VATmess update

Happy New Year’s Eve, all!

I’m just popping my head up from a holiday daze to post a quick note about this whole #VATmess business.

Others have done a much better job of explaining the issues and available solutions, so I won’t go into detail here, but do check out these links for more if you’re interested:

I’ve decided to go with the Ravelry/LoveKnitting solution, at least for the time being. I’ve added my for-sale patterns to the LoveKnitting site, and they’ve just been approved (though I have some editing/tagging to do on their site). Here’s what this means for any EU customers:

  • Buy your patterns now, in the remaining few hours of 2014, to take advantage of the current pricing and lack of VAT! 
  • As of Jan. 1st anyone from the EU who purchases my patterns through Ravelry will be automatically directed to use the LoveKnitting checkout (which will handle the VAT requirements).
  • Thanks to the partnership between Ravelry and LoveKnitting, any patterns you purchase in this way will still be added to your Ravelry library!
  • Prices WILL change, at least for EU customers, unfortunately.
    • Right off the bat, EU customers will have to pay their own country’s VAT, on top of the base price of a given pattern.
    • I’m not changing my pricing significantly at this point (LoveKnitting has converted the Canadian pricing I use on Ravelry to GBP, so there may be a tiny difference based on their conversion rate), but I’m going to have to look at my sales figures over the next 6 months to figure out what’s reasonable. I will post here with advance warning if/when I do change my pricing!
    • LoveKnitting is offering their service free for 6 months, but once that period is up, their service will be more costly for me, as a designer, than Ravelry is. On every sale, LoveKnitting will keep a 20% + £o.25 commission, which they take out of the overall cost of the pattern. (The VAT will be added on top of the base price, but the commission fees come out of the base price, so buyers won’t see that broken out separately.) That’s a substantial bite out of a pattern sale, from a designer’s perspective!
    • Furthermore, LoveKnitting will only process payments to designers once the net they owe us (sales minus commission) is over £20 — so if I only sell a few patterns in a month, they hold my earnings until the next month, or the next, or the next, whenever I clear that minimum. I know that this is done to save on transfer fees, and it does make sense from that perspective. Still, Ravelry has only been showing me purchasers’ country information since the start of November, so I don’t have a lot of data to work with, but at this point only about 2% of my sales since then have come from the EU. In other words, I’m not liable to get payment from LoveKnitting very often, as I’ll have to wait several months for sales to accrue between payments! That’s a new twist on my cost of doing business as a designer, and something I’ll need to reflect on more.
    • On one hand, if my EU sales are such a tiny fragment of my overall sales, it means that maybe I can afford to take the hit of the LoveKnitting commission, without increasing my prices, since it will have a smaller effect on my bottom line — but on the other hand, having a slice of my sales revenue stuck in limbo for months at a time is a new challenge. (I’m glad, at this moment, that designing is not my main source of income…)
  • Unfortunately, any sales/promotions/coupon codes offered through Ravelry will not carry over to the LoveKnitting site. (This is new information, to me at least, so I don’t know if there will be workarounds offered…)

I am very grateful to Ravelry and LoveKnitting for coming up with a solution so quickly and for making it so seamless for designers like myself.

However, you might detect a hint of frustration in my tone, and you’d be right. I am frustrated! I’m frustrated at the EU lawmakers’ lack of forethought about how this affects microbusinesses. I’m frustrated that I have to charge some of my customers more than others, for an identical product. I’m frustrated at some of the clunkiness of the LoveKnitting website (and my own inexperience with their platform) that’s making it tricky to figure out what I’m doing there. (Right now, I can’t even find a way to link to all of my designs in their store, even though they’ve had me set up a designer profile…!)

Anyway. I’m sorry, EU customers, that you have to deal with this new frustration. And I’m sorry, non-EU readers, that you’ve just had to sit through my rant!

To thank you for bearing with me, I’ll leave you with a happier mental image: Nike demanding belly rubs!

Now that's comfy.

Pet me!

 

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4 Comments

Filed under Design, Meta

4 responses to “VATmess update

  1. Hi, I was lucky enough to win one of your patterns in the GAL! I grabbed Brightness and Contrast because I admired that one when you first showed it to us here, but I don’t have the right *that skein* yet. I’m happy to have the pattern though, so when I do find my *that skein* I don’t have to pet it sadly and leave it behind, but I can take it home with me and know exactly what to make with it! 🙂

    Also, I did what you said and went on an end of year pattern buying frenzy, plus I won quite a few GAL patterns, so I should have enough to tide me over until they fix it! If they do fix it 😦 But it still makes me sad when I can’t support a designer by buying a pattern I admire now.

    If you don’t have many EU pattern sales, another option is to have the buyer message you and you send them a paypal bill, then gift them the pattern when they pay it, a couple of the GAL designers said they planned to do this and see how it went. Apparently that is enough personal interaction to make it not an automated sale. That way the promotions can still be applied.

    Such a stupid law, I do hope we can get microbusiness exempted.

    • Annie Bee

      It really is such a mess! I’ve seen some (non-EU) people say that they’re refusing to collect VAT because it amounts to taxation without representation. Plus, as many people point out, the risk of any government coming after microbusinesses like knitting pattern designers is slim — the admin on their end would cost more than the taxes/fines they could collect. This link was shared by Marnie MacLean: http://blog.sitesell.com/2014/12/definitive-guide-new-eu-vat-rules.html#IGNORE

      Others, as you suggest, are getting around the rules by removing automation from the process — asking EU buyers to email them, manually sending out Paypal invoices, and manually sending out the patterns. I think the instant gratification of the Ravelry pattern shopping experience is a big draw — I’m not sure, as a knitter, if I would take the time to email someone to arrange a pattern purchase, when there are other patterns available for immediate download.

      Others have closed shop completely, either just to the EU or altogether.

      Another idea was to frame the pattern as a license rather than an outright purchase, and to highlight the customer support involved, as Planet June has done: http://www.planetjune.com/blog/my-eu-vat-position/.

      I have no idea of the legality of any of these positions (except, obviously, it’s totally legal to close up shop — just sad!). I am more and more tempted to revert back to the “ignore the rules” option, especially after the trial period with LoveKnitting ends, but… I’ve always been pretty rule-bound, and breaking anyone’s rules, anywhere, is hard for me to contemplate.

      • It’s true that the instantness of a Rav purchase is a big draw, I think I’d only go down the route of making contact for an amazing must have pattern, especially as the price is not displayed for ones like that :/

        The license idea sounds interesting, but I am hoping for the best solution, an exemption for micro-businesses, so Rav can get back to normal. No one has ever accused the EU of having any sense though, so I’m not holding my breath!

    • Annie Bee

      P.s. Yay for winning patterns in the GAL, including Brightness and Contrast! I hope you enjoy knitting it, whenever That Skein comes into your life…