Tax

Sales tax

Sales tax is applied on sales in the European Union (EU) and certain other regions in the world. Sales tax is known as VAT in the EU,  GST in New Zealand and Australia and JCT in Japan.

Customers in the US will be charged sales tax if LoveKnitting is registered in that state

When you sell your patterns through LoveCrafts, you’re conducting a business-to-business transaction with us and we conduct a business-to-consumer transaction with the customer buying your pattern. As LoveCrafts is the one carrying out the transaction with the customer, we are responsible for managing the sales tax for pattern purchases.

You are able to set pricing preferences when you sell with LoveKnitting or LoveCrochet to include whether your pattern prices exclude or include sales tax.

Pricing your patterns Excluding sales tax

Pricing your patterns excluding sales tax means you set a base price and let us add the appropriate sales tax based on the buyer’s country. The prices will vary depending on the sales tax rate in the buyer’s country and in some locations there will be no sales tax applied. The amount you receive will be the same and will not depend on the buyer’s location.

This is the default sales tax preference setup. However, if you’d prefer to price your patterns including sales tax you, go for it!

An example of sales tax-exclusive pricing:

  • Let’s say you set the price of your pattern at £5.00
  • If this pattern sells to a customer in Germany, where sales tax is charged at 19%, the price the customer will see and pay is the Euro equivalent of £5.95
  • When a sale of this pattern is made, we’ll pay you this £5.00, keeping the 95p to pay the sales tax

Pricing your patterns Including sales tax

Pricing your patterns including sales tax means all customers outside the US  will pay the same price for your pattern. You will account for the cost of sales tax in your pattern price and the money you receive will vary depending on the sales tax rate in the buyer’s country. No sales tax will be deducted in countries where sales tax doesn’t apply, whereas in other countries the sales tax deducted may range between 10% and 25%, depending on where the pattern is sold.

An example of sales tax-inclusive pricing:

  • Let’s say you set the price of your pattern at £5.00
  • If this pattern sells to a customer in Germany, where sales tax is charged at 19%, the price the customer will see and pay will be the Euro equivalent of £5.00
  • When a sale of this pattern is made in Germany, we’ll pay you £4.20, keeping 80p to pay the sales tax
  • When a sale of this pattern is made in country where there is no sales tax, we’ll pay you £5.00, as no sales tax is due

Self-Billing agreements

What’s that? Well when you sell patterns with us, you agree to enter into a “self-billing” arrangement with us in which you agree that we will produce an invoice on your behalf on a monthly basis in arrears for any Realisation Amounts realised due to sales of your Patterns during the relevant monthly period.

If you are VAT registered in the EU, this will be a formal VAT “self-billing agreement” which complies with the HMRC rules on self-billing.  This agreement will expire 1 year after you sign it. We will contact you to let you know when you need to sign a new agreement after 1 year is about to lapse.

If you are not VAT registered in the EU, we will still provide invoices on your behalf but they will not be valid sales tax invoices.

You must notify us and update your details on your Designer Profile immediately when your sales tax number changes, you stop being sales tax registered or sell your business.

Updated on June 14, 2019

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