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Comment by freetonik | Hacker News Reader

Frankly, doing business within EU from EU is more complicated than selling overseas, at least with certain digital products. VAT on digital services is a fantastically dreadful thing: you have to pay VAT to the country of your customer rather than your country. VAT MOSS [1] makes things a bit easier, but it still involves complex reporting and bookkeeping. When I was actively working on my startup in Finland, in the early days of this new VAT rule it was such a mess...

1. https://europa.eu/youreurope/business/taxation/vat/vat-digit...

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It's not like the US is better, with states and counties imposing a myriad of (hyper)local taxes. Hell the US is the only country I know where price tags in ordinary retail stores doesn't include taxes because that is too complex to organize.

In contrast, no matter where I am in Europe, I know precisely down to the cent how much I'll pay at the counter.

> doesn't include taxes because that is too complex to organize.

It’s not too complicated. There just isn’t sufficient political momentum to require total price to be shown prior to checkout.

This year, California couldn’t even get restaurants to include all non tax charges in menu prices. They passed a law requiring businesses to include all non tax charges in advertised prices, and then passed another law to exempt restaurants.

Infuriating, to say the least.

The retail price thing could be solved in brick and mortar stores (because the location of the register is well-known), but there’s a desire of some to have the taxation amount be explicit. (I have some sympathy for the philosophy, but practically, it’s annoying, which is probably part of the motivation.)

The vat bit is interesting. In Europe, the companies are the one responsible, in the USA, it's the consumers.

I think VAT is a bad tax overall, a vestigial appendage from colonialism, and would prefer to ultimately remove it, but I think the US system is overall better. At least more transparent.

My biggest conceptual issue with VAT is that it’s a flat tax rate for everyone, while income taxes are progressive in many European countries.

That actually was the point, in colonial economies, (declared) income taxes hit colons way more than locals for a lot of very good reasons (and one bad, undeclared work that prevented owners to pay social security contribution), and for a lot of very bad reasons, French government/business owners wanted that to stop, hence VAT.

What's funny is that the families behind the fast implementation of VAT in colonized Africa are still two of the most powerful and rich French families.

Sorry but tax rules in the US are much more complicated than EU rules, which is a huge reason why Avalara exists...

Does it apply to digital goods sold from outside of US?

Yes, depending on thresholds which vary by state. For some you have to figure out taxes from the first transaction, for others from the 100th and then there are some that consider revenue, like $100k. At least at a conceptual level, taxes in the US seem much more complex than the EU, where you have only one tax rate per country.

I wonder if the reason it's perceived as "easy" is because companies are flying under the radar. In my experience, you get a bit of leeway until the country you're selling into starts to notice and demands you start collecting and paying sales tax. Perhaps the fact the US is split across jurisdictions internally means tax authorities don't have a very clear picture until the company gets big enough.

Either that, or more companies are using third parties who mask the complexity for them. Kinda like a duck looking serene on the water but its feet are paddling furiously to keep moving.

When you're inside a jurisdiction, you don't really have the option to ignore the law for long because the tax authorities will come knocking sooner rather than later.

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