This article explains what VAT Moss is and how it affects you if you sell digital products on Folksy – and why if you sell digital patterns or products through Folksy you are likely to be exempt from the regulations.
What is VAT MOSS?
VAT MOSS is an abbreviation of VAT Mini One Stop Shop and is a way of paying VAT on supplies of certain digital services. It is relevant to Folksy sellers who sell PDF patterns, artwork or graphics.
Does VAT MOSS apply to products sold on Folksy?
Because Folksy does not offer direct digital download service, VAT MOSS is not applicable to PDF patterns, printables or graphics sold through Folksy. This is because they are supplied by the seller manually emailing the PDF (or other) document to the customer, ie attaching a PDF or file to an individually written email. As a result the HMRC does not consider them “electronically supplied” and they are exempt from the VAT MOSS scheme. See the chart below from the Government’s own guidance here.
Does this mean my products are exempt from VAT MOSS?
Not necessarily. Although the VAT MOSS rules do not apply to products sold on Folksy and then manually emailed to the customer, if you sell on another platform or the PDF pattern, printable or graphic is delivered to a customer by automatic download from another site, even if the purchase was made through Folksy, the new legislation does apply and you will need to register for the VAT MOSS scheme.
What does the HMRC say about VAT MOSS and Folksy?
When VAT MOSS was first introduced we asked the HMRC to clarify two points: firstly whether Folksy is a marketplace as defined by the legislation; and secondly the definition of an e-service and if PDFs that are emailed to a customer are covered by the new legislation. HMRC confirmed that:
- After reviewing how the Folksy platform currently operates, HMRC does not consider that our platform is responsible for accounting for the VAT on business to consumer supplies of digital services.
- The definition of whether or not something is a digital service depends on the level of human intervention that occurs in that supply. If a seller receives a sale through Folksy and then prepares a bespoke e-mail for the customer to which they manually attach a PDF, then HMRC does not consider that as a digital supply. If, however, the customer downloads the PDF or other electronic service from another site (for example, from a seller’s own website), then this may be regarded as an e-service as the level of automation is more significant.
So, although the majority of Folksy sellers will not currently be affected by the new legislation, there could be a very small number who will be. To help these Folksy sellers comply, we will be extending the information they receive about each sale to include the country code the item has been sold to and the price of that item (excluding VAT). This will be given to sellers either monthly in their bill or as a separate document.
Is the definition of a digital service the same across the EU?
Some sellers have been concerned that the interpretation of a ‘digital service’ may not be the same across EU Member States, and that the Netherlands, for example, may still consider a PDF that has been emailed to a customer as a digital service. However, the HMRC has informed us that all Member States, including the UK, are basing their interpretation of what constitutes a ‘digital service’ on a single unanimously agreed piece of EU legislation and that it does not expect its interpretation to be contentious and challenged.
If you do become aware of another Member State publishing a significantly different interpretation, please do let us know, either by leaving a comment here on the blog or emailing us at firstname.lastname@example.org
If you still have concerns or questions about VAT MOSS, please email email@example.com or leave a comment on this post and we will do our best to answer them.
(Featured image: Mossy Globe Necklace by Comedaygoday)