Bandcamp Eases Indies' Worry Over New Tax Changes in Europe

Independent artists and labels, in an uproar this weeks over sales tax changes in Europe and their effects on their online business, have been (lightly) assuaged by a message from Bandcamp.

Uproar from the independent community over the potentially devastating impact that upcoming changes to European Union tax regulations will have on digital music sales has resulted in Bandcamp revising its tax policy in artists' favour.
 
As previously reported, beginning tomorrow (Jan. 1), new changes in European Union tax regulations mean that all businesses selling digital products in the EU are required to collect sales tax (VAT) based on where the consumer resides, not where the seller is based, as has previously been the case.
 
The change in law applies to all digital products and services sold to consumers based in the European Union's 28 member states and applies to music, audio and film downloads, eBooks, online computer games, app purchases, as well as online film and TV subscriptions.   
 
European Commission regulators originally passed the law to curb multinational tech giants like Google, Apple and Amazon from exploiting a tax loophole by basing themselves in European countries like Luxembourg, where VAT rates are among the lowest in Europe.

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It is, however, the smaller operators and sole traders (I.E. independent musicians and indie labels) that look set to lose the most due to the financial and administrative costs of complying with these regulations.

Chief among these is the need for each artist or business to register with the EC's 'Mini One Stop Shop,' or VAT MOSS as it is known, and submit quarterly tax returns, as well as obtain two pieces of evidence that identify where each and every customer is based, which the seller must then safely store for ten years. Artists and labels selling to consumers in EU members states will also automatically forfeit their VAT sales threshold, which stands at £81,000 in the U.K. ($125,000), meaning that they will have to charge and pay sales tax on every single download sold. 

The time and financial expense of doing so led to many independent artists threatening to pull their entire catalog from merchant sites like Bandcamp.

In response, Bandcamp has now abandoned its "temporary solution where artists submitted the tax themselves" and said that it will instead look after its artists' tax obligations on their behalf. 

"If you've seen the recent news of changes to EU tax law, you may be wondering how this affects you as an artist or label selling on Bandcamp. The good news is that for digital sales, there is no need for you to register for VAT, submit quarterly reports, and so on. We will take care of all of that for you," read a statement on Bandcamp's official blog, posted GMT evening time Tues 30 Dec.
 
A spokesperson for U.K. tax authority HMRC confirmed to Billboard that e-services being sold through a marketplace such as Bandcamp would not necessarily require each user to be tax registered or individual submit tax returns.
 
"It's extremely good news and means that many of us can continue to sell without being hampered by the red tape," Casee Wilson, a U.K.-based independent singer and songwriter, tells Billboard following Bandcamp's change of heart.
 
Wilson was one of a number of artists who had previously considered pulling her catalog from the platform due to the time and cost involved in becoming VAT registered and submitting quarterly tax returns in line with the new EU regulations. 
 
"It really has been a bit of a nightmare," explains Wilson, who says that without Bandcamp taking care of her tax responsibilities she would have little choice but "to shut down my digital sales completely."
 
"For me, it's really important to have the global reach that selling online brings. Shutting that door to these developing artists who are trying to build an audience -- without making their music available for free - seems to penalize the little people far more than the big companies," adds Wilson.
 
Her views are echoed by Matthew Newnham, founder of Nottingham, England-based independent label Gringo Records, which has released records by Hookworms, Fists, The Wharves and Broken Arm in recent years. While Newnham welcomes Bandcamp's decision to look after its user's increased tax responsibilities, he fears that the regulatory changes will have a wider impact on independent artists, labels and businesses, who will still face increased costs and reporting responsibilities for every sales transaction carried out in the EU. 

"I think it shows a complete lack of understanding about the digital economy for small businesses," Newnham tells Billboard. "HMRC seems to have been under the impression that companies like mine only use iTunes and Amazon. We don't. We use multiple different platforms to sell and quite often our own websites as well. They seem to have it all arse about tit."

Newnham says that because his label sells music (both digital and physical) through its own webstore, which is administered by a U.S. company, he faces the choice of registering and reporting through VAT MOSS or pulling his entire catalog and selling exclusively through Bandcamp. "At the moment, the latter seems to be the easier option," he reluctantly says, adding: "Every kind of artist imaginable is going to be impacted by this."

Outside of the independent sector, there are also concerns that the EU tax changes will result in services like iTunes, Amazon, Spotify and crowdfunding platforms ramping up consumer prices to cover the increased VAT costs.

At press time, iTunes, Amazon, Deezer and Kickstarter were not available to comment, but a spokesperson for Spotify -- which Billboard understands already pays local rates of VAT in each country that it operates -- did confirm that that streaming service would not be changing its prices following the Jan 1 changes.


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