This past week has seen some major Twitter and other online uproar over Patreon’s ‘not our problem’ stance on handling the new EU VAT for their users – buyers and sellers. Not helped by the fact that PWC aka Price Waterhouse Cooper, their massively expensive accountants initially gave them 100% inaccurate advice. Apparently the issue is now under review…
This isn’t the first such uproar and more than one business has effectively been bullied – by HMRC and the EU, not their customers – into hastily coming into line with the new regulations and the decree that 3rd party marketplaces are responsible.
On one hand it’s good to see organisations like Gumroad, Etsy etc taking on the VAT headache for their customers – especially given it’s apparent they were given nothing like appropriate notice that all this chaos was heading their way.
On the other hand, so many of our businesses still need a workable option for selling direct. For reasons that don’t necessarily relate to money – or not only to money.
For me as a writer, that direct contact with readers is vital to building an keeping a fanbase, and one way to enhance that relationship is by offering advance sales of new books and side projects exclusively via my website. And yes, that’s also a way of maximising my income from new releases which is also money that comes to me at once, not a month or more in arrears via Amazon etc.
I’ve seen a software developer elsewhere explaining how initially offering apps direct from his own website is an important way to establish which new ideas are worth pursuing. These aren’t suitable for putting out via 3rd parties.
I’m sure there are similar considerations for any number of other businesses.
The first tangible result of my own meeting with David Cameron last week is a meeting scheduled for the EU VAT Action campaign with the No.10 Policy Unit next week. This is something I want to raise.
It would be really, really helpful, if you could let me know your thoughts on this by Monday.
Digital Microbusiness Action Group 
Without intending to get into a debate about politics and sovereignty and etc and etc… what is quite obvious is that there are US retailers who absolutely will not comply with it. It’s not that they don’t have to or lack the resources. They genuinely see no reason why they should have to comply with EU law. After all, what’s going to happen? The EU is going to fly over and shake them down for the pocket change they owe to Portugal? And yet, when the third party refuses to comply, that pushes the financial and legal liability to the seller.
So what is happening here is that individual people like you and me, sat at our laptops, unable to pay the electricity bill much less scale up up our work to an entrepreneurial level, are being personally dragged into international financial politics. That time we’re spending dealing with that, is time we’re not spending working. We’re all in the death spiral already.
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Some thoughts re selling via 3rd parties:
1. Another situation in which 3rd parties may be unsuitable is where the deliverable is generated or customised for each order (for example, a software licence that incorporates customer-specific details and is then digitally-signed as genuine by the producer; or a children’s story customised with the child’s details plus some randomly-chosen or highly topical elements).
I don’t think many of the main 3rd parties cater for this – they generally need already-produced content that they can simply deliver. The best you can typically do is be notified of orders and then deal with them afterwards as a separate step, or sell “vouchers” that the customer then uses to obtain the product from your website (all of which is clumsy and limited for an otherwise-downloadable product). There are some smaller/specialist services that can obtain dynamically-generated deliverables from your own server, but it’s a limited choice and they each have their own particular assumptions and limitations (and might not meet whatever other criteria you have).
In contrast, when selling directly from within your own system you’re not faced with any limitations on this, and can potentially do whatever you need to and can integrate it into your sales process however you like.
2. As with the VATMOSS fiasco, any presumption at this point in time that sales can – or should – be done via 3rd parties could easily end up looking outdated and odd in five or ten years time (or when some other piece of legislation comes along to fix the next problem). Please let’s not continue the mistake of basing future policy on somebody’s half-baked idea of what today’s e-commerce is like!
3. Similarly, 3rd-party marketplaces are likely to lag behind any innovation in the nature of digital products and how they are sold. The extent to which new start-up companies might be obliged to sell via 3rd parties as the only way of meeting legislative requirements (e.g. because they are too small to handle VATMOSS themselves) could thus act as a brake on innovation in this area.
4. To some extent this is a separate and wider issue, but another reason for avoiding 3rd party services is their terms and conditions. These are often incredibly one-sided and can be extremely unfair. As a small/micro business entering into a business agreement you’ve no real say in this and as far as I know there isn’t anything like “consumer protection”; so you either agree to whatever one-sided terms and conditions they’ve come up with or you walk away.
That’s not so bad when using a 3rd party is entirely optional, but if it becomes the only feasible way of doing business then you’d have no choice but to accept some 3rd party’s terms no matter how unfair they all are.
5. More generally, any dependency on a 3rd party service always comes with some degree of risk. There is always the prospect of the service shutting down, or suddenly changing something that you rely on, or no longer meeting your requirements for customer privacy, or proving to be unreliable or vulnerable to hacking – or suddenly becoming a political “hot potato” that customers are boycotting. This doesn’t rule out the use of a 3rd-party service, but everyone needs to understand that selling via a 3rd-party comes with a whole set of costs and risks: it’s not just “well just use a 3rd-party service, they will do it all for you, problem solved”.
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