Ask YC: How do payment gateway users collect VAT?

[cattledogit]

How do SaaS or software providers using payment gateways such as Braintree, TrustCommerce, or Authorize.net collect VAT from EU consumers?

Because they're acting as resellers, Ecommerce vendors like Plimus and Avangate are responsible for collecting VAT for EU consumers who don't have a valid VAT ID for electronically delivered products. Per http://www.avangate.com/articles/software-vat-123.htm : "Private customers (consumers) in EU countries must be charged VAT for electronically supplied services and products, both by EU and non-EU providers."

Collecting VAT yourself would be quite a headache: "...non-EU sellers have to ... pay the specific member state tax authorities (all 27 of them) their respective VAT..." (http://tinyurl.com/pgnvpb). The revenue threshold for being required to collect VAT can be quite low: "Denmark, for example, taxes all traders with an annual turnover of $1,600" (annual revenue of $1,600 from Denmark I assume). (http://www.taxpolicycenter.org/taxtopics/encyclopedia/VAT.cfm)

[kierank]

You charge the price+vat, then pay your VAT to your home government. But since it's a "Value-Added" tax you claim back VAT on the goods and services you have purchased.

[bwd2]

Why would you bother to do this if you are a non-EU provider?

[cattledogit]

Plimus and other non-EU resellers collect VAT for a reason. See for example http://discuss.joelonsoftware.com/default.asp?biz.5.366294.2... , http://www.eweek.com/c/a/IT-Management/VAT-in-Europe-7-Steps... and http://www.ez-eu.com/eu-vat-why.html.