Sales Tax Abroad: How a startup wants to help online merchants
Many people now make their money on the internet through online trading. So Amazon recently registered more than 55,000 Marketplace dealers, on eBay, there are even more than 125,000. There are a few tax issues to consider, especially if merchants deliver goods abroad. Here the company Taxso wants to make their lives easier.
If online retailers take the next step and offer their goods not only at home but also abroad, they will soon be confronted with international tax issues such as VAT. However, inexperienced traders only realize this when they are contacted by a foreign tax authority.
In an interview with finanzen.de, Roger Gothmann explains when entrepreneurs have to pay sales tax abroad. Together with Dr. Matthias Allmendinger and dr. Christian Königsheim he founded the Startup Taxso. The company provides a software solution to automate processes related to sales tax. It’s designed to help merchants cope with the tedious monitoring of transactions and the transmission of important data.
Mr. Gothmann, when does an entrepreneur have to worry about the foreign sales tax?
Roger Gothmann: In online trading, tax liability in other EU countries can generally occur for two reasons. The first trigger is the crossing of so-called delivery thresholds . If the merchant ships his products to other EU countries, the tax liability will occur if he exceeds certain thresholds. For most EU countries this value is 35,000 euros net.
The second trigger is often the use of foreign logistics structures , for example those of Amazon. Hardly an online retailer does not sell its products through the marketplaces. This is due to the range of Amazon. On the other hand, the company offers the fulfillment of a large part of the logistics through the so-called Fulfillment by Amazon (FBA). It gives the traders incentives to have their products also spent in foreign warehouses.
On the one hand, this happens because the capacities in German warehouses are increasingly utilized. On the other hand, the individual products are so closer to the customer across the EU, who hardly want to wait more than a day for their order.
Participation in Amazon’s respective programs, which operate under the terms “Pan EU” and “Central Eastern Europe”, immediately leads to tax liability in the countries in which Amazon spends the goods. This can be directly within the framework of the Pan EU program six EU states.
How would you summarize your service for laymen?
Roger Gothmann: Taxso is the first fully automated value added tax solution in the field of online trading. This means that we automatically obtain raw data from all conceivable distribution channels, such as Amazon, eBay or our own web shop, process it for VAT purposes and monitor it on an ongoing basis . Subsequently, this processed data can be transferred to the financial accounting at the touch of a button. In the case of tax obligations in other EU countries, Taxso transmits this data via international tax advisor networks to the responsible tax authorities. Taxso is aimed both directly at online retailers and their tax advisors.
Is Taxso more likely to appeal to small ebay retailers who do not sell more than a hundred articles a month abroad, or people with significantly higher sales?
Roger Gothmann: The greater the number of sales, the greater the VAT risks and the need for automated processes as we offer them. But even for the small eBay dealer who is not taxed in other EU countries, we have the appropriate building blocks, with which he can, for example, daily up-to-date the level of his delivery thresholds and automatically monitor.
The supplier fbahero offers similar services in terms of sales tax as you. But what makes your platform special?
Roger Gothmann: At Taxso, sales tax and technology experts work closely together to automate all sales tax compliance in online commerce – that is, to fulfill all VAT obligations. This goes far beyond the mere reporting of transaction data in other EU countries, which some offer service providers. In particular, cross-border online trading requires at least daily up-to-date VAT evaluation and monitoring of transaction data .
Companies using Taxso rely on being on the safe side for tax purposes. But what about the liability, if Taxso should make a mistake in international sales tax processing?
Roger Gothmann: Automating their VAT processes does not relieve companies of their liability , but significantly reduces their risks. We’ve made numerous plausibility checks, which even made us realize a bug in Amazon’s data at the end of last year before Amazon even noticed this error.
You have already won several prizes. How do you want to evolve over the next few years and improve service to your customers?
Roger Gothmann: At the end of last year, we completed our financing round with High-Tech Gründerfonds. We are now using these funds to further expand our sales tax platform . In doing so, we want to make our services available to other customer segments as well: in both the traditional SME sector and in the tax departments of large corporations , Excel-based VAT control tools are still considered “state of the art” regarding the automation of VAT compliance. Here we see great potential for our technology.