Honestly, VAT is one of the most puzzling aspects of trying to do any trade with people/entities in Europe, and unless you use some service that handles the accounting for you, it's impossibly hard to figure it out all on your own.
This affects everyone who has sponsor tiers as effectively all sponsor tiers come down to a trade: You sponsor me (e.g. pay me) and I give you something in return (e.g. mention somewhere, a sticker, support, etc.). It also affects GitHub because they will very unlikely be able to argue that they are just payment processors with the current way it's implemented.
Additionally it's even worse than what the tweet suggests, because VAT rules are different for digital services and physical goods in most countries in the world. So if you give someone something physical in return (e.g. stickers, coffee mug, some merch, etc.) for a sponsorship then you must distinguish your VAT collection for sponsors who only get a digital service in return and those who get a physical good in return.
It's a real bloody mess and VAT is the worst bureaucratic nightmare to digital businesses. Nonetheless, no excuse for a huge corporation like Microsoft to blatantly violate tax laws which they are very well aware of.
> Honestly, VAT is one of the most puzzling aspects of trying to do any trade with people/entities in Europe, and unless you use some service that handles the accounting for you, it's impossibly hard to figure it out all on your own.
True, but it's beyond Europe. VAT applies in the country where the customer lives which means you also have to deal with VAT rules for South African customers and many others and not just EU or UK.
The EU Commission forcibly changed this some years ago to the present system which is drastically more complicated, where you have to figure out where your customer is. There are even special rules for things like people who buy things whilst on cruise ships. Then you have to submit VAT returns to every single country where you have customers, and those countries are under no obligation to make it easy, for instance, they usually only offer tax returns in their own language.
Because this is impossible to comply with without enormous numbers of staff, there's now a whole industry of tax middlemen who do it for you. Thus selling to the EU is a nightmare of overheads and costs. It doesn't have to be this way because it never used to be that way, but the EU is ideologically committed to the socialist notion that tax competition is harmful and should be eliminated.
Unlike in Europe they don't include it in the advertised price - same as service. As a rule of thumb add 10% or 30% to the price you see on the shelf/menu and you may be in the right ballpark.
I don't believe the tax isn't paid with interstate commerce though, giving a massive boost to online sales. There have been attempts to change this.
There are two problems with collecting sales tax / vat in the modern world, the rules themselves (which can be byzantian, especially when involving 3 or more companies in the transaction), and compliance.
Removing consumption taxes completely would be the easiest way to solve the problem, but there's still tariffs on international trade in most countries. If I buy a CD from another country, I have to pay import duty. If I buy an mp3 I don't. Or do I?
That changed in 2018 with the Supreme Court decision in South Dakota v. Wayfair [1]. Online sellers now have to collect sales tax on sales into any state where they meet that state's "economic nexus" law. Here's a summary of each state's economic nexus law [2].
It's way worse than VAT. With VAT, all you need to know is what country the buyer is in, and which of a handful of categories the thing you are selling falls under. It's easy to figure out the rates on a given sale yourself.
Then it is just a matter of registering with one EU country, and using their VAT MOSS system to submit a simple quarterly report with your sales for each country. It just got less simple because the UK failed to arrange to stay in the VAT MOSS system, so now you need to deal with them separately, so it is two quarterly reports you have to file.
With US state sales tax, you have to know the exact address of the buyer. The tax at 123 Foo Street might be different from the tax at 124 Foo Street. Heck...I remember that the last time I played around with state tax data, I found cases where 123 Foo Street Suite 100 and 123 Foo Street Suite 200 had different tax rates. There are also many more categories of goods that might have different rates than there are under EU and UK VAT.
If you want to play around with the insanity that it is to figure out sales tax rates in the US, you can download data for about half the states from here, in a common format [3]. You can get data directly from states, but then you have to deal with each state having its own format.
Each state of course has its own way of submitting your reports. That and the difficulty in determining rates pretty much guarantees that you need to use a third party tax service.
[1] https://en.wikipedia.org/wiki/South_Dakota_v._Wayfair,_Inc.
[2] https://www.avalara.com/us/en/learn/guides/state-by-state-gu...
[3] https://www.streamlinedsalestax.org/Shared-Pages/rate-and-bo...
USA is pretty much the only major country that does not apply VAT. As of 2018, 166 of the 193 countries with full UN membership employ a VAT [1].