A substantial change in European Union (EU) VAT (value added tax) regulations has been put in place beginning on January 1, 2015, and despite being based in the United States this change impacts Engine Publishing. The new rules are explained on the European Commission website.
I’m not a lawyer or an accountant, but here’s my understanding of the new rules: If you sell a digital product to a customer in the EU, you have to verify their location, charge the appropriate VAT for that country, and remit VAT to all countries where you made even a single sale. It doesn’t matter where the seller is based, only where the customer is based. It’s an accounting nightmare that is too expensive, both in time and money, for Engine Publishing to handle.
The only legal, financially viable option for me is the one that impacts the fewest customers: Effective today, Engine Publishing will no longer sell our products directly to customers in the EU. I’ve agonized over every possible solution, and I wish there was a better option. Choosing from a menu of shitty options has been a stressful process, and this new law makes no sense to me as it applies to small businesses. I apologize to all of our customers in the EU for making this change to our online store. It sucks, and I’m sorry.
The rest of this lengthy post lays out the new rules, the options I considered, and what this means for Engine Publishing and you.
The new VAT rules
Direct digital sales, such as sales of PDF RPG products from our online store, must comply with the new rules. Because Engine Publishing has always provided a free digital version with every print product, the new rules apply to the digital “portion” of those sales as well. This means that for every sale to a customer in the EU I would have to:
- Charge VAT based on the customer’s member country. There are currently 28 countries in the EU, all of which have their own VAT rates and laws.
- Collect very specific data proving that the customer lives where they say the do, and retain that data for 10 years.
- Remit VAT payments to each member country where I’ve made any digital sales, with no minimum threshold.
- …or face fines and other penalties from any EU member country for not following the new law.
The crazy part is the lack of a minimum sales threshold. By way of example, that means that if I sell a $10 PDF to one customer in France in 2015, I have to remit VAT to France for that sale. Add a threshold, and the law wouldn’t impact me — or most small-press RPG publishers — at all, because I don’t make enough money from EU sales to meet a reasonable threshold.
What this means for Engine Publishing
This presents a big problem for Engine Publishing.
Engine Publishing is a small business with one part-time employee, me, and I run it in my spare time. Like a lot of small-press publishers, I have a full-time job that pays the bills, and I also have a family. I handle direct order fulfillment (shipping), accounting, customer service, advertising, and other “publisher stuff” like finding new sales venues on an ongoing basis. Alongside that, I do the stuff that goes into publishing our books: lining up freelancers, handling contracts, making payments, editing, indexing, etc.
Adding complex VAT remission on a regular basis isn’t something I can handle. There are products and services available that will handle the tax stuff, but they’re too expensive for me. That leaves a few options, all of them bad.
- I can just ignore the law and hope no one notices, but that’s not how I roll. I pay my taxes and run my business on the books and above-board, and doing otherwise isn’t in my blood. It’s a shitty law, but I’m going to follow it.
- I can rely on the Internet’s advice regarding complex tax law and employ a loophole, such as manually attaching a PDF to an email and manually sending that email to customers in the EU. I’ve read as much information as I can find on the automated aspect of the new law, which is also pretty weird, and — setting aside the time and effort costs involved — I’m not convinced that this manual workaround is legit. So I’m not going to do that.
- I can stop bundling free digital versions with print products in our online store. This goes against one of my deepest-held beliefs about gaming books — that buying the print book should give you access to all available formats — and it impacts all of our direct print customers. This isn’t an option.
- I can close the Engine Publishing store entirely, shifting all sales to third-party marketplaces. This would impact 22% of our sales (both print and PDF, overall) in some way. Exactly how is hard to calculate, because some direct customers would be willing to buy our books elsewhere and some wouldn’t, and I don’t know how to guess that. This option isn’t economically viable for Engine Publishing as a business, and on top of that it would remove an important component of the company’s present and future development. I can’t do this.
- That leaves only the least-shitty option: I can stop selling books to the EU. This will impact roughly 25% of our direct customers (roughly 6% of our customers overall), though some EU-based folks will likely buy the books through other channels. This, unfortunately, is what I’ve decided is the best option.
From setting fair prices, to providing free digital versions with print sales, to bundling multiple digital formats at no extra charge, to customer service, I’ve always tried to run Engine Publishing as a customer-focused business. No longer selling books to the EU is a crappy, customer-unfriendly thing to do, but it’s the legal, financially viable option that impacts the fewest customers and I can’t see a better choice.
What this means for our customers
Effective today, our online store will no longer sell products to customers in the EU. Again, I’m very sorry about this.
If you’re in the EU and want to buy digital versions of our books, I recommend DriveThruRPG.
If you’re located in the EU and want to buy print copies of our books, I recommend your local gaming store or an online retailer (Amazon, Noble Knight, etc.). Our books are distributed worldwide, and your local store should be able to use one of their regular distributors to order you a copy.
Our PDF guarantee (Bits & Mortar) still applies to customers in the EU. (I may send PDFs through DriveThruRPG or via email; I haven’t figured that out yet.)
I’ll keep tabs on these regulations, as I have done for the past several months, and if a sensible exemption for small businesses or some other change makes it feasible for me to start selling books to customers in the EU again, I’ll go right back to doing that. However, I’ve heard that these regulations will also apply to physical products — i.e., printed books — starting in 2017, so it’s entirely possible that this change will be a permanent one. I just don’t know.
Thank you for reading this, and my apologies again for making this change.