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U.S. Marketers Start Collecting Digital VAT Today

Online marketers in the United States begin collecting value-added taxes on software, music and other online purchases delivered digitally to European residents today under a directive unanimously passed by the European Union.

Prior to July 1, only companies based in EU member countries had to collect the VAT. The law does not affect digital sales to business customers, which account for about 90 percent of total sales and which already are covered by value-added-tax rules in the EU.

Non-EU companies that sell digitally delivered goods and services have two options to comply. One is to establish a subsidiary in the EU and pay all VAT at the rate of the country of corporate residence. The other is to register with a VAT authority in at least one EU state and collect the VAT based on the customer's country.

Companies will have to levy charges of 15 percent to 25 percent, depending on the country.

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