UK tax on US software company
This was partially addressed in another question, International tax on digital products for a US company, however, I'm still unclear as to what I need to do if the UK removes this threshold next month. Basically I'm selling software for download only, from California with a California LLC. Do I need to be VAT registered - most of my customers are in the UK - but I doubt sales will top the current threshold value.
I understand being UK-registered would cover EU member states too. But what about the rest of the world? How on earth do I keep track of all the sales taxes around the world? I'd rather not go down the route of Digital River or other online sales agents unless I have to. Currently I use Hikashop and Paypal for my website (for other reasons - I haven't started selling yet).
Thanks.
1 Answer
I believe the answer that you refer to is incorrect. I'm a fellow Californian, and can't speak about the UK laws, but in California you do not need to collect sales taxes for intangible goods (software for download).
The point is that the UK laws are irrelevant for your business. Her Majesty's Revenue and Customs office has no bearing on you. Their rules are for the subjects of the British Queen (that's why its "Her Majesty"). You're not subject to British laws. They can demand VAT all they want, but they'll be thrown out of any California or Federal court. They can take it to their citizens (as California does when Californians buy from out of state and try to avoid sales tax - through the "use" tax which is basically sales tax on purchases from out of state), but its the citizens' liability, not the sellers.
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That's certainly an interesting POV. It backs up some other statements I've heard. The problem is, opinions seem to be 50:50 on the subject. On the one hand I have a UK/US (dual qualified) accountant who says no tax, on the other hand, a VAT expert who says I am liable but probably won't have to pay! I really want to do the right thing but there just seems no clear cut answer. Maybe there isn't one yet, with laws yet to catch up with the digital millennium. Thanks for your answer. – Geoff M 12 years ago
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I've also been directed to http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_PROD1_029955&propertyType=document#P49_7184 which seems to say the place of supply is NOT the customer's PC as stated in the linked question, but where the supplier is - ie me, in California. This also backs up your first sentence. – Geoff M 12 years ago
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@GeoffM You're **never** liable for VAT. The **buyer** has to pay the VAT, **always**. The reason the sellers **collect** it is because that's the most efficient way to enforce the law - similarly to the CA sales tax. Its the buyer who pays it, the seller only collects and remits. As not being subject to the UK laws, they cannot force you to be their policeman, as they can their own businesses. Any claim that you are liable to anything per UK laws, when you're only subject to California and US Federal laws - is **false**. – Littleadv 12 years ago
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That is probably the clearest answer I've ever seen anywhere - and makes complete sense. Thanks. – Geoff M 12 years ago
