Wednesday, January 28, 2015

#VATMESS 2015 - My solution

I think I mentioned that I have found a solution for my pattern etc shop? I'm working on sorting it all out so I can re-open my shop in early February.

But this is what I have come up with: I will split my shop into two. It's not a perfect solution, but it's what I've decided on for now. I may change it later. Physical goods will stay in my shop on and digital goods which are covered by the new EU VAT rules will be available though a site called Payhip.

The back end I use for my shop at the moment is capable of capturing all the information to comply with EU VAT, but I have decided to go the easy route and sell digital goods through Payhip. Because they will handle VAT! No need to sign up for VATMOSS and deal with all that.

I have an Etsy shop too, and I was going to set that to manually emailing patterns etc, but thankfully Etsy are responsible for collecting VAT and sending it to the relevant entities. So basically you can keep using your Etsy shop like you did before January 31. However, Etsy does not meet the UK exemptions regarding VAT threshold, so UK customers will be charged VAT too. Read more about Etsy and VAT here.

There are a couple of other options out there, but the reason I decided on Payhip is that their price is very competitive and they have been very helpful. I've been asking them a bunch of questions to make sure it would work for me.

Since I figure other people need a solution too, I thought I'd do a wee Q&A with Payhip and they were gracious enough to take the time to answer my questions. I hope this is helpful. :-)

Thank you, Payhip!

Would you tell us a bit about how and when Payhip got started? Where are you based? How many are on your team?

Firstly, my name is Abs Farah, I am one of the founders of Payhip. Payhip started in September 2012 when we’re trying to help a few friends setup a new site to sell their workout training program. A
personal trainer friend of ours and an old school friend had just put the finishing touches on their training program and they needed a brand new website with payments enabled.

Whilst building this for them I realised it wasn't a straightforward process and many people would be going through the same steps as us, wouldn't it be easier if this was simply a “plug and play” platform? This was the moment we realised we should build Payhip.

We are currently a team of 4 developers and designers, mostly geeks that like to hide in a basement and once in a while go to the gym when are collective lower backs gets sore from all the coding! We are all based in London.

Is there a monthly fee for using Payhip or are you charged for each transaction?

There is no monthly fee, setup fee or hosting fee for using Payhip. We wanted a pricing model simple enough for anyone to get started without worrying about any upfront costs. We’ve adopted the transactional model where a fee is charged every time a sale is made.

This is a great model as it allows our goals to be aligned with the goals of our sellers as we only make money when our sellers do.

How would you compare Payhip to a site like Etsy?

Etsy is a fully fledged market place. We see ourselves as a direct sales platform where you can get a lot more data about your customers to better help sellers understand where their marketing efforts should be spent. Etsy is great, but sellers should not relay on one platform, sellers should own their customers and have direct access to them.

Many people will be interested in hearing about how you deal with the EU VAT legislation. From a VAT point of view, you are the seller so dealing with VAT/VATMOSS is on you, correct?

Yes, this is correct. Since we have a licence clause in our terms, it allows us to sell your digital items for you which makes us the supplier and therefore we have to account for VAT. Since the 1st of January, we've been charging VAT to EU customers and our first report to HMRC is due in March, we’re looking forward to the fun!

The new EU legislation seems very complicated - do you have clever people on the team who know all about it and can make sure that you, and your users, comply with it?

We’re mostly a team of developers but once we were aware of the new EU VAT changes we sought advice and help from our awesome accountant who recommended a great VAT expert. We also found a great tech lawyer who came up with the idea to licence digital items to resell. They are all very smart and qualified professionals and we are now very happy with our abilities to comply with the law.

At the moment, Payhip doesn't have a shopping cart, is that something you are looking to implement? If a customer want to buy more than one item, most people expect a shopping cart.

Yes! The shopping cart has been requested a lot and we plan on implementing this feature. We are already at the planning and user experience stage, once we get past this stage, it’s onto a week or so of furious development. It should be ready in a matter of weeks.

Is it possible for customers to create an account and access their previous purchases via Payhip?

This is an interesting feature we've discussed internally. For customers to be able to do this, they would need to create a password on Payhip, however, would this step hinder the buying experience even if it’s at the end of the checkout process? Would customers want this and would be it be something that is often used?

These are tough question to answer and we’d like to think we are data driven. We have analytics in place to answer some of those questions partially and once we have enough data and feel this would be a useful feature, we will build it. Alternatively, if this is requested frequently, we will build it anyway. It’s seems we've already got one vote from your Carina. :-) [Yup! :-) ]

I imagine that you must have seen a bit of an influx of new sellers over the past 1-2 months. Is there a trend in what kind of products they sell? Craft patterns or ebooks for example?

Yes, you are right. We've had a lot more sign ups in the past few weeks and a lot of support questions regarding the new EU VAT changes. We welcome any interaction with customers as each conversation helps us understand them and actually improve Payhip.

Craft patterns are certainly a big new product category that has risen, mainly due to Etsy's stance on VAT. But I think the team at Etsy are busy with going public!

HMRC have said that if a UK seller emails a pattern, for example, to UK customer, then the UK customer won't have to pay VAT. But buying through Payhip there is no manual emailing of that pattern - will UK customers have to pay VAT when buying through Payhip?

The great thing about being located in the UK and being a small company is that we do not have to charge VAT for any transactions that UK buyers make with us! This may change in the near future, but for now, no VAT for Brits!

We are based in the UK but surprisingly (kind of) a significant portion of our sales come from outside the EU.

It looks like the new legislation will also apply to physical goods from 2016. Is this something Payhip will be able to handle?

We’ve had plans to support physical goods on Payhip for a while but a few other features have been more popular. If this law comes into effect, we will expedite the implementation of this feature!

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