VAT and digital products

Starting in 2015, the European Union (EU) requires anyone in the world selling digital products like PDFs, digital music, and e-books to a customer in the EU, to collect and pay VAT based on the VAT rates of the country where that customer is located. We know these changes can be confusing and stressful for many sellers, so we’re here to help you make sense of it for your store.

Disclaimer: This guide shouldn’t be considered as tax advice. We highly recommend you talk to a tax professional in your country to figure out what is the best option and course of action for your business. Read more here »

While the options below aren’t perfect, they can still be useful workarounds to keep your digital goods selling. These tips will help you limit which countries you sell to, if that’s your preference, or will help you collect tax on multiple EU countries if you’d rather do it that way.

There are also some other really handy resources out there for getting a better handle on all of this and how it affects you, so make sure to do your homework - it is still your responsibility to report any collected VAT and pay it according to the new law standards.

Selling only digital goods to all countries

Selling only digital goods to select countries

Selling physical and digital goods to select countries

  • Set up each digital product as its own individual product listing in your shop (not bundled with physical goods, or as a product option).
  • Limit the countries you will “ship” to in the product’s Shipping settings. This way customers trying to order your digital product from an unsupported country will not be able to complete their transaction.
  • Use PayPal Standard for your store’s checkout, and set up PayPal Tax/VAT rates for each EU country where you plan to sell.
  • If you don’t need different tax settings for multiple countries, you can use Big Cartel’s single country or EU tax settings in your admin in conjunction with our Stripe or PayPal Express checkout. Downside: this will charge the same PayPal tax settings on both Physical and Digital goods, as the checkout doesn’t differentiate between types of goods.

Selling physical and digital goods to all countries

  • Use PayPal Standard for your store’s checkout, and use PayPal’s Tax/VAT settings to apply sales tax to all applicable transactions in your shop based on country.
  • With our new checkout features enabled, use Big Cartel tax settings to apply tax to the European Union, using the highest common denominator as your tax rate. Apply this higher tax rate to all purchases made on physical and digital goods within the EU. Downside: this will charge the same PayPal tax settings on both Physical and Digital goods, as the checkout doesn’t differentiate between types of goods.