Charge VAT by Location?

Like most payment processing providers, ONTRAPORT doesn't currently support everything that's required to handle the ridiculous VAT-MOSS tax according to the byzantine rules they have created. Fortunately, ONTRAPORT does allow you to set up custom taxes based on the buyer's country, so you're in a much better position than most for collecting this tax. See this article on Adding Tax Types to ONTRAPORT.

However, among the unsupported requirements are:

1. The requirement to capture two non-contradictory proofs of country before completing the sale.
2. The requirement to include the VAT in the product price, instead of as an add-on line item (as we do with taxes in the US).
3. The requirement that B2B sales are excluded from the tax after checking with an EU database of VAT IDs.

If you are a seller that's required to collect this tax (and you want to actually do it) then you'll need to use a service other than ONTRAPORT to do that.

A note from ONTRAPORT's CEO:

Be advised that Landon Ray is not an accountant, a lawyer, a politician, or a tax-collector and thus has no idea what he's talking about. This is not legal advice and is probably wrong, so read on at your own risk. It is your responsibility to keep your business in compliance with all applicable laws.

There has been much hoopla and fretting about the absurd VAT-MOSS tax and the 'changes' that are now in effect.

This change in law was designed to stop major online retailers (mainly Amazon and Apple) from avoiding taxes in the EU by locating their business in the lowest-tax country (Luxembourg). The specific change is that, as of January 1, 2015 if you're a seller of digital goods in the EU you'll have to start collecting taxes based on the buyer's country instead of wherever your company is located.

All the rest of the law has been in place since 2003. That means if you're not in the EU, then you've been successfully evading this law for 11 years. That's no surprise, since the EU has no authority to collect money from you or to make you their unpaid tax-collection agent. I'm quite sure that our taxing authorities aren't going to lift a finger to help Europe collect their taxes. Personally, I'm thinking you should sleep well at night doing business as usual. (Again, this is not legal advice. Consult your attorney or tax professional.)

To make this clearer, here's a table of the old law and the new law, with the ONLY change highlighted in red: 

If you're a seller of digital products who's based in the EU (or you're somewhere else and simply can't sleep at night knowing that you're not abiding by some other country's laws, over which you have no voting power or recourse, and which are incredibly onerous to abide by) and you want to figure out how to pay this tax, you've got some work to do.

At this time, we're unable to devote the very significant resources it would take to help you abide by the letter of these tax laws, some of which are outlined above. We would suggest that the simplest way would be to increase your prices somewhat to cover the cost of the VAT, capture the user's country by IP address (done automatically) and pay accordingly. However, this wouldn't be in complete compliance due to items 1 and 3 above.

Another option would be to add taxes for each country in the tax rules of your order form and capture the appropriate tax on a per-country basis. This solution would allow you to only raise your prices for customers actually in the EU, but would still fail to comply with all three of the rules listed above.

Your totally-compliant option would be to use another service, like Amazon or Fastspring, to sell your digital-only goods. Because they're the actual sellers, and simply forward a portion of the sale price on to you, they are responsible to take care of the taxes.

I wish we could waive a magic wand and make this problem disappear for you, but we won't take our team off of the important projects they're working on at the moment to comply with this circus. I'm sorry for the unfortunate situation that causes for some of you.