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Friday, November 21, 2014

EU's New VAT "MOSS" - Relevance for MFA?

On January 1, 2015, the EU's new approach for charging and collecting VAT on B2C sales of e-services and digital goods begins. The key to the approach is that all businesses will charge based on the customer's location (destination basis). That makes sense for a consumption tax, but has its challenges.  One key one is knowing where the customer is, which is not always easy to determine for digital goods relative to physical goods.

One administrative simplification is the Mini One Stop Shop or MOSS. This allows a business to register in one country for filing purposes. The business still has to collect the appropriate VAT for the country where the consumer is, but rather than quarterly filing in each country, the business just files in the MOSS country. That country makes sure the funds get to the right country (and handles the currency translation since not all EU countries use the Euro).

As I learned more about the MOSS, I was intrigued as to whether this model might help for collection of sales tax from remote sellers, such as if the Marketplace Fairness Act is enacted.

I have more on this in a recent article on this topic in BloombergBNA's Weekly State Tax Report (11/21/14).  I hope you'll take a look. I provide some background on challenges of taxing digital goods, the old and new EU VAT regimes for these items and how the MOSS (and some other VAT B2C aspects) might be relevant for the MFA.  Yes, I know that few states tax digital items, but I suspect more will start to do so to address eroding sales tax bases and the MOSS is relevant for not only digital goods, but for any consumption tax items (in the EU, it will just be for e-services, digital and broadcast; but that could change later).

What do you think?

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