Gumroad: EU citizens pay max VAT on ebooks or can go to hell

4 points by gbon 5 years ago | 9 comments

Trying to purchase the book "Hands-on Scala", advertised here on HN.

TLDR: We can't support multiple VAT percentages on our system: you could pay the maximum VAT rate applied in your country or you can go to hell.

"Gumroad Support via helpscout.net

9:15 PM (1 hour ago)

to me

Translate message Turn off for: English "Your system doesn't support different VATs for kind of product, perhaps ?"

That's correct, as told you in our previous emails:

We flatly label all of our products as "digital products" so none of our products are labelled as "ebooks" but rather a "digital product"

So, we use the VAT rates that we are told to charge for digital products.

Best, Steve, Manager of Support Gumroad"

That is what happened trying to buy that e-book, Paypal notified me that I had to pay a high VAT tax. Because in my country (and other EU states) there are lower VAT taxes on cultural goods (i.e. books), I asked explanations to the customer care. So because their system can not handle multiple VAT rates for a specific country, as confirmed after my questions, they chose to apply the always the highest tax for all the goods they sell, including the books, independently of the rate officially assigned to their category.

So I can pay five times the standard VAT for an e-book or I can go to hell.

Outstanding!

mytailorisrich 5 years ago |

The thing is that one cannot 'choose' to apply a higher or lower VAT rate.

I would think that knowingly charging for VAT that isn't due may be considered fraud because they tell their customers to pay extra for tax when they know the money isn't tax and will go into their pocket.

detaro 5 years ago | |

It doesn't necessarily follow that they pocket the money - if they truly do not make a distinction between products and treat everything the same, one would expect them to pay the full amount to the tax authorities - who generally have less of a problem with being given too much money. This classification can be tricky - an e-book that qualifies for lower rate in country A might not qualify for the lower rate in country B, despite B having a lowered rate for other e-books, so it might make some business sense to just always use the higher rate, not spend money on evaluating this case-by-case and avoid getting in trouble for paying to little tax.

That said, under national laws you might very well have a right to correct billing, and could demand a corrected invoice. Good luck enforcing that effectively against a US company though for small sums.

gbon 5 years ago | | |

In EU you have to pay the VAT required by the law of customer's country. So, yes, tha law if different for each country in EU. Here, for example, an elegible e-book must have an ISBN code. That is the requirement. Amazon applies correctly the taxes. Gumroad think to be different. Moreover, Amazon explains transparently how the taxes are applied on their websites.

https://www.amazon.com/gp/help/customer/display.html?nodeId=...

mytailorisrich 5 years ago | | |

Sure, never ascribe to malice what can be adequately explained by incompetence, even when the incompetence is off the scale.

Enforcing any right to correct in this case is hard but collecting all the evidence and tipping off the tax authorities about VAT irregularities can be a sweet revenge as well.

gbon 5 years ago | |

Before contacting them, I asked to Paypal: they confirmed that the VAT applied is specified by the seller (Gumroad). So I suspect a fraud, too. It depends from who really collect the VAT and who have to pay that tax to the EU country. In any case their behaviour is questionable.

gbon 5 years ago |

Amazon knows how to apply the VAT in EU:

https://www.amazon.com/gp/help/customer/display.html?nodeId=...

maxharris 5 years ago |

It's just not worth doing business in the EU because regulation and taxes are too high there.

nvbg 5 years ago | |

It's true, but nobody force them: if they chose to do business there they can't vex the customers.