Dealing with VAT
Spoiler Alert: you don't have to worry about it.
The EU recently made a major change to its VAT regulations that requires businesses to pay VAT according to the locations of consumers. This was meant mainly for large companies that have been avoiding higher taxes by establishing presences in places with lower VAT. Unfortunately, this also put a burden on independent creators who sell digital products to customers in Europe.
Going forward, this is what creators on Gumroad need to do to properly handle VAT for their digital products:
Go back to making awesome stuff.
In other words, we're on it. Gumroad collects VAT as required and remits it to the EU. You won't need to fill out any forms, register for anything, or send anything out. Your (EU-based) customers, will see (and pay) the added VAT on their purchases.
These changes were neither easy nor cheap, but it was crucial to us to make this as smooth and invisible as possible. Handling VAT will cost us approximately 1% of the transaction. We've decided it was important to absorb that fee so there will be no change to our 5% + 25¢ fee.
We like how easy our platform is to use and how low our fees are, and we plan to keep things that way.
As always, let us know if you have any questions about these changes! We're here to help.
Frequently Asked Questions
But I am registered for VAT in my EU country - why do you have to charge VAT?
The new VAT regulations (as of January 1, 2015) require digital portals, platforms, gateways, and marketplaces that electronically supply, authorize payment, and handle delivery/download of electronic services to collect, report, and remit VAT. Gumroad is the entity with whom your customers are doing business, so we are responsible for VAT, not you.
How do I report VAT?
To the extent that you have to report VAT, please consult your country's tax agency to determine the exact requirements.
What if my customers don't have to pay VAT?
If your customers do not have to pay VAT, they may make a direct request to Gumroad for a VAT credit. Upon receipt of sufficient evidence and approval thereof, Gumroad will issue them a VAT credit within a week or two.
How do I send invoices to my customers?
Your customers have the ability to print their own invoices, from Gumroad, on their receipts that we email to them after a purchase is made successfully. Every email receipt has a button that says, Generate Invoice that, when clicked, allows customers to create an invoice. The VAT they have paid on these purchases is explicitly detailed on this invoice. Remember - your customers are buying from Gumroad, not from you, so we send them invoices.