In the following you will find out how, as a seller of digital products, you can (in my opinion) bill correctly to Etsy Compliance with the Reverse Charge Procedure (RCP). I hope to make your business easier for you.
You can find a similar post specifically for small businesses here. This sheds light on the topic from a different perspective. Small businesses will also be covered again later in this article.
Application of RCV when selling digital products
The RCV applies when selling digital products via Etsy. Because legally speaking, Etsy sells your products to "your" Customers, not you directly. Ultimately, your actual customer is always Etsy. Since Etsy is based in another EU country (Ireland), the RCV is activated.
Consequently, the sales tax liability is reversed, so that it is not the seller (you) who owes the sales tax, but the recipient of the service (Etsy). The service that Etsy receives from you is the provision of digital goods.
Invoice write to Etsy
This in turn means that you as the seller have to write an invoice to Etsy. If you are billed monthly, the invoice amount is your monthly net sales. This means the amount of income you generate without sales tax (withheld by Etsy). Fees from Etsy are not taken into account or charged.
You can find the amount of your monthly net sales in your shop manager:
The sales tax is therefore not listed separately on the invoice. Instead, you must provide a reference (e.g. in English and German) to the RCV so that it is clear to all readers why no sales tax is shown.
You can download an invoice template to fill out, suitable for Etsy sellers for whom the RCP applies, here:
ATTENTION: Small business owners on Etsy
If your company is a small business, then the RCV does not apply. Logical, because which sales tax should the recipient of the service (Etsy) withhold if you are not obliged to pay sales tax at all.
You should still write an invoice to Etsy. Without reference to the RCV.
Instead with reference to the small business regulation according to Section 19 UStG. The invoice amount is your monthly net sales.
You can download the appropriate template for all small business owners here:
Accounting of the Etsy fees
I download the monthly statement from Etsy for all my Etsy fees. To do this, click on Finance in your shop manager, then Monthly Billing. Here you have to make sure that you select a past month. Now theVAT appears below. Reportingon. Click Download.
I store these documents in my accounting department to keep track of the "expenses" to document the "revenue" invoiced above. be charged directly by Etsy.
The surplus will then be transferred to your account.
I hope this article has given you some clarity on the reverse charge procedure. If you don't yet have any legal texts for your Etsy shop, you can easily download a template bundle of terms and conditions, data protection declaration, legal notice and cancellation policy here without a subscription :
I appreciate your support!
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