Huge Salex Tax/ VAT/ GST Problem

• Governments don't know my websites.
• Governments can't verify where the payment comes from most times (I'm using PayPal mainly, so I have the PayPal customer addresses, but those are not valid all the time). I can track the I.P. and create a field where the customer must enter his address. However, I could also fake this address - it's nearly impossible to check that.

• The customer must enter the address during checkout. I create a dropdown menu with all the countries, and I only include the ones where I'm below the registration threshold/ countries with 0% tax rate. I think most customers will enter a fake address then because no one cares about that.

1. Merchant of Record (MoR): Personally, I think the best option is to use a service like Paddle. They handle all the VAT stuff for you — registration, payments, everything. It takes a lot of the work off your plate, especially if you’re selling to lots of countries. However, for me, it’s not an option because I haven’t found one that accepts adult sites, which is a bummer.
2. IP Geolocation & Blocking: You can also check the user's IP address and show a message saying that you don’t accept payments from their country at the moment. That way, you avoid issues with countries you aren’t registered in.
3. Tax Compliance Software: I’m looking into Quadermo for tax compliance, but there are others like Taxamo and Avalara too. They help automate the VAT process.

If you're facing administrative challenges and costs with tax filings, there are a few ways you could simplify the process:​

a) As you suggested, limiting the countries in the dropdown menu to only those where you're below the registration threshold or have a 0% tax rate could help you reduce your tax burden. However, it’s important to note:​

• You must track whether the customer’s location corresponds to the country selected in the dropdown, especially for U.S. states and countries with low tax rates. This can be risky if customers choose a country solely to avoid tax.
• Tip: Consider offering a clear disclaimer about which countries you're currently not charging tax for and that customers must provide accurate information to avoid potential issues.

b) You could consider using tax automation tools like TaxJar, Avalara, or Quaderno. These platforms help automate the process of calculating the right tax rate for each transaction, handling registration, and even filing returns on your behalf. Some of these tools integrate directly with popular e-commerce platforms and payment gateways like PayPal, which would simplify the process significantly.​

• VAT MOSS (Mini One-Stop-Shop): For EU businesses, the VAT MOSS system allows you to file VAT returns for all EU countries in one place. This reduces complexity, though it’s still essential to track your sales in each country to ensure you're not exceeding the registration thresholds.

c) For U.S. sales, using a tool like TaxJar (for sales tax in the U.S.) can automatically track which states you have economic nexus in and calculate sales tax rates based on the customer’s location. If you’re below the economic nexus threshold, you wouldn’t need to collect tax, but these tools can help you stay on top of which states require you to do so.​

jimbobo2779 said:

Ignore the AI answers above.

As someone that has processed far in excess of a million pounds internationally I can tell you that, by far, the easiest way to stay safe in these matters, especially in the EU, is to just use a payment processor that handles all of it for you.

I am based in the UK and had to deal with MOSS VAT and it was going to be so much work, it would have added about 50% to my workload. I now just have the payment processor take and hand over purchase taxes for me so I don't have to worry about it.

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beatou said:

I actually thought that handling OSS (as I understand it replaced MOSS) would be the easiest part. As I understand you only need to file a quarterly report to one country (for me, it's the country of residence), and they will distribute the tax to other countries themselves. I was more concerned with US and other countries.
I really wanted to use the processor that handles international VAT for me, but failed to find one that works with adult websites. Can you suggest one?

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chmakrt said:

Why don't you keep a business in the US while selling to the EU? There is almost no way EU can ever find out about this. Or make a company in the UK and sell to the EU. I'm not a tax advisor, but I know someone who own a very large ecom store successfully avoiding EU VAT for nearly a decade now

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jimbobo2779 said:

I wouldn't advise doing it with the UK. Start a company in Delaware and make use of the tax benefits that go along with it. The UK is highly combative to businesses at the minute, costs are crazy high and are likely to rise again over the next 4 years. Steer far away from the UK if you are looking to improve your tax costs for your business.

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chmakrt said:

What costs? Don't make profit, move money out of the country later. UK is a very simple and straightforward legislation where you are not bothered by bureaucracy much.

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jimbobo2779 said:

Corporation tax is high here, to not make a profit you have to pay wages, to pay wages you need to setup a PAYE scheme and pay into a pension and it all needs doing with a chartered accountant. In the past few years we have had VAT, corporation tax, National Insurance increases with more expected, we have tightening regulations and a down turning economy. The UK would be a terrible choice for a small to medium company to be in, if you have the choice to be in somewhere like Delaware.

However you look at it, the UK will struggle a lot over the coming years, everything is stacked against small and medium businesses.

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jimbobo2779 said:

Corporation tax is high here, to not make a profit you have to pay wages, to pay wages you need to setup a PAYE scheme and pay into a pension and it all needs doing with a chartered accountant. In the past few years we have had VAT, corporation tax, National Insurance increases with more expected, we have tightening regulations and a down turning economy. The UK would be a terrible choice for a small to medium company to be in, if you have the choice to be in somewhere like Delaware.

However you look at it, the UK will struggle a lot over the coming years, everything is stacked against small and medium businesses.

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chmakrt said:

No. In order not to make profits you have to send money out of your company somewhere. Btw, no, you don't need chartered accountant for PAYE - why? It's easy.

The main benefit of the UK is that if you sell to the EU you have low banking costs and you lay no VAT (because EU will never find out). Also, you have a very simple and straightforward forward reporting process and the tax authorities never really bother you for every single 'mistake' you make. You also don't need audits and accountants before you start making 10m a year.

Yes, taxes are relatively high, but the point is to move the money out by making payments to your overseas company (for 'marketing' for example). This way your accounts in your overseas company are very simple (2-3 big transactions a month) and your reporting is super easy.

Idk if Delaware tax authorities are picky or not. Of course if Delaware tax authorities don't care that much and you can have good transaction fees when receiving payments from Europe, then maybe it's a better choice.

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jimbobo2779 said:

So I was slightly off in that, post Brexit, UK companies don't have to file VAT on EU sales through the MOSS VAT system, instead it is done through the Non-Union OSS. You still have to do it that way OR file a VAT return in every country in which you deal with.

You can say, just ignore it, and you will likely be fine but I am not in the business of hoping I don't get hit with a huge tax bill if the government decides to crack down on it.

If you're in the UK it would likely be easier to just setup a UK Ltd company but if you are not you would be far better off incorporating in a region where the tax laws are just far more accommodating, somewhere like Delaware.

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