Hi there,

I was just wondering if anyone has ever used the Paypal VAT rates on a site?

The reason I ask is that I have a site that I am currently developing that will be selling downloads to world-wide customers. That’s where the problem creeps in though!

I am going to be using the Simple Commerce Module which does what I need admirably. The problem I have is that I have found out that as this is for a UK based business we have to charge VAT to UK customers but not to America etc…

Just wondering if the easiest thing to do is just place the cost on the site and then a note underneath that says VAT will be added for countries where it is applicable and then the VAT is added on by Paypal when they come to checkout?

As I have no way of checking the validity of where the people are from (not with any absolute certainty anyway) I thought that it would just be easiest doing it in this way.

Just wondering if this is okay to do and if there are any pitfalls that anyone knows of by doing this?

Thanks for any help on this.

Best wishes,

Mark

They have to charge VAT to EU customers too I believe not just the UK! I haven’t done this myself yet but I’m going to soon so I’m looking forward to any advise!

The only thing I was thinking was that you could use IP to Nation Module to check where they are from. Not 100%  accurate (proxys and all) but thats the way TV stations in America stop me downloading shows damn them!

Emily Griffiths - 23 July 2008 04:55 AM

They have to charge VAT to EU customers too I believe not just the UK! I haven’t done this myself yet but I’m going to soon so I’m looking forward to any advise!

The only thing I was thinking was that you could use IP to Nation Module to check where they are from. Not 100%  accurate (proxys and all) but thats the way TV stations in America stop me downloading shows damn them!

Hi Emily,

Ah yes sorry I meant to say UK and EU above. Regarding the IP to Nation Module though I don’t think that would work in this situation as I want people to be able to see prices first then very quickly sign up for an account on the site before they can add items to their shopping cart. As the Add To Cart button from the Simple Commerce Module doesn’t have any provision for sending along other variables (not that I know of - definitely would like to find out otherwsie though! )I don’t think that it would matter as I wouldn’t be able to check out where they are from and then send that information to Paypal anyway.

Definitely a tricky one so hopefully others have come across this problem before and can lend a hand to us on this one!

Best wishes,

Mark

My take on this, and I am in a similar position, is to build VAT into the price seamlessly - so no one sees it. Charge everyone the same price but pay the VAT part on the orders sent to delivery addresses that are taxable - UK EU etc.

I suspect you will need to talk to the businesses accountant about what taxes need paying for exported goods.

Simon Cox - 23 July 2008 06:15 AM

My take on this, and I am in a similar position, is to build VAT into the price seamlessly - so no one sees it. Charge everyone the same price but pay the VAT part on the orders sent to delivery addresses that are taxable - UK EU etc.

I suspect you will need to talk to the businesses accountant about what taxes need paying for exported goods.

Unfortunately from what I have been told this would be illegal to do. If you charge say £117.5 for an item to a UK / EU based person / client then you should only be charging £100 to America and anywhere that doesn’t have VAT. You aren’t allowed to charge the same rate so our accountant says.

There is a really long document somewhere (Section 5 of something or another methinks) outlining all of this. It is a pain as it is all different to if you were selling for instance something that you then post. As soon as it is an electronic service it all gets even more difficult.

Had thought of that one but if someone in America was to complain that they were getting charged the same as the UK then there would be all hell to pay!

Best wishes,

Mark

I’m glad you mentioned that because charging the same price was going to be my next suggestion too!

Mark Bowen - 23 July 2008 06:20 AM

Unfortunately from what I have been told this would be illegal to do. If you charge say £117.5 for an item to a UK / EU based person / client then you should only be charging £100 to America and anywhere that doesn’t have VAT. You aren’t allowed to charge the same rate so our accountant says.

I don’t see why that should be an issue. I can see how consumer protection laws and such would not allow you to specify a price of “€100 + applicable sales taxes”, but “€120, all taxes included (if any)” should not be a problem. Not that I can speak for UK law, of course.

Had thought of that one but if someone in America was to complain that they were getting charged the same as the UK then there would be all hell to pay!

I still don’t see why? You advertise one price, they know what you charge, either take it or leave it.

Mark Bowen - 23 July 2008 06:20 AM

Had thought of that one but if someone in America was to complain that they were getting charged the same as the UK then there would be all hell to pay!

oh yes - as in the price of a new Mac in the US is $1,200 and in the UK it’s £1,200 - ok it’s not as bad as that these days but lets say shipping and export taxes amounted to 17.5% pf the price for sending it abroad - then we would have the same price and I think it is actually down to the producer what price they charge to each market.

I had those exact same thoughts too Ingmar but apparently the law is quite specific in this country regarding that kind of thing. I asked the accountant if we could just say this is the price and it has VAT on it. If you want to pay it is up to you but apparently that is a definite no no

We wouldn’t be allowed to say that a product is £117.50 all taxes included as we just aren’t allowed to charge tax to countries that aren’t taxable. Even though it is up to the individual as to whether they pay or not when it comes to submitting your taxes this end that is when the problem arises!

Not really a big problem until the site starts making over £70,000 (I think that’s the tax bracket in the UK at the moment) but just wanted to make sure that when / if that happens that the site is all set up and ready to do that from day one. Don’t want to have to take a site off-line whilst trying to figure out the intricacies of UK tax law!!

That’s why I’m looking at the Paypal VAT thing. The law over here really is quite an a*s when it comes to digital downloads. Now if you were to supply the download on a CD then I’m pretty sure that you can charge the same rate all over the world!!!

Stupid isn’t it?!!!

Best wishes,

Mark

I don’t know how much you like PHP but I think thats what I’m going to use. I think I’ll check the persons IP address and if they are from the EU then the item price will show as the price + 17.5% tax if not it’ll just show as the standard price.

I’ve used the IP to Nation tables before to show certain adverts depending on the country I’d imagine it’ll work in a similar way.

Simon Cox - I agree with you I thought it was down to the producer after all we get ripped off in the UK all the time compared to prices in dollars. Take iStock and iTunes for example! And don’t even get me started on Adobe!

Emily Griffiths - 23 July 2008 06:56 AM

I don’t know how much you like PHP but I think thats what I’m going to use. I think I’ll check the persons IP address and if they are from the EU then the item price will show as the price + 17.5% tax if not it’ll just show as the standard price.

I’ve used the IP to Nation tables before to show certain adverts depending on the country I’d imagine it’ll work in a similar way.

The only problem being that I am using the Simple Commerce Module to spit out the Add To Cart buttons so not really an easy way to add on the 17.5% at will.

Will probably look at creating the Paypal links myself if this is the case and just do away with the Simple Commerce Module. Still need Paypal to ping back the Simple Commerce Module though so that it knows the item has been paid for though.

Best wishes,

Mark

Mark, just a sidenote: If I remember correct, the IPN handler built into the SCM has a check regarding the amount received - I think it was a 10% difference that was allowed, else the payment would not be processed by the SCM ... not sure about details at the moment.

Yeah sorry don’t really know much about Simple Commerce as I’ve never used it myself. Good luck though let us know how you get on!

ms - 23 July 2008 07:28 AM

Mark, just a sidenote: If I remember correct, the IPN handler built into the SCM has a check regarding the amount received - I think it was a 10% difference that was allowed, else the payment would not be processed by the SCM ... not sure about details at the moment.

Hi Markus,

Never seen that before but how would that help in this situation? Not too sure what all that means anyway?

Gosh I really have started a thread going here haven’t I. If only UK tax laws were easier to understand. It’s almost like they don’t want anyone to have their own business unless they get all the money and also make it really difficult for you to understand!

Best wishes,

Mark

Mark Bowen - 23 July 2008 07:32 AM

Never seen that before but how would that help in this situation? Not too sure what all that means anyway?

Not implying that this would help (I don’t know of UK VAT laws, btw) or further complicate things. But if you want to use SCM to associate a sales to a customer, it seems the amount paid PayPal reports in the callback notice will be compared with the sales price stored inside the SCM. And as mentioned, the check allows a difference of 10% if I am right (Derek might know better). So, you might have to keep in mind that adding or substracting a 17.5% VAT, the difference might get bigger than expected by the SCM and the sales might not be processed as intended.

Have a look at around line 628 in mod.simple_commerce.php and you’ll see what I refer to.

Perhaps, best would be to let the customer first choose this location and store two sets of item repositories (one with, one without VAT)  in the SCM - and tell the customer that he is required to select the right country. Moreover, isn’t there a further complication were companies (business customers) can give their VAT-ID and aren’t forced to pay VAT even if they are located in the EU?

Ah I remember that now. I think that is more incase you change the price of the item before you get back the IPN call to your site though isn’t it? Not too sure how that could be used though.

Regarding the VAT issue from what I have been told by our accountant and the way it usually works is that if a person / company that is VAT registered purchases something on your site they have to pay the full amount plus VAT. You then have to provide them with your VAT number and a proper VAT receipt and then they can use this to get the VAT back, as far as I know anway!

A bloomin’ minefield this one. Might be nice to find someone in the Tax office to come in and comment on this one but I don’t really think that would ever happen!!

Best wishes,

Mark

There are pitfalls but I have managed to do this. here goes with an explanation:

First off you need to charge VAT to UK and EU BUT if the EU customer DOES have a VAT number then your VAT rate is ZERO for those customers. Paypal doesn’t ask for a VAT number or ask if the customer is VAT registered so this presents a problem.

You could ignore this problem and let Paypal handle the TAX. Although Paypal gives you an opportunity in your account settings, to put a VAT rate for different countries, you would need to go through every European country, including UK and put 17.5%.

Here is what I did:
First the customer registers and in that form you ask for a country (compulsory) and a VAT number - where appropriate.
Then when they are logged in you can charge VAT depending on the country. HOWEVER - I had to hack the ecommerce module to pass through the TAX rate to Paypal.

To determine if VAT is payable when knowing the EU country I used this in the template:

The hack to the ecommerce module is not dramatic and I can send it to you if you want. The ecommerce tag looks like this after the hack:

In other words the ‘tax’ parameter is new.

Also, if you want to get the details that come back from Paypal, I have a little plugin that makes some sense of the data that comes back and shows you the tax that has been paid on the transaction.

Hope that helps…

Hi Chris,

I sometimes wonder why I live in the UK. Just seems like everything is so much more difficult over here!!

Thanks for the explanation, would love to see the hack if that’s okay. The plugin sounds handy too if you don’t mind

Thanks for everything on this.

Best wishes,

Mark