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Tax questions
I have some questions about the tax feature.
- What is it used for precisely? Only for calculating fees due to BO, or is it for personal administration as well (in the latter case it is inadequate, see below)?
- Does it cause items for people outside of the tax zone to appear cheaper, or is the price the same and the tax simply deducted when the buyer is from within the tax zone?
I noticed tax is calculated over the item price only. For example, I got this:
Sub Total EUR 12.97
Shipping EUR 1.05
Incl. 21.00% Tax EUR 2.25
Order Total EUR 14.02
Calculating it back, it seems the tax is only taken from the sub total and not from the additional charges. Is that because it is only intended to calculate fees due to BO (which is 2,5% of sub total and not handling charges)? If so it is rather tricky for your personal administration, as to me it implies it is the total amount of tax on that order as a whole.
- What is it used for precisely? Only for calculating fees due to BO, or is it for personal administration as well (in the latter case it is inadequate, see below)?
- Does it cause items for people outside of the tax zone to appear cheaper, or is the price the same and the tax simply deducted when the buyer is from within the tax zone?
I noticed tax is calculated over the item price only. For example, I got this:
Sub Total EUR 12.97
Shipping EUR 1.05
Incl. 21.00% Tax EUR 2.25
Order Total EUR 14.02
Calculating it back, it seems the tax is only taken from the sub total and not from the additional charges. Is that because it is only intended to calculate fees due to BO (which is 2,5% of sub total and not handling charges)? If so it is rather tricky for your personal administration, as to me it implies it is the total amount of tax on that order as a whole.
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If you have VAT enabled for your store, for countries that VAT does not apply to, the VAT will be removed from the price of the item.
Tax Settings has nothing to do with the commission.
Good question. I think in the NL, VAT on actual postage stamps is controversial - there is no tax on it, unless a "business" person touches it - then the "added value" appears out of nothing and has to come out of his pocket rather than the company PostNL. However, the line between "adding value" and simply buying shipping on behalf of another person is unclear (basically there is no line). Also, the tax agency says it is a 'necessary evil' because otherwise they can't know if you're hiding part of your profit in shipping costs. On the other hand, however, that same agency requires you to keep track of all details of your business in invoices and if they would take the time to practise what they preach and look into it, they could verify it without the "necessary" evil.
All in all I bet it's one of these many fiscal adventures you could win a lawsuit over. Looking at their terms, most professional Dutch sellers on the competition don't seem to calculate VAT over the shipping costs. I don't either.
VAT on handling & packaging should of course always be there no matter the circumstances or country. So that is the tricky bit - Brick Owl could take the simple approach and calculate VAT on the whole shipping cost variable, or you can split it up into actual postage (possibly no VAT if desired) and commercial handling&packaging (VAT). You have a fair reason to calculate VAT on everything, as that is the Dutch tax agency's official statement on their website. At any rate, the way it is right now may cause Dutch sellers to forget to manually add VAT on their handling & packaging.
Personally, though, the system as it is now will probably work for me; I will just parse the order in my own software. It'll take the Brick Owl calculated tax on the parts, and it will know how much handling tax to add to that. (That is, if I know how to put individual orders into my software.. I already saw I can download orders, but I'm not yet sure which orders it will download, it'd be useful for me to be able to parse them one at a time, so individual download buttons on each order in the list)
To get the best out of BO you have to understand the differences between BL vs BO pricing.
On BL, many stores will itemise every little thing. For example:
Cost of parts £2.12
Paypal cost £0.82
Handling cost £1.00
Packaging cost £0.50
Shipping £2.41
Total £6.85 (of which £1.31 is VAT)
This is great as you know exactly what you're paying for, but it comes at a cost. There's a delay between placing your order and being able to make payment, which may impact on how quickly you receive your order. There's a time cost for the buyer if they want to get the cheapest possible price, as they have to review the terms of many stores and make many calculations. There's also a time cost for the seller because they have to make calculations every time an order is received.
As a seller on BO you have to choose up-front how to factor these costs into your pricing. Do you inflate your item pricing, your shipping costs, or both? You can combine your packaging and handling costs into your shipping prices, and a small amount to cover the basic PayPal fee, and then inflate your item prices slightly to cover the PayPal % fee. Whatever you choose to do you're never going to truly replicate what you could do on BL. This probably means that sometimes the customer will end up paying a little more, sometimes they'll pay a little less.
So you might end up with:
Cost of parts £2.65
Shipping £4.26
Total £6.91 (of which £1.32 is VAT)
Although everything isn't openly itemised, the pricing remains transparent. It could be argued more so than on BL because it's now infinitely easier for a customer to directly compare several sellers without having to worry about ad-hoc fees and charges that vary from store to store. In most cases a customer is also able to pay immediately which reduces the delay in receiving their order.
As a buyer as well as a seller I absolutely prefer the BO method. I'm also more certain that the BO way is compliant with the relevant EU regulations that demand clear pricing, and less sure about the BL way because often the fees and charges are hidden in the small print.
Sorry for the long post
It's easy to fill up a cart while trying to stay under some weight threshold that doubles the shipping rate. When a shipping quote has to be requested, you may not know if you are 10g above some limit that doubles your shipping rate. Optimizing value for shipping in that case involves a lot more work and a fair dose of guessing.
@Stragus: Actually, I don't think that is true for most people. BL features item weight as well, and I have a table of shipping costs. Also, in every invoice (4 a day) I explicitly write "X gram left without additional shipping costs" - and very few people ever add anything. Even if it's just a few gram over a limit. I would totally do what you say though, but I'm Dutch..
@Admin, since you mentioned VAT profiles above, I wondered how BO handled the oddball territories such as the Channel Islands, Heligoland, Livigno and Monaco for example? Some like Gibraltar and Monaco have their own entry in the shipping tables so it's easy to choose whether to apply VAT or not, but others like the Channel Islands and the Canary Islands do not. I just wondered if the VAT treatment of such places was done under the hood as it were?