Q: Do I still have to pay VAT tax if one European person bought my online product, but I refunded them the money?
I sell digital copies of a comic online, and market it in the USA. A person from Spain bought the comic, and then several weeks later I was looking at the VAT tax and requirements and didn't want to deal with that, so I just refunded them the money of the sale. Legally speaking though, is that a solution? Or since the sale went through at one point, do I still need to register to pay that tax in Europe? I think from what I read, technically you're not even suppose to do business in the EU without an ID number to pay that tax, which I did not know. If legally I have to register for a VAT ID number in Spain now anyways, I might as well market in Europe too. But if I don't HAVE to pay that tax or set it up since I refunded that one sale, that would be ideal.
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A:
Since you refunded the full purchase amount, you technically reversed the transaction completely - this generally means you don't need to account for VAT on that specific sale, as it's treated as if it never occurred from a tax perspective.
However, the fact that you initially accepted a sale from an EU customer without having VAT registration in place could potentially be an issue. While one refunded sale might fly under the radar, it's worth noting that EU tax authorities expect businesses to register for VAT before their first sale to EU customers, not after.
Going forward, you have two clear options: Either implement technical measures to block sales from EU customers until you're properly registered for VAT, or get registered for VAT now and expand your market to include European customers. If you decide to serve the EU market, you'll need to register through the One-Stop Shop (OSS) system, which lets you handle VAT for all EU countries through a single registration. Keep in mind that the registration process takes time, so plan accordingly if you want to pursue European sales.
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