me or from other designers, you might want to do it now and call it a gift to yourself. While paper patterns are always available and can be purchased via the Pattern Store page of this blog, several of my patterns are download only, including the popular Motley Spool mug rug, and will cease availability on 12/31. I cannot speak for all designers, but I do know many who are in the same boat and have made the same decision. My Craftsy store can be accessed via the link on the left sidebar, or CLICK HERE.

If anything changes, I'll certainly let you all know. I appreciate your business always and hope that I can reinstate the downloads or find another place to host them, but cannot guarantee anything at this time.


Lisa England said...

I had heard about this VAT because Fat Quarterly digital magazine is also shutting down. I think that's the one I read about. I hadn't thought about US sellers via Craftsy that would also be affected. Thanks for providing some clarity on what this ridiculous tax will lead to. I hate it that it will affect you and other small business owners. I hope Craftsy will provide some help before lots of their sellers shut down.

Marly said...

I live in Europe and I haven't heard about changes to the VAT regulation either. Are you sure it is in the whole of Europe or only in the UK (where it is called VAT - elsewhere there are other names)
I ask because Europe doesn't have one standard rate for the whole of the European Union; each country has its own rates, and exceptions. So, unless Value Added Tax has been harmonised throughout the EU, it's impossible.
I sympathise with your losing income but we're all losers on this one.
One solution would be to block sales to people with European IP addresses, like me, which would require Craftsy putting a filter in their billing procedure. I hope the issue is solved soon, and please don't hate us Europeans!

Jeneta said...

Gee. One day I had hoped to be a designer selling patterns on Craftsy. I think I need a new dream! What a ridiculous sitation. I hope Craftsy are madly working on some kind of solution.

pennydog said...

I took part in the #EUVAT twitter storm earlier this week, but they just aren't listening, saying that the third party is responsible and not to worry about it. It's frustrating because I know the third parties that are US based don't actually want to acknowledge this, as if somehow it doesn't affect them. Here in the UK the VAT threshold is £81k. It should remain there and everyone who needed to be put in place by this law (AMAZON) would be, and the rest of us can get on with our lives.

In response to Marly, it applies to all EU member states, so if you're in Norway or Switzerland, you're OK.... unless you're selling to the rest of the EU then you have to either register for VAT in the country of the sale (and pay them about 10p and do a quarterly return) or register for the VATMOSS thing which isn't free and will cost more than it's worth to do so, plus still with quarterly tax returns. Really, we are all Worldwide losers in this.

It's surprising how little I've found online from the US and Canada perspective. The EU have advised that it's up to the goverments of individual countries to inform their businesses, but I only heard of this a month or so back and apparently it's been on the cards for 8 years, plus it will soon affect physical goods too!

I could choose to go under the radar and not declare it but I'm in that much trouble over a previous mistake with my student loan with HMRC that I would probably get done for fraud. It's such a mess and they're all trying to play it down. This is going to be bad for sellers but also us in the EU who want to buy patterns from the US but soon won't be able to.

pennydog said...

Hi Beth, I have an update.
It appears our Twitter Storm on Tuesday really made them sit up and listen. Hopefully Andrus Ansip will have a short term solution put in place but it's a waiting game- latest information here:

Rebecca said...

Well that sucks big time. You would think that Craftsy would have been more help...but I guess that if they do not get a cut anyway they did not feel the pressure of possible loss income. (You don't pay them do you?)

Unknown said...

I am coming off Craftsy too. I will be closing on the 31st December. It is such a shame as I had only just started this year and it takes a long time to set up a shop and list patterns, but I dare not take the chance when I don't know how to go about collecting VAT to pay foreign countries and I am not registering for VAT when I already pay plenty of tax on the sales I make. Sales of which as you say, only brings in pocket money to help with the expense of the kids.

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