Why don’t we have paid versions on the Android market? | Hacker News Reader

Why don’t we have paid versions on the Android market?

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48 pointsDanielRibeiro39 comments

Yeah, it's nuts that Google leaves it to individual developers to figure this out. Handling stuff like this is exactly what should be part of the service that Google is charging that 30% fee for.

I'm Dutch, and I've asked the Dutch tax service if I'd have to charge VAT if I sold through Android Marketplace to foreigners, to EU members or to Dutchmen. They didn't know. They suspected nobody really knew. They'd ask if there was any policy on that, and maybe initiate policy on it. They'd get back to me, but never did.

If I ever end up selling through the Play Store, I'll just charge some price, and deal with any tax service when they knock on my door. I'll probably tell my own tax service that it's all international sales unless they have more details for me.

(Disclaimer: IANAL and this is not advice.)

- If you're selling to customers within your own country or within the EU, you should charge the same rate of VAT as you would for selling software to people in your home country.

- If you're selling to customers outside the EU, you don't need to charge Dutch VAT

(I am assuming your business is registered for VAT, either because you wanted it to, or because it had to by virtue of exceeding a turnover threshold.)

If you sell an app for 4.99 to an EU customer, then this implicitly includes 21% VAT. So your sale price is 4.12, plus 0.87 VAT. That's what you would show on your VAT return.

Does Google ask you about your VAT status? Do you pay them 30% of the gross (4.99) either way?

> If you're selling to customers within your own country or within the EU, you should charge the same rate of VAT as you would for selling software to people in your home country.

The thing is: when I'm selling through an international platform like the Play Store, do I even know where my customers live? Well, maybe I do, but I'd much rather do my business with Google and have them handle the second half of the transaction for me.

I'm registered for VAT simply because I have a business that's not in health care. As far as I know, I have to register for VAT even if I'm below the threshold where I'd have to _pay_ the VAT.

> Does Google ask you about your VAT status? Do you pay them 30% of the gross (4.99) either way?

No idea, but it's an interesting question. Do I have to pay VAT over their share of my revenue, with it coming out of my share of the revenue? That would be odd. Yet another reason why Google should be handling this.

Do I have to pay VAT over their share of my revenue, with it coming out of my share of the revenue?

As it turns out, no :)

You should set the VAT rate correctly in the Play/Wallet settings, and Google will only charge you commission on the net price. They will remit the collected VAT to you in its entirety.

Except when the customer is a business located outside your own country but in the EU, in which case reverse charge applies, so you are not allowed to charge VAT, but instead the buyer has to pay VAT in their country (well, "pay" as in "pay and immediately get it refunded" in most cases). Plus, if you are making more than some threshold in a particular country from sales to non-businesses, you might be required to pay VAT in that country, and charge your customers that country's rate. And it also depends on what you are actually selling. And I may well have confused some details, so don't rely on this as tax advice, other than the fact that it's somewhat complicated and difficult to get right.

AFAIK you are, in fact, required to handle these taxes when selling via the Play Store.

http://play.google.com/about/developer-distribution-agreemen...

> Developer is responsible for determining if a Product is taxable and the applicable tax rate for the Payment Processor to collect for each taxing jurisdiction where Products are sold. Developer is responsible for remitting taxes to the appropriate taxing authority.

It might be possible to set a tax rate on a per-country basis in Google Checkout (which I think is still used as the backend for Play, even though mostly deprecated and gone for external uses?) for this purpose.

That's correct, you can set in in Wallet settings:

https://support.google.com/googleplay/android-developer/answ...

Checking your tax rates

Sign into the Google Wallet Merchant Center. Next, click Merchant Settings. After that, click Sales Tax. Then, click Edit next to the country or region whose tax rates you'd like to set. (Optional) Select the state/country/province and set the tax rate Finally, click Save

Also:

If you are a developer selling apps in one of these countries, please note that we have applied the tax rate set in your merchant center to your existing tax exclusive prices.

Keep in mind that Google will continue to pass on the entire tax amount collected to the developer, and calculate the 30% transaction fee off the net price of the product. For example, if your tax inclusive price is 10GBP and your VAT is 20% (as set by the developer in the Google Merchant Center), then Google will first calculate your net price (8 GBP) and then apply a 30% transaction fee to that amount (2.4GBP fee). The developer would then receive 7.6GBP (includes tax collected).

When an EU resident buys physical goods from a non-EU country the shipment is stopped at customs. The customer must then pay VAT (plus an importation tax) on the value of the goods in order to have the shipment released. There is no requirement that the seller of the goods pay VAT - how could the EU hope to enforce this across hundreds of foreign countries all with different legal system? They simply police their own borders.

What I don't understand is how they apply this to digital goods, where there are no borders to police? How do they even find out that digital goods are being imported? If neither the buyer nor seller pay the VAT, how do they stop the transaction? If the seller is located in Assfuckistan, then surely the transaction takes place in Assfuckistan, and unless Assfuckistan has signed a treaty with the EU to collect VAT on their behalf, why would their authorities interfere?

the shipment is stopped at customs

This is not always the case. As far as I can tell, they stop some random % of shipments.

The customer must then pay VAT (plus an importation tax) on the value of the goods

VAT is not applicable to low-value shipments. When I lived in the UK, that threshold was 18 pounds, which is just under US$30. (The tax authorities could, in theory, group separate shipments from the same vendor to the same customer in, e.g. the same month, but I've never heard of this happening.)

Import duty is only applicable to some classes of items, not on everything.

how they apply this to digital goods

It's important to understand that VAT and import duties are not even applied consistently to physical goods which are imported by individuals for their own use (e.g. by ordering from overseas web sites). It's another leap to expect consistent treatment for things which, as you suggest, are hard to detect.

>What I don't understand is how they apply this to digital goods, where there are no borders to police? How do they even find out that digital goods are being imported? If neither the buyer nor seller pay the VAT, how do they stop the transaction?

Well, this mostly applies to places they have treaties with (which is most part of the world one would care to do business with). If they find out they sell digital stuff without handling the proper tax, the company gets fined. It's a simple as that.

They don't have to police every sale, nor every country. Just the more popular countries and sellers. You know the 80/20 rule.

What I don't understand is how they apply this to digital goods, where there are no borders to police? How do they even find out that digital goods are being imported?

Audits of online stores, plus massive penalties (potentially exceeding 100%) on the VAT and other taxes that should have been paid. Tax evasion generally means that the statute of limitations (the period of time for which the tax authority may still go after a taxpayer for back taxes) never ends and they can go after a taxpayer for unpaid taxes from decades prior.

If the seller is located in Assfuckistan, then surely the transaction takes place in Assfuckistan, and unless Assfuckistan has signed a treaty with the EU to collect VAT on their behalf, why would their authorities interfere?

Under international treaties and laws, sales are deemed to occur in the jurisdiction of the buyer, not the seller. However, if the transaction is agreed to/executed in another jurisdiction (i.e., the seller's country or a third country), it could also be subject to tax in that other country.

In this case, who is evading customs? The play store or the app developer?

It's not really that hard. I only know the situation when selling from Germany, but it should be similar in other countries.

Basically, you don't have to pay taxes in other countries, you only pay taxes in the country your company resides in (of course there are some exceptions, you should get a lawyer etc., but this is what I've heard in a couple of cases).

If you make less then a certain amount, I believe 17500 € / year, you count as a "small entrepreneur" and are not treated like a business, but as a private person. You can sell and buy what you like and don't pay additional sales tax to the state. You implicitly pay 7-19% sales tax when buying goods just like any other customer.

If you are a "real" business, you don't have to pay the sales tax when buying stuff (raw material). In practice, you can deduct it from your taxes. You have to pay sales tax directly to the state for things you create and sell. This is why it's also called value added tax, because its a tax on the value your company added to the "material". In practice, if you are a software company, you'll just have to pay a certain percentage of your income in taxes, it's not really complicated.

The interesting part is when you do business with abroad. It is really complicated to do the customs procedures for all the different countries, but it is much easier when you only sell digital goods, and/or sell directly to customers.

In most cases, you just pay the 19% tax to the German government, and sell your product to the customer, and youre fine. There are ways to avoid the sales tax when selling to other countries, but AFAIK you have to pay some customs fees and it starts getting complicated.

I only know the case when importing things to Germany, in that case someone has to pay an additional import sales tax, besides the customs, but the taxes in the country of origin can usually be waived. In case something goes wrong here, usually the selling company isn't held liable, but the goods are stuck in customs and the customer has to pay the import tax. This is frequently a problem for american companies trying to sell stuff to Germany, e.g. Pebble and Ouya had that problem. It's a nuisance, but the customs agencies are generally very cooperative and will tell you exactly what they want you to pay :-).

>It's not really that hard. I only know the situation when selling from Germany, but it should be similar in other countries.

This is so anecdotal it's useless. "This is what I've heard" doesn't really cut it. Case in point:

>If you make less then a certain amount, I believe 17500 € / year, you count as a "small entrepreneur" and are not treated like a business, but as a private person. You can sell and buy what you like and don't pay additional sales tax to the state.

That's maybe true for Germany, but sure as hell is not true in other EU countries (I know, I have business in one).

It's not just anecdotal. I did a lot of research on this, talked with the German tax office and (un)employment agency, and read everything I could find from the chamber of commerce, since I'm toying with the idea of setting up a little business. I know a couple of people who have their own business. I have two people in my family in the export business, and I've worked in that area a long time ago as a summer job. So while one can hardly call me an expert, I am pretty familiar with the procedures.

Your very right not to trust random strangers on the internet, but you shouldn't dismiss what people say as anecdotal and useless either. My point was just: Look, an average technical guy with no talent for burocracy can figure out the laws in his country (in this case Germany); and in general while laws are different in other countries, you can probably figure them out there as well.

>> "VAT, for example, is used in many European countries, it’s included in the displayed purchase price, and it’s complicated."

It's not that complicated. It's basically equivalent to the US sales tax except it's shown in the price (consumer doesn't have to calculate it themselves). In the UK I believe you don't need to pay it until you are earning over £69,000 per year.

Overall it seems like the problem here is how the Play Store works. With the Play Store you are collecting direct from the purchaser. With the App Store sales are funnelled through 5 or 6 major regions (Europe, North America etc.) and paid out to developers. I think this solves the issue of working out tax for every country you do sales in.

>> It's not that complicated.

Actually, it is complicated. If you are selling a service from the US to European end-users, you owe VAT in each European country you have customers in. You can simplify the process with a special registration with the tax offices in one country (e.g. Germany) and send all the owed taxes there. They will then further distribute it to the other countries. Also note that to do it correctly, you need to charge the right rate in each country. Generally, every EU country has a different tax rate and every few months, it changes somewhere. In order to be able to automate this, the EU offers an API that returns current VAT rates.

To further complicate the issue, there are numerous exceptions. E.g. special rates for food and touristic services, that differ from country to country. Things are simpler when selling to companies, in which case it is the responsibility of the importing buyer to declare VAT correctly. But to do so, you need to ask your users whether they are companies and if yes, they have to provide you with their VAT registration number so you can validate them.

> You can simplify the process with a special registration with the tax offices in one country (e.g. Germany) and send all the owed taxes there. They will then further distribute it to the other countries. Also note that to do it correctly, you need to charge the right rate in each country.

If you are selling apps or other download software to end users, I don't believe that the last sentence applies. These are classified as sales of services, not sales of goods, and services (with a bunch of exceptions) are taxed at the rate of the place of the provider.

At least, this is what our UK accountants told us, as a US company with sales in the EU. We are registered in the UK (I'm not sure exactly what kind of entity we have there...a subsidiary, and agent, or something else) and all our EU sales are from our UK entity. The accountants said we should charge UK VAT rate to all customers, and we report and pay to the UK.

Note: I'm not sure exactly what our arrangement is in the UK. It is possible that we actually have a UK subsidiary, and that is the seller for our EU sales. This could mean that we are under different rules than a US company accepting orders from the EU. As always, consult an expert who is familiar with your particular situation before acting.

Collecting it might be complicated but my point was the concept of VAT itself is not that complicated.

But that's exactly the problem. The individual developer still needs to figure out whether to collect or pay anything for all those different countries. That's inefficient. Google should handle that.

It's not complicated to a consumer in the UK buying something but how complicated is it for someone outside the EU to figure out and apply this to their product? And then do the same for every applicable tax in every country (including working out which taxes are applicable in the first place in a country that might not even document things in a language you can understand)

then do the same for every applicable tax in every country

They don't need to do it in every EU country where they have sales. They can just pick one EU country (ideally one with a low VAT rate, like Luxembourg):

As regards business to private consumers (so-called B2C) sales, the single place of registration introduced under the new Directive will provide the non-EU traders with the option of discharging all VAT obligations through a single administration.[0]

[0] http://ec.europa.eu/taxation_customs/taxation/vat/traders/e-...

If we're talking about barriers to entry, then think about one-man shops - for a non-EU programmer, registering a legal entity in Luxembourg is neither simple nor affordable.

You can register for VAT in an EU country without registering a legal entity.

For example, if you were to choose the UK, you can register as an NETP (non-established taxable person): http://search2.hmrc.gov.uk/kb5/hmrc/forms/view2.page?formId=...

Yes, you have to do a little research. Yes, you have to fill in some forms, and pay some taxes. However, whilst you might not like the cost of the tax itself, it's hard to argue that compliance itself isn't simple and affordable.

In Turkey, though not in EU but an EU candidate, the biggest GSM operator founded an appstore for Nokia devices and the developers were to receive 1/8th of the selling price exactly because of the complications.

It was before the iPhone era, so the appstore had an unique advantage for exposure of the mobile apps to the clients but the one of the biggest benefits was that the GSM operator was handling the billing procedure.

If you were to sell the apps by yourself, other than the need to process payment, you were required to send a bill to the buyer and figure out the tax payments. If you sold your app through the GSM operator's store, they would just add the purchase to the clients phone bill and handle the taxes.

Because of this service, the developers would have been earning 0,125$ from 1$ sale.

> It's not that complicated. It's basically equivalent to the US sales tax

US sales tax is more complicated than you'd think. I recall having a very amusing conversation with an Amazon engineer about the software they procured to calculate sales tax on purchases, which promised "24/7" uptime but also required you to shut it down and run an hours-long migration every so often.

Here's a novel suggestion: Ask the EU. http://europa.eu/europedirect/index_en.htm

Also the US government might help you: http://export.gov/europeanunion/marketresearch/sellingusprod...

Specific documents: US on VAT in EU: http://buyusainfo.net/docs/x_7292727.pdf EU on electronic services VAT: http://ec.europa.eu/taxation_customs/taxation/vat/traders/e-... EU on VAT: http://ec.europa.eu/taxation_customs/taxation/vat/traders/va...

Perhaps worth mentioning that this article is almost two years old, and I believe certain things have changed at google since then.

Going by this: https://support.google.com/googleplay/android-developer/answ...

Even though they've moved off checkout all this does still apply.

It is absolute madness.

The EU tax on digital sales really is hard to understand and comply with as a small developer. We're also thinking of blocking EU sales until we are big enough to afford to comply. How are people dealing with this?

This might be a good starting point:

http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_wo...

* non-EU suppliers ... register with a single VAT authority in a Member State of their choice ... will be offered a set of procedures ... streamlined set of obligations that can be easily completed online without the need for a fiscal representative or for any physical presence.*

EDIT: Also see here: http://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPubl...

and here: http://www.guichet.public.lu/entreprises/en/fiscalite/tva/de...

Just charge whatever you need, and if they come knocking, give them whatever they can prove they deserve. It may knock 20% off your revenue from that market, but it's still better than 0% revenue from that market.

I would not recommend that strategy, unless you really understand all possible consequences. The fine may much bigger then you expect and tax cheating may earn you jail time or kill your business for good.

To top it all it is frustrating that there is mostly no way to contact Google directly to get an answer or make a feature request like this. If you go to their product support forums, some support people (who are nothing but other actual users) write canned responses which make no sense. Many times they don't understand our issue.

The EU VAT rules extend to most digital products and services for all companies anywhere in the world. Yeah.

And US income tax laws apply to citizens by birthright who have never resided or worked in the US. Law is weird.

Same with iOS

Is this true? I've yet to actually sell anything on either platform, but my understanding is that Apple is the seller of apps on the App Store, and makers are simply publishers who effectively get a royalty check. The Google Play store, in contrast, has Google acting as a facilitator but far more falls on the laps of app makers.

Apple makes a 30% cut of your app, but while Google takes a 30% cut apparently they give most if not all of this to...oddly enough...telcos? (This is still incredibly fuzzy and I know of no sources, beyond various Google claims that they get just a small administrative charge) That may explain the service difference.

Recall that there was a bit of a hoopla because Google shares customer data with app makers, because again the sale is between the app maker and the customer (which is something that very few app buyers expect or understand).

https://support.google.com/googleplay/android-developer/answ... - "Distribution partners"?

no it isn't, apple pay the 15% Luxembourg sales tax for you.

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