VAT threshold, place of supply, and international ebook sales

[v.bampton]

Hi there

I wonder if anyone can put me out of my misery! I seem to be chasing my tale trying to find this information. Please?

My total business turnover is hovering around the VAT threshold.

That is roughly made up of:
£40k odd of services within the UK
£22k odd of ebook sales, of which a majority are sold to the US, with some EU and UK sales, via digital download
£18k odd of paperback book sales, which are printed on demand in the US and shipped within the US to US consumers

I've found the blurb on the website that says:
"so leave out of your calculation any goods you supply to other countries, including distance sales, and any services you supply where the place of supply is another country rather than the UK."

However neither my accountant nor myself are entirely sure whether the 'place of supply' for both the ebooks and the US paperback sales is the US or the UK.

Does anyone have additional insight they can offer on the subject? Any thoughts would be much appreciated!

Many thanks

Victoria

[David Richards]

However neither my accountant nor myself are entirely sure whether the 'place of supply' for both the ebooks and the US paperback sales is the US or the UK.Hmm that's quite a difficult one. On the basis of VAT Info Sheet 04/03 (http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageVAT_ShowContent&id=HMCE_CL_000907&propertyType=document) I'd say that the sale of eBooks is an 'electronically supplied service'. And then following the decision tree in VAT Notice 741A, section 23 (http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_ShowContent&id=HMCE_PROD1_029955&propertyType=document#P1428_168841), if the supply is to consumers, then it's outside the scope of UK and EC VAT. Incidentally VAT Notice 700/12 section 5.6 (http://customs.hmrc.gov.uk/channelsPortalWebApp/channelsPortalWebApp.portal?_nfpb=true&_pageLabel=pageLibrary_PublicNoticesAndInfoSheets&propertyType=document&columns=1&id=HMCE_CL_000070#P226_15551) says that such sales should be included in box 6 of a VAT return, suggesting they are actually zero rated rather than really outside scope - which suggests they may also be counted as part of your turnover to determine if you need to register for VAT or not.

The book sales seem to me more a supply of goods rather than services, but it's not an export as the goods are created and despatched in the US. It may be that you will be liable to register for, and charge, sales tax in the US.

So no real answers I'm afraid - just more questions. But hopefully giving you a different angle to investigate.

[v.bampton]

Hi David

Thanks for the reply, much appreciated. More questions seems to be all I'm creating wherever I turn!!

To complicate it further, the US paperback sales are all going direct to bookstores through a distributor in the US (Lightning Source), however my agreements are with their UK branch. Hmmmm, ok, I'll investigate that one too!

So are you thinking that paperback sales might not count towards the threshold? I know you can't give me a definite answer either way!

[v.bampton]

Just in case anyone comes back to this thread at a later date, I'll add the information I finally managed to get from HMRC, having finally figured out (with your help!) what I needed to know from them. The conclusion was:

1. For books orders placed and processed entirely within the US, do they count towards the VAT threshold? He said no, because the goods don't come anywhere near the UK. Those sales are outside of the scope of VAT and therefore don't count towards the applicable turnover.

2. For books orders placed on my website in the UK but printed/shipped entirely within the US, same question and answer again.

3. For eBooks which are sold via my website and sent by download to consumers in the US, do they count towards the VAT threshold? He confirmed that they are classed as 'electronically supplied services' and said that it depends on 'where the customer belongs', and said that US eBook sales therefore don't count toward the threshold either, even though I'm based here in the UK.