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Subject: UKNM: VAT and trading locations - RE: UKNM Digest V1 #115
From: Steve Johnston/IMRG
Date: Thu, 17 Dec 1998 19:39:28 GMT

Craig Pickup wrote:

>This may also apply to the actual e-sales as the point of sale is the location
>of the server not the customer. Therefore UK law relating to sales and VAT do
>not apply if the server is located in the US.

The point of sale is actually the desktop of the customer. If a UK company
is selling to a UK customer, it has to charge VAT (If the product is
vatable). Period. The argument that the server was in a non-vatable country
will not stand up to even the slightest examination. The difficulties,
however, arise when companies trade with consumers internationally.

Presently there is no formal agreement, between anyone, about whose VAT
should apply, there are a number of arguments about country of origin and
country of consumption, but common sense and market example is likely to

Look at CDnow, previously they left the problem with the consumer, so on
occasion, having bought your super-cheap VAT-free CD from the US a nasty
surprise would arrive in the shape of a DHL bill for VAT on behalf of UK
Customs & Excise and a small(ish) handling charge for DHL's trouble. This
didn't happen too often, and the volumes were such that it wasn't causing
any meaningful customer problems.

You go to CDnow now and buy from their European centre, you will get UK VAT
added to your bill prior to shipping. So you are buying from a US firm with
a base in Holland and yet are paying UK VAT.

The answer lies in the customer experience and scaleable models. The
tin-pot past had little of the first and none of the second.

Steve Johnston
Director of Development

07000 46 46 74

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  Re: UKNM: VAT and trading locations, Craig Pickup
  Re: UKNM: VAT and trading locations - RE, Ben Thompson

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