Etsy Charging VAT On UK To UK Orders - Is It A Glitch Or Proper Application Of The Law?
Etsy sellers are confused as it appears the platform is suddenly charging VAT on UK to UK orders when it did not apply to similar orders in the past.
Some sellers think it may be a glitch, but others say it may be Etsy finally applying the law correctly for shops that previously were registered outside the UK.
My last 3 orders to customers in the UK have had VAT put on them even though i am well below the threshold. I e-mailed ETSY and after many attempts to get an answer have all failed. all i get is a standardised e-mail saying goods sent outside the UK incur VAT, but these items were sent to UK addresses. Can somebody help me, it's deterred UK customers from buying from me.
VAT is added on all of my UK orders, it has never happened before. I am not VAT registered. It is also adding VAT on orders In EU unless they are over £135
Customer support has been useless, cannot call them and the chat that supposed to have 1min response time gets stuck on bot reply...
I have contacted them by email still waiting.
In the meantime I am writing to all my UK customers to request a refund from Etsy for incorrectly charged tax.
Anybody with the same problem?
Most of the sellers reporting having problems with this VAT issue appear to have unique situations which may have caused Etsy to be confused about their locations or to pull location information from their registration rather than their shop location settings.
For example, one seller was registered in the UK initially, then moved to Spain for a few years and changed their bank account but upon returning to the UK, due to Brexit they were unable to change their bank account to a UK one without having to open another shop, so they've left their Spanish bank details for payments on the account and updated their shop location to the current UK information.
Another seller is registered in New Zealand, but has orders shipped from their printer partner in the UK, which previously had not incurred any VAT for orders shipped from that partner to other UK addresses.
And another said they are registered in the UK, but are currently selling from Slovakia while visiting family for a few months.
One helpful seller says they believe these situations with mixed country information could be causing confusion in Etsy's systems or that in some of these scenarios, Etsy may in fact just finally be applying VAT correctly if they are required to collect it as the marketplace.
I think I have worked out what is happening . . . Etsy have finally started to collect VAT correctly.
You know that special condition I posted about earlier in this thread? for zero threshold UK VAT registration for non-UK sellers selling goods from UK to UK, it applies when the seller is selling direct, but it does not apply when selling through a marketplace, instead the marketplace becomes responsible for collecting VAT.
When IOSS was introduced in July 2021 there were 2 situations when Etsy (as a marketplace) should have been collecting the VAT on sales to EU consumers:
- any goods being imported into the EU under €150 intrinsic value, using the IOSS system
- all goods sold by non-EU sellers being despatched from EU locations to EU consumers, any value
Etsy did not action the second condition, until now.
Similarly, basically the same rules apply for the UK (who wrote the EU rules while still in the EU) for sales to buyers in the UK. Since January 2021 Etsy should have been collecting the VAT on sales to UK consumers for:
- any goods being imported into the UK under £135 intrinsic value,
- all goods sold by non-UK sellers being despatched from UK locations to UK consumers, any value.
and again, Etsy did not action the second condition, until now.
It looks like Etsy have finally done something correctly for VAT.
The problem we are seeing in the forum is that it is going wrong for sellers with mixed country settings.
Either
- the sellers have an incorrect country setting somewhere,
- or Etsy are using the wrong country setting for these sellers (either the seller country, or goods despatch from country),
- or Etsy really should be charging VAT on some of these sales.
We've reached out to Etsy to attempt to get clarification on what may be causing this issue and whether it's a glitch or VAT is being applied correctly in these scenarios and will update if/when more information is available.
In the meantime - are you experiencing this issue with UK VAT on Etsy? Let us know in the comments below!
